RBI asks banks to claim regulatory benefit under SLF-MF scheme irrespective of source of funds

On Thursday (April 30, 2020) RBI announced that the regulatory benefits under the special liquidity facility for mutual funds (SLF-MF) scheme being extended to all banks irrespective of whether they avail funding from the Reserve Bank or deploy their own resources under the scheme. As per RBI circular April 27, 2020, RBI would conduct repo operations of 90 days at the fixed repo rate of 4.4 per cent under SLF-MF scheme. Funds availed under the SLF-MF shall be used by banks exclusively deployed for meeting the liquidity requirements of MFs for extending loans, and  undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs) held by MFs. The  circular also mentioned that the liquidity support availed under the SLF-MF would be eligible to be classified as held to maturity (HTM) even in excess of 25 per cent of total investment permitted to be included in the HTM portfolio. Further, the exposures under this facility will not be reckoned under the Large Exposure Framework (LEF) it said.

However, the latest circular dated April 30, 2020 states “Banks meeting the liquidity requirements of MFs by (1) extending loans, and (2) undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial paper (CPs), debentures and certificates of deposit (CDs) held by MFs will be eligible to claim all the regulatory benefits available under SLF-MF scheme without the need to avail back to back funding from the Reserve Bank under the SLF-MF”.

RBI also asked the banks claiming the regulatory benefits as detailed above would be required to submit a weekly statement containing consolidated information on entity-wise and instrument-wise loans and advances extended or investment made to eligible entities to Financial Markets Operations Department (email) and to Department of Supervision (email) on every Monday till the closure of the scheme.