RBI package too dry for fund-Starving MFs

Author: MP Rana

The liquidity package RBI brought has not been able to overpower the risk aversion attitude Mutual Funds are adopting. So far, an amount of Rs. 7,900 crore has been taken up by six banks at rate of 9%, Rs. 6,290 crore by another set of 11 banks at 6%, and yet another amount of Rs. 2,500 crore by a single bank that could not borrow from other lenders as it already exceeded the limits. In all, the Rs. 20,000 crore relief has probably not lived up to the expectations of the needy.

One reason may be the selectivity the Central Bank is following regarding the acceptability of Certificates of Deposits (CDs). These are the securities against which the monetary relief is being given.
	Also, there were rumours that Fund Managers wanted to hold talks with the regulators to permission for freezing of fixed Maturity Plans. Banks, on the other extreme seemed confident of the cuts in CRR. Following this move of RBI, banks made clear as to whether they are thinking of slicing their interest rates or not. Among the ones to act positively was PNB, which declared that education and home loans it offers can be had at a lower rate.