Credit risk funds have seen a net redemption of ₹8,186 crore over the past week, following the turbulence created by the sudden closure of six debt-oriented schemes by Franklin Templeton.

Net redemptions under such funds peaked to ₹4,294 crore on April 27, against ₹2,949 crore on April 24. Subsequently, they fell to ₹1,847 crore, ₹1,251 crore and ₹794 crore between April 28-30 as the RBI offered support to the MF industry.

Credit risk funds those that invest nearly two-thirds of their corpus in relatively low credit-rated debt instruments.

Nilesh Shah, Chairman, Association of Mutual Funds in India (AMFI), said the declining trend in net redemptions from credit risk funds indicates investor comfort from RBI’s special liquidity facility to the MF industry. The AMFI will continue to work with regulators to ensure normal functioning of the market, he added.

Liquidity window

Last Monday, the RBI had announced a special liquidity window of ₹50,000 crore for banks to lend specially to the mutual fund industry to tide over any redemption pressure from investors. Banks can now borrow 90-day funds from the RBI at the current repo rate of 4.4 per cent and on-lend to MFs or purchase investment-grade corporate papers held by them.

The RBI scheme is available between April 27 and May 11. Banks buying securities from MFs can hold them in their held-to-maturity segment, even if the total investment in that category overshoots the central bank’s limits. The advantage of the segment is that banks do not have to account for mark-to-market losses in case the bond values fall further.

As of April 23, four mutual fund houses, including Franklin Templeton, had borrowed ₹4,428 crore from banks to meet redemption requests.

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