No takers for special RBI window for mutual funds on day 2

The Reserve Bank of India (RBI) did not receive any bids for the special repo auction conducted on Tuesday for mutual fund (MF) players, who maintained there is enough liquidity in the system.. This is a second consecutive day when this facility, opened last week, has not been used, according to RBI data.. Explaining the reasons for no takers of RBI facility, market players said there is enough liquidity in the system. Also, the actual redemptions, after RBI's tightening measures to support the rupee, are much lower than the reported numbers, pegged at around Rs 50,000 crore, they said.. "There is enough liquidity in the system to take care of the redemption pressures. So, there was no need to fall back on repo window," Quantum Mutual Fund chief executive Jimmy A Patel told PTI in Mumbai.. Sharing similar views, K Ramanathan, executive director and chief investment officer of ING Investment Management, said, "There are no visible redemption pressure as of now. So, the special repo window has not been used.". Whether this special repo window will be used or not depends on the liquidity situation on Wednesday taking into account more tightening measures announced by the apex bank, said Mr Ramanathan.. The RBI reduced the liquidity adjustment facility (LAF) for each bank from 1 per cent of the total deposits to 0.5 per cent, thus limiting the access to borrowed funds from the apex bank. The limit will come into force with immediate effect and continue till further notice.. In another measure to suck out liquidity from the system, RBI has asked banks to maintain higher average cash reserve ratio (CRR) of 99 per cent of the requirement on daily basis as against earlier 70 per cent. Cash reserve ratio is a portion of deposits that banks are required to keep with the apex bank.. According senior bankers, the measures could suck out Rs 4,000- 5,000 crore from the system.. Last week, the Reserve Bank had opened a special repo window for banks to withdraw Rs 25,000 crore for meeting the redemption pressure arising from MFs and had fixed the interest rate at the marginal standing facility (MSF) rate of 10.25 per cent.. The apex bank had said the window would be opened for three days to meet the possible liquidity requirements of banks as fund houses faced increasing redemption pressure from short-term debt funds, which was in reaction to the RBI measures announced on July 15 to squeeze out liquidity from the system in an effort to contain rupee volatility.. In a surprising move, the RBI had come up with a slew of measures like increasing the MSF rate by 200 basis points, capping LAF window facility at Rs 75,000 crore, conducting OMO sales, among others, to contain rupee fall. This has pushed rates on short-term money market instruments, prompting redemption in short-term debt fund schemes.. The measures came after the rupee plunged to all-time low of 61.21 to the US dollar on July 8. The Indian unit has been battered over 10 per cent this fiscal year.

No takers for special RBI window for mutual funds on day 2

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