The Hindu Business Line : RBI extends special repo auction for MFs; response poor

Mumbai, Oct. 15 The response from banks to the special repo auction scheme for mutual funds continued to be poor. On Tuesday, banks borrowed only Rs 200 crore, against the available limit of Rs 16,500 crore.

On Tuesday, the Reserve Bank of India had announced that banks would be allowed to borrow up to Rs 20,000 crore through a special 14-day repo auction facility, which they could then lend to MFs. But as banks borrowed only Rs 3,500 crore on the first day, the RBI extended the 14-day auction facility and allowed banks to borrow till the cumulative amount of Rs 20,000 crore was reached. But even on the second day, banks borrowed only Rs 200 crore, taking the total amount under the scheme, so far, to Rs 3,700 crore.

In the notification issued on Wednesday, the RBI said that the special fixed rate term repo will now be conducted every day until further notice up to a cumulative amount of Rs 20,000 crore, in order to enable banks to meet the liquidity requirements of mutual funds. Accordingly, the residual amount will be notified every day till further notice.

But banks, which are short of funds for their own requirements, say they don’t have enough excess SLR securities using which they can borrow for on-lending to mutual funds.

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