The Hindu Business Line : Banks slow to use RBI facility for loans to MFs

Kolkata, Oct. 17 Asset management companies have welcomed the Reserve Bank of India’s special facility extended to banks to lend to the mutual fund sector recently. They, however, say the banks have been responding inadequately to the mechanism.

Of the cumulative Rs 20,000 crore on offer to banks through the special 14-day fixed rate (9 per cent) repo window, banks have utilised Rs 7,005 crore so far. According to RBI, four bids were received on Thursday for Rs 1,035 crore.

The RBI had earlier clarified that the special fixed rate term repo under liquidity adjustment facility would be extended every day until further notice.

Response slow

“Banks do not seem to be ready to mobilise the loans fast enough,” said Mr Waqar Naqvi, Chief Executive, Taurus Mutual Fund. The demand by mutual fund companies placed with the banks was almost twice the amount availed by banks from the RBI, he said.

Mr Devendra Negvi, Chief Executive Officer, Quantum Mutual Fund, however, pointed out: “While it is a welcome move by RBI, the lack of utilisation may on the contrary indicate that the mutual fund industry is not much in need of loans as it has already sold enough assets in the market.”

Procedural hurdles

Mr Anil Kumar, Chief Executive Officer, Birla Sun Life, said, “Procedural delays due to sudden announcements and lack of securities with banks may be prompting them to take a slow approach.”

Public sector banks with higher SLR margins could be better equipped to mobilise the loan, said Mr Sanjay Das, Head (Fixed Income division), Bharti AXA Investment Management Company.

“The measure by RBI will serve more as a morale booster to investor confidence rather than a move to infuse liquidity in the mutual fund sector,” said Mr Rajiv Bajaj, Vice-Chairman and Managing Director, Bajaj Capital.

Mr S.K. Goel, Chairman and Managing Director, UCO Bank, said, “We see the lending in this scheme at two per cent interest margin as a viable transaction option.” The bank has enough security to avail the loan from RBI and its exposure to the facility will be to the tune of Rs 500 crore, he said.

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