An improvement in the liquidity situation is visible as also an increased inflow into mutual funds this month, a top mutual funds industry official said today.
"There has been an improvement in liquidity. There is (also) an increased inflow into mutual funds," Association of Mutual Funds in India (AMFI) Chairman, A P Kurian, told reporters on the sidelines of a conference here.
The recent measures taken by the Reserve Bank to ease the liquidity crunch in the system have helped the mutual funds industry, he said.
"In the month of October, we (the mutual funds industry) faced redemption pressures," Kurian said, adding that thanks to the special repo window provided by the RBI, the situation has now improved.
The apex bank has cut its cash reserve ratio by 3.5% and repo rate by 1.5% since October, thereby considerably easing liquidity pressure in the system.
The concerted efforts by the authorities have helped in bringing down interest rates from nine per cent to 7.5%.
"Consequently, funds are now able to borrow at lower interest rates. Initially, funds were borrowing at 14-18% but now due to intervention by the Government, RBI and the Indian Banks Association, most public sector banks are ready to lend money to mutual funds," Kurian said.
Besides, they have also reduced interest rates to 10.5-11% "which is a very welcome development," he said.
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