Cash awash banks are rushing to park their monies with mutual funds.
Since October 1, when the restrictions in lending in the call money market became effective, banks have been turning more to mutual fund schemes, especially liquid and short-term bond plans.
While the trend of banks turning to mutual fund schemes had become significantly noticeable in August itself, the inflows this month are significantly higher as banks do not have many options for deployement of funds.
Fund managers said short-term bond funds return between 6.5 and 6.9 per cent, while liquid schemes have been yielding around 7.2 per cent on an annualised basis. This is higher compared with returns in the call money market (around 5.5 per cent) and the Reserve Bank of India
