NEW DELHI: The Reserve Bank of India (RBI) on Thursday said debt mutual funds have got a fair share of the abundant liquidity in the system which helped them come out of the Franklin Templeton fiasco back in April.
“Mutual funds have stabilised since the Franklin Templeton episode. Assets under management of debt mutual funds, which fell to Rs 12.20 lakh crore as on April 29, 2020, recovered and improved to Rs 13.89 lakh crore as on July 31, 2020,” said Shaktikanta Das, Governor, RBI.
Debt mutual funds also got a boost last month after reports said Reliance Industries parked a large chunk of the proceeds from its stake sales in Jio Platforms in liquid funds.
Net asset values of funds in many categories have risen sharply in recent months due to low interest rate conditions, making investing in debt funds attractive for investors.
The central bank added that thanks to its proactive approach, borrowing costs have come down sharply and led to record primary issuance of corporate bonds of Rs 2.09 lakh crore in the first quarter of (April-June) 2020- 21.
“In particular, the market financing conditions for NBFCs, which had become challenging, have largely stabilised in the wake of targeted policy measures. For AA+ rated 3-year NBFC bonds, spreads over similar tenor G-secs have narrowed from 360 basis points on March 26 to 139 basis points on July 31, 2020,” it said.
Spreads of corporate bonds have also narrowed sharply, the RBI noted. It said spreads of 3-year AAA-rated corporate bonds over similar tenor government securities have also declined from 276 basis points on March 26, 2020 to 50 basis points on July 31, 2020.
Similarly, spreads on AA+ rated bonds softened from 307 basis points to 104 basis points; spreads on AA bonds narrowed from 344 basis points to 142 basis points and even for the lowest investment grade bonds (BBB-), spreads came down by 125 basis points.