RBI Directs Banks To Cut MF Debt Exposure In 6 Months

Reserve Bank of India on Tuesday directed the banks to the total investment in liquid or short-term debt schemes of mutual funds with a weighted average maturity of the portfolio, but not more than 1 year, subject to the prudential cap of 10 percent of its net assets at 31 March last year.

Following up on its announcement of monetary policy 2011-12, RBI noted that the weighted average maturity is calculated as a weighted average of the amounts invested by the end of the maturity of the securities.

In order to ensure a smooth transition, the banks that have investments in mutual funds these programs exceeds 10 percent limit, the requirement is fulfilled at the earliest but not later than six months of the fifth July 2011. This means that in December, banks will have to pull out of almost Rs one lakh crore of debt schemes of mutual funds. Earlier, RBI set the deadline in October.