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Economy

Banks Reducing MF Investments

Sangita Mehta at The Economic Times: (HT and Thanks: Ninad Kunder)

Data released by RBI shows that banks’ investments in mutual funds have fallen by Rs 21,957 crore to Rs 147,279 crore as on December 18. This comes just a few days after RBI sought information on bank exposure to mutual funds.

The RBI had cracked the whip after it turned out that banks had continued to park money in mutual funds even after RBI governor D Subbarao had told bank chiefs to impose internal limits on their exposure to mutual funds as there was an element of circularity in these investments. What this means is that bank investments in mutual funds comes back to banks again in the form of investment in certificates of deposits or through lending under the Collatarised Borrowing and Lending Operations (CBLO).

For the curious: This information is released every week, as a “Weekly Statistical Supplement” in which this information is given under “Accommodation”.

Of course, as of March the figure was only 36,000 cr. (parked in MFs by banks), so there’s a long way to go.