Govt readies Rs. 33,000-cr fund to aid corporate debt market

Govt readies Rs. 33,000-cr fund to aid corporate debt market

The government is constituting a Rs 33,000 crore ($4 billion) fund to provide liquidity support to its corporate debt market during periods of tension, reported Reuters. An SBI Mutual Fund executive told the news agency that the fund would help stem panic selling and ease redemption pressures.

Deputy Managing Director of SBI Mutual Fund D P Singh said that the government will provide 90 per cent of the money for the fund, and other asset managers would contribute the rest.

According to the report, SBI Mutual Fund has been tasked with administrating the fund. It was first proposed by the Securities and Exchange Board of India (SEBI) in 2020 after high-profile defaults rocked the domestic debt market. SBI Mutual Fund is a unit of India’s largest state-owned PSB, State Bank of India.

“We have seen in the past that whenever there is a credit event, there is a run on the funds for redemption which in turn creates pressure on liquidity…this fund is being created to avoid such a situation in the future and meet the redemption pressure in any such event,” said D P Singh.