MFs cut cash holding in short-term funds
08 Nov 2013 12:00,
Mumbai Thu, 07 Nov 2013 23:20:00 +0530 Mutual fund houses have reduced their cash holdings in short-term funds as the liquidity in the system has become comfortable. The average cash-holding position in short-term funds was about 20 per cent after the Reserve Bank of India (RBI) tightened liquidity in mid-July to arrest volatility in the rupee. The cash-holding position has now been reduced to five-10 per cent and, in some cases, even below five per cent. In its second-quarter monetary policy review on October 29, RBI had reduced the marginal standing facility (MSF) rate by 25 basis points (bps) to 8.75 per cent. Besides, RBI also increased the liquidity provided through term repos of seven-14 day tenures to 0.50 per cent of banks' net demand and time liabilities (NDTL) from 0.25 per cent earlier. "Due to lowering of the MSF rate, liquidity was back into the system. Now we are buying papers in the tenure of one-two months and locking these. In short-term funds, the cash
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