Skip to main content

RBI raises concerns over increase in assets of money market mutual funds

By

The Reserve Bank of India has raised concerns on the increase in assets of money market mutual funds (MMMFs) in the past few months. The central bank observed that the infusion of liquidity in the wake of the pandemic had led to a sharp decline in term rates. Even as deposit yields fell, assets under MMMFs have grown, indicative of a search for yield. “Such risk taking among institutional investors, specifically in illiquid investments to earn targeted returns, may lead to build-up of financial vulnerabilities, with adverse implications for financial stability,” the RBI said in its financial stability report released on Monday. Average net assets under management of such money market funds rose to Rs 96,210 crore in December, up 61 per cent over Rs 59,512 held in April, the data from Association of Mutual Funds in India shows. The central bank said excess returns of MMMFs had started to normalise after turning negative in the previous quarter, reflecting increased proportion of liquid assets in their investment corpus. The share of liquid assets in debt mutual funds’ portfolios has surged since March and constitutes 39 per cent of the aggregate AUM by end-November 2020, reflecting precautionary allocations, it observed. The RBI said MFs showed a marked preference for long-term debt while also holding equity shares. Such simultaneous holdings in debt and equity allowed transmission of risk from equity market sell-off to the debt markets and vice versa. Given their interconnected nature, however, such sell-offs can potentially transmit asset market shocks across the financial system.

The central bank reiterated that the dominant positions occupied by mutual funds and insurance companies in the non-banking space needed to be assessed as NBFCs and housing finance companies remain the largest borrowers, with systemic implications.


Business Standard, 12th January 2021

Comments

Post a Comment

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

By
  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6
Post a Comment
Read more

Jaitley plans to cut MSME tax rate to 25%

By
Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem
1 comment
Read more

Don't forget to verify your income tax return in August: Here's the process

By
  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s
Post a Comment
Read more