Indian Association IBA The Apex Body Of India Facilitation - Nov 03, 2008

Mumbai: Banks have worked out a system to give "hassle-free" credit to mutual funds facing redemption pressure. Indian Banks Association (IBA), the apex body of banks in India, has opened a facilitation counter to enable mutual funds to borrow from banks under the Reserve Bank of India's liquidity support scheme for MFs. The IBA will assist mutual funds to locate banks which have headroom under the RBI scheme, as each bank has a lending limit, said Dr K. Ramakrishnan, Chief Executive of IBA. The IBA will collect data on the position of its members on a daily basis so that it will know which bank has funds to lend under the scheme.

Banks will also be considerate on interest rates to be charged. Though it is for the individual banks to decide on the interest rates, Mr M.D. Mallya, Chairman, Bank of Baroda, who is also an IBA managing committee member, said banks should be able to lend at 11-12 per cent interest. The announcement of the IBA initiative, ahead of the scheduled meeting of bankers with the Finance Minister on Nov 4, is seen as a proactive move by banks to support MFs. The RBI had also enhanced the liquidity support on Saturday as part of a host of measures to inject more funds into the system. The IBA move follows representations made by the Association of Mutual Funds in India (AMFI) alleging that its members were finding it difficult to access funds.