The Reserve Bank Wednesday opened a three-day borrowing window of Rs.25,000 crore to help mutual funds meet their financial needs.
The central bank said that "as a contingency measure", it had decided to conduct a special repo under which banks could raise funds totalling Rs.25,000 crore at 10.25 percent interest.
"As a contingency measure, the Reserve Bank of India (RBI) has decided to conduct a special 3-day repo at an interest rate of 10.25 per cent for a notified amount of Rs.25,000 crore with a view to enabling banks to meet the liquidity requirements of mutual funds," Alpana Killawala, chief general manager, said in a statement.
This facility will be made available for a temporary period until further notice and that details for the repo facility will be announced separately, said the bank.
The mutual fund industry has been facing equity folio closures in recent months due to profit booking and various merger schemes in the industry.
The mutual fund industry lost more than 36 lakh investors in 2012-13. The last financial year was the fourth straight year of loss of folios by mutual funds.
Folios are numbers designated to individual investor accounts, although one investor can have multiple folios.