116: What the RBI Special Liquidity Facility means for debt mutual fund investors

The COVID-19 lockdown brought in a wave of fear among debt fund investors who redeemed large sums of money from the funds holding low rated paper. The surge in redemptions forced debt funds to borrow money to honour the redemptions. This is because they were unable to sell their holdings, in a market that had become illiquid. On April 23rd, Franklin Templeton Mutual Fund froze 6 debt schemes with a corpus around Rs 26,000 crore and announced their winding up. To calm down investors, RBI announced a special liquidity on the 27th. What is the facility all about and will it solve the problem? Mint explains