RBI announces special liquidity facility for mutual funds

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News: Reserve Bank of India(RBI) has announced a special window of ₹50,000 crore for Mutual Funds in view of the pressure that the fund houses are facing in the wake of the Coronavirus pandemic.

Facts:

  • Mutual Funds: It is a type of financial vehicle made up of a pool of money collected from many investors to invest in securities like stocks, bonds and other assets. 
  • They are operated by professional money managers, who allocate the fund’s assets and attempt to produce income for the fund’s investors.
  • Benefits: a) Profession expertise b) Less risk as fund managers invest the pooled money in diversified assets c) Potentially Higher Returns and d) Relatively easier to buy and exit. 
  • Disadvantages: a) High management fees b) Loss of Control by investors and c) Vulnerable to market volatility.