P Chidambaram Urges Government To Act Promptly To Resolve Franklin Templeton Issue
Senior Congress leader and former finance minister P Chidambaram speaks during a press conference in New Delhi. (Source: PTI)

P Chidambaram Urges Government To Act Promptly To Resolve Franklin Templeton Issue

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Franklin Templeton Mutual Fund's decision to wind up six debt schemes is a matter of "grave concern" to investors, mutual fund industry and financial markets, senior Congress leader P Chidambaram said on Saturday, urging the government to act promptly to resolve the issue.

In an unprecedented move, Franklin Templeton Mutual Fund has voluntarily decided to wind up its six debt schemes citing redemption pressure and lack of liquidity in bond markets due to the coronavirus pandemic. This is the first instance when a fund house is shutting its schemes because of the coronavirus-related situation.

"I recall that a similar situation arose in the first week of October 2008 (during the global financial crisis) when mutual funds faced liquidity stress. Government immediately consulted RBI, SEBI (Securities and Exchange Board of India), IBA (Indian Banks' Association), AMFI (Association of Mutual Funds in India) and others," the former finance minister said in a statement.

An urgent meeting of the Financial Stability and Development Council was convened and a solution was found by the end of the day, he recalled. "On the next morning, officers of RBI and SEBI met at 8 a.m., and RBI announced a 14-day special repo facility and allowed an additional 0.5 percent of NDTL. The situation was resolved," he said.

Chidambaram said fortunately, the markets will be closed on Saturday and Sunday and he expects that the government will act promptly and resolve the situation quickly.

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