The liquidity rush in the financial system since demonetisation has led to “unprecedented fund flows to both equity and debt mutual funds”, which is showing some signs of risk, according to the Reserve Bank of India’s (RBI’s) Financial Stability Report on Thursday.
Given the significant increase in the mutual funds (MFs) corpus and an excess monthly return of almost 250 basis points (annualised) from a representative money market fund, “there seems to be some risk migration from the banks to the mutual funds”, the FSR said.
