The fallout from the Franklin Templeton wind down

The RBI’s new special liquidity window should help ease redemption pressure on Indian mutual funds, which have come under strain since Franklin Templeton’s announcement on Thursday that it has been forced to close six of its debt schemes. But another consequence of the closures is that mutual funds are likely to turn their back on riskier corporate debt. With bank lending to corporates also likely to dry up, financing constraints are likely to become a major drag on the economy, compounding the impact of the coronavirus and lockdown.