Banks can bid under the facility on any working day. While there are still many days to go, the initial low response may suggest that the mutual fund industry has not yet faced redemption pressure, as was feared, according to a treasurer. This also bolsters the theory that the mutual fund crisis is a debt event limited to some schemes of Franklin Templeton.
If and when redemption pressure rises, the money can be fully utilised by banks, and the central bank can also possibly increase the limit, depending upon the severity.
Banks will borrow from the window and the mutual funds will have to do repo with banks to get the liquidity, using investment grade papers. They could also sell the papers directly to bank if they chose to.