mumbai large corporates have made a killing picking up cheap mutual fund units filling in for banks which pulled out thousands of crores from liquid schemes after the reserve bank of india curbed its lending to banks to prevent speculation in the foreign exchange market banks are understood to have withdrawn bulk of their investments in liquid mutual funds due to a cash crunch after rbi said that it would lend only rs 75000 crore under its daily liquidity adjustment facility to banks which provides overnight funds at 725 this was part of rbis measures to reduce demand for dollars mutual fund source said that the withdrawals could be in the region of rs 40000 crore banks exited at a loss as rbis measures caused a fall in the net asset value nav of liquid mutual fund units this was because these schemes invested in debt instruments such as treasury bills and certificates of deposits which had seen a fall in value banks find it beneficial to invest in liquid mutual fund schemes as it provides superior returns to deploying funds in the money market there is also no tax deducted at source corporates have made the best of this fall in value by buying these units cheap the corporates which pumped in money into mutual funds include those with large treasuries such as reliance industries mutual funds are understood to have made a beeline to these corporates as banks queued up to withdraw their investments according to data released by the association of mutual funds in india the total assets under management of mutual funds stood at rs 846 lakh crore assuming that bank investments in mutual fund schemes stood at rs 50000 crore this forms a significant chunk of aum for mutual funds this is a double whammy the rise in yields has shrunk valuations of their bond portfolio while the withdrawal by banks will directly hit business said a fund manager with corporates stepping in mutual funds did not find the need to borrow from rbis special threeday finance facility on thursday which provided funds against the security of government bonds at a high rate of 1025 the actual amount of bank withdrawal from mfs can be ascertained only after rbi releases data on bank investment in mfs later this month the latest number is for the fortnight ended june 28 when total bank investments stood at rs 36493 crore however the number is expected to have risen to around rs 50000 crore this is because banks typically pull out their investments out of mutual funds at the end of the quarter to reduce their capital requirement but build them up soon thereafter for instance banks had parked rs 58147 crore in mutual funds as of may 31 a fortnight later this amount rose to rs 64000 crore but towards the end of the month banks had liquidated close to half their investments bankers say that the investments had gone up in subsequent weeks