As on March 31, 2011 5, the investor profile of liquid funds was dominated by corporate (76.5 per cent) followed by Banks/FIs (17.1 per cent), HNIs (5.3 per cent). As a consequence, when the banking sector faces liquidity shortfall and withdraws its investment from liquid Mutual Funds, they collectively come under stress.
This may lead to a sharp fall in banks’ fresh investment in liquid funds which, in turn, could intensify the pressure on those entities that receive investments from the liquid funds.