The economic uncertainty and the state of individual finances has impacted investments. Several retail investors say they are in no position to consider fresh investments at this time.

The RBI's announcement comes days after the Franklin Templeton announced to close six of its credit funds.

The fund house said that mutual funds, especially in the fixed income segment, are facing continuous and heightened redemptions.

This was the lowest level of deployment since June, when equity funds' exposure to bank stocks stood at Rs 1.87 lakh crore. In May, it was at Rs 1.89 lakh crore.

"Sentiments may get impacted as mutual funds have been gaining traction among investors as route to invest in stock markets," HDFC AMC chairman Deepak Parkeh said

With the RBI’s swift action to forestall any turbulence, there is hope that Franklin Templeton is a one-off case during this lockdown phase

Unwise investments by banks have become common, slapping investors with losses and high soaring fees