RBI will give an indirect credit line of 50,000 cr. to mutual funds
1) Money goes through banks
2) Banks can lend onward to MF, or just buy bonds from them
3) Defaults will be problem of bank, not RBI.
4) Lending is for the next 3 months
https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR22761B4E43FCBED94A12955FD65458EBEEDA.PDF

(thread)
Banks need to give Govt Securities as collateral to RBI. Take the money specifically to lend to (or buy from) mutual funds.

Mutual funds have been saying two things: They have good credit stuff that there is no buyer because market is bad. Or they have bad credit stuff.
The good credit stuff - like say REC/NTPC bonds - can be given to a bank, the bank lends the MF money for redemption. But who pays the interest? My reading: Interest upto the yield of the fund itself, the fund will pay. So if there's 6% yield in the fund, it can pay 6% interest.
But if a bank asks for 8% interest rate, the remaining 2% has to be paid by the AMC on its own. Very tough in these times to burden the AMC, but these are the rules.

What else? The good bonds can be BOUGHT by the bank. But come on.
If a bank wanted to buy good bonds from a mutual fund, it would have bought them anyhow. There's the TLTRO as well that allows this to happen.
There are some additional things, like banks not having to report such bonds as "non priority sector" exposure or "large" exposures (though I don't get the last part - if they buy a bond, and have the credit risk, they do have exposure to the company)

Anyhow leave that for now.
My view: This will work only if a PSU bank is FORCED to do so. RBI should lend directly to the Mutual funds but doesn't want the credit risk at all - but the problem banks are fearing is credit risk. RBI needs to say it will buy from the market outright at least AA/AAA.
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