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G-SAP 2.0: RBI to conduct purchase, sale of government securities today
The RBI said in an official statement that it will on Thursday purchase three government securities of different maturity dates amounting to ₹15,000 crore. The central bank added that it will also sell three government securities of the same amount on this day.
The Reserve Bank of India (RBI) will on Thursday conduct an open market purchase of Government Securities (G-Secs) under its G-Sec Acquisition Programme (G-SAP) 2.0 for an aggregate amount of ₹15,000 crore. According to an official statement by the RBI governor earlier this week, the central bank and regulatory body will also simultaneously conduct the sale of G-Secs under open market operations for an aggregate amount of ₹15,000 crore on the same day. This is the first time that the RBI will be conducting simultaneous purchase and sale of G-Secs, in view of the current liquidity conditions in the banking system.
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The RBI said in an official statement that it will on Thursday purchase three government securities of different maturity dates amounting to the aforementioned amount. The central bank added that it will also sell three government securities of the same amount on this day. The result of the auctions will be announced on Thursday itself, the Reserve Bank of India said, adding that it further reserves the right to decide on the quantum of purchase and sale of individual securities.
Globally, the G-Sec market is predominantly an institutional market, with the major participants being banks and long-term investors, including investment funds, insurance funds, retirement funds. The RBI's multi-faceted role as a monetary policy authority, manager of systemic liquidity, government debt manager, a regulator of interest rate and foreign exchange markets, a regulator of payment and settlement system, and overseer of financial stability makes the G-Sec market critical for the effective discharge of these responsibilities.
RBI governor Shaktikanta Das said earlier this week that the central bank is aiming to conduct fine-tuning operations to manage unanticipated and one-off liquidity flows to ensure balanced liquidity conditions in the system.
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Speaking at a conference organised on Tuesday by the Fixed Income Money Market and Derivatives Association of India (Fimmda) and the Primary Dealers' Association of India (PDAI), Das said that the RBI is looking to manage unanticipated and one-off liquidity flows so that liquid conditions in the system evolve in a “balanced and evenly distributed manner”.
“On its part, the Reserve Bank will endeavour to ensure adequate liquidity in the G-Sec (Government Securities) market as an integral element of its effort to maintain comfortable liquidity conditions in the system,” the RBI governor added.
He also said that government securities are a distinct asset class and it is important to appreciate the role the G-Sec market plays in the overall macro interest rate environment of the economy. A well-functioning G-Sec market ensures the efficient discharge of the public debt management function, he added.
