On April 8, 2021, The Reserve Bank of India (RBI) announced its first purchase of government securities for an amount of Rs 25,000 crore under the G-sec Acquisition Programme (G-SAP 1.0), the purchase was planned to be held on April 15, 2021.
Background:
- On April 7, 2021, the RBI had announced the introduction of a secondary market Government Securities Acquisition Programme (G-SAP 1.0) for the financial year 2021-22(FY22) to enable an orderly evolution of the yield curve.
- On April 8, 2021, RBI Governor Shaktikanta Das announced the RBI’s open market purchase(OMP) of government securities (G-secs) ofRs 1 lakh crore under the G-SAP 1.0 in the first quarter (Q1) of FY22.
The first purchase:
- Under the OMP On April 15, the RBI planned to purchase 5 different types of government securities with different maturities for a total of ₹25,000 crores through a multi-security auction.
- The maturity dates may vary from November 2, 2023, to March 16, 2035.
About the G-SAP:
- G-SAP will run alongside RBI’s regular operations, including Liquidity Adjustment Facility (LAF), open market operations (OMOs) and Operation Twist.
- The programme is built into the RBI’s liquidity planning framework for FY22 as a whole.
Yield:
- The yield on the 10-year benchmark bond was traded at 5.93% (on an average) during April 2020-January 2021 and spiked to 6.25% on March 10, 2021.
- In synchronization with G-Sec yields, corporate bond yields also hardened in the recent period.
About OMO:
- It is the sale and purchase of government securities and treasury bills by RBI to regulate the money supply in the economy. When the RBI wants to increase the money supply in the economy, it purchases the government securities (G-Secs) from the market and it sells them to suck out liquidity.
Recent Related News:
In a first, the Reserve Bank of India (RBI) is all set to conduct the simultaneous purchase and sale of Government securities (GS) under Open Market Operations (OMO) for an aggregate amount of Rs 20,000 crore under the purchase and Rs 15,000 crore under sale on March 10, 2021.
About Government securities:
Government securities are government debt issuances used to fund daily operations, and special infrastructure and military projects. They guarantee the full repayment of invested principal at the maturity of the security and often pay periodic coupon or interest payments.
Types: There are many types of government securities in India. They can broadly be classified into four categories, namely Treasury Bills (T-bills), Cash Management Bills (CMBs), dated G-Secs, and State Development Loans (SDLs).
