RBI’s second purchase under G-SAP 1.0
The Governor of Reserve Bank of India Shaktikanta Das recently announced that the apex bank will make the second purchase of Government securities under the G-Sec Acquisition Programme 1.0 on May 20, 2021.
The first purchase was made in April 2021. The RBI purchased Rs 25,000 crores of Government Securities during the first purchase.
What is the plan?
The RBI is to purchase Rs 35,000 crores of Government Securities in the second purchase. Earlier, the RBI had announced a target of one lakh cores rupees for the GSAP-1.0.
Government Securities
It is a tradeable instrument issued by the Reserve Bank of India to the state government or central government. It can be short term or long term. Short Term Government Securities are the treasury bills with original maturities of less than one year. Long term are bonds with original maturity more than one year.
The Central Government issues both bonds (dated securities) and treasury bills. On the other hand, the State Governments issue only bonds or dated securities.
Factors that affect prices of Government Securities
- Demand and Supply of G-Secs
- Liquidity, Inflation and changes in interest rates
- Changes in foreign exchange, money, credit and capital markets
- Development in international bond markets
- Policy actions of RBI such as cash reserve ratio, repo rate and open market operations.
Recent Developments
- The Finance Minister allowed five states to raise financial resources through Open Market Borrowings.
- RBI conducted Open Market Operations of Rs 20,000 crores
- RBI Monetary Policy Review
- State of Economy Report for the month of April, 2021 released by RBI
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Month: Current Affairs - May, 2021