G-SAP 2.0: RBI announces Rs 20,000 crore bond purchase on July 8

The Reserve Bank of India (RBI) on July 5 announced the open market purchase of government bonds worth Rs 20,000 crore under the G-sec Acquisition Programme (G-SAP 2.0) on July 8.

On July 4, RBI Governor Shaktikanta Das had announced that the central bank will conduct the open market purchase of government securities of Rs 1.2 lakh crore under the G-SAP 2.0 in Q2 of the financial year 2021-22 to support the market.

This is the first round of purchases under G-SAP 2.0.

The RBI said it reserves the right to decide on the quantum of purchase of individual securities, accept bids for less than the aggregate amount, purchase marginally higher/lower than the aggregate amount due to rounding off and accept or reject any or all the bids either wholly or partially without assigning any reasons.

The next purchase under G-SAP 2.0 will be conducted on July 22, 2021 for Rs20,000 crore. The Government securities to be purchased in the auction would be communicated in due course, the RBI said.

Announcing the plan, the RBI Governor said on June 4 that another round of G-SAP 1.0 worth Rs 40,000 crore will be conducted on June 17. Additionally, Das announced G-SAP 2.0 plan in Q2.

"The specific dates and securities under G-SAP 2.0 operations will be indicated separately. We do expect the market to respond appropriately to this announcement of G-SAP 2.0," Das said.

In its April monetary policy review, the RBI had announced secondary market G-SAP 1.0. Under the programme, the central bank committed upfront to a specific amount of open market purchases of government securities with a view to enable a stable and orderly evolution of the yield curve amid comfortable liquidity conditions. It had planned a G-SAP of Rs 1 lakh crore for Q1 FY22.

“The auctions under G-SAP 1.0 have evoked keen interest from market participants, with bid cover ratios of 4.1 and 3.5, respectively, in the two auctions undertaken so far. The timing of the second auction was aimed towards replenishing the drainage of liquidity due to the restoration of the cash reserve ratio (CRR) to its pre-pandemic level of 4 percent of net demand and time liabilities (NDTL), effective May 22, 2021,” Das said.