RBI Governor Shaktikanta Das (file image)
Reserve Bank of India (RBI) Governor Shaktikanta Das on May 5 announced the second purchase of government securities (G-Secs) under the Government Securities Acquisition Programme (G-SAP) 1.0 to be conducted on May 20, 2021.
In the second purchase under G-SAP, the government will buy securities worth Rs 35,000 crore. The RBI had first announced G-SAP 1.0 in its monetary policy on April 7, 2021.
Das also listed out other measures from the RBI to counter the second wave of the pandemic.
Usually, the central bank periodically purchases G-Secs through Open Market Operations (OMOs). With the introduction of G-SAP 1.0, the central bank made an upfront commitment to the markets that it will purchase bonds worth a specific amount along with announcing the advance calendar for purchasing G-Secs.
“The endeavour will be to ensure congenial financial conditions for the recovery to gain traction. For Q1 of 2021-22, therefore, it has been decided to announce a G-SAP of Rs One lakh crore,” the RBI had announced earlier when it launched G-SAP 1.0 on April 7.
On April 15, RBI had conducted the first phase of open market purchase with five dated securities for an amount aggregating to Rs 25,000 crore.
The first purchase was made through a multiple price method under which the bidders paid at the respective rate they had bid for. The RBI had notified four securities for the G-Sec purchase in different maturities.
"Forex reserves of $588 billion give us the confidence to deal with global spillovers," Das said in his address today.
"The first G-SAP auctions elicited an enthusiastic response. G-SAP is contributing to softening of government security yields and in turn private sector borrowing in the market."
Das acknowledged the second wave of coronavirus that has hit the country adding that the new mutant strains have emerged, causing a severe strain on health infrastructure.
"Global economy is exhibiting incipient signs of recovery supported by fiscal, monetary stimulus. The global outlook is highly uncertain and clouded with risks," Das noted.