RBI proposes to permit lending, borrowing of G-secs: RBI Gov Shaktikanta Das
1 min read . Updated: 08 Feb 2023, 10:53 AM IST
Premium- G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
Governor Shaktikanta Das on 8 February said that the Reserve Bank of India (RBI) will permit lending, borrowing of G-secs to further develop government securities market.
Shaktikanta Das-headed Monetary Policy Committee (MPC) started its three-day meeting on February 6 amid the rate hiking spree that started in May last year to check inflation.
"We propose to permit lending and borrowing of g-secs (government securities). This will provide investors with an avenue to deploy their idle securities, enhance portfolio returns and facilitate wider participation," RBI Governor Shaktikanta Das said in his monetary policy address. "This measure will also add depth and liquidity to the g-sec market," Das added.
The governor also said that the market hours for government securities market to be restored to pre-pandemic timing of 9 am - 5 pm to move towards normalising liquidity and market operations.
Also read: RBI Monetary Policy Live Updates
What is a Government Security (G-Sec)?
As per the RBI, a Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments and acknowledges the Government’s debt obligation.
Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).
In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).
G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
Meanwhile, the MPC of the RBI also decided to raise the key benchmark interest rate by 25 basis points to 6.5 percent on Wednesday.
Four out of six members of MPC have decided to go ahead with this hike in the repo rate, RBI Governor Shaktikanta Das said on Wednesday.
Since May last year, the RBI has increased the short-term lending rate by 225 basis points to contain inflation, mostly driven by external factors, especially global supply chain disruption following the Russia-Ukraine war outbreak.
