G-SAP 2.0: RBI’s second open market purchase of govt. securities on July 22

RBI announced the second tranche of acquiring government securities on 15 July under the Government Securities and Acquisition Programme 2.0 or G-SAP 2.0.

According to this announcement, RBI will purchase securities worth Rs. 20,000 crores on 22 July.

The auction results will be available on that date itself. Moreover, applicants will receive their securities in their respective SGL accounts by 12 pm on 23 July.

RBI also reserves the rights to –

• Decide the volume of individual security purchase
• Accept bids lower than the aggregate amount
• Accept higher or lower bids than the aggregate amount for rounding off purposes
• Accept or reject bids totally or partially

In RBI’s bi-monthly monetary policy meeting on June 4, governor Shaktikanata Das mentioned the apex bank would raise Rs. 1.2 lakh crores for FY2021-22.

In the first tranche occurring on July 8, RBI raised approximately Rs. 20,000 crores.

As a part of its larger attempt to inject liquidity in the Indian market, RBI also conducted G-SAP 1.0. 

G-SAP 1.0 – An overview

In its first bi-monthly monetary policy meeting for FY 2021-22 in April, RBI announced G-SAP 1.0. Under this programme, RBI purchased –

• 25,000 crores of G-Secs in its first tranche
• 35,000 crores worth of securities in its second tranche
• Securities worth Rs. 40,000 crores in its third tranche

Overall, RBI spent a total of Rs. 1 lakh crores in FY2021-22’s first quarter under this G-SAP scheme.

Reasons for this liquidity injection

According to IMF and various other agencies, Covid-19’s impact is likely to extend its stay in the Indian economy, dealing with inflation.

Liquidity injection is one of the methods that RBI is favouring presently to combat this situation.

Accordingly, RBI has opted for open market purchases of government securities.

Per RBI’s statement, these OMOs are issued and carried out based on the review of current and estimable liquidity conditions.

Bottom line

With the help of an open market move like this, curbing the liquidity crisis prevailing in the Indian economy can be possible. In this regard, eligible participants can submit their bids in electronic format via the E-Kuber System. They can do so between 10 to 11 am on July 22.

Frequently Asked Questions

1. What are the current policy rates of RBI?

The current repo rate is at 4%, and the reverse repo rate is 3.35%.

2. What is the growth percentage of the Indian economy in the 4^thquarter of FY2021?

The Indian economy grew by 1.6% in the fourth quarter of FY2021.

3. What are government securities?

Government securities are trading instruments issued by state and central governments. They acknowledge the government’s debt obligations to bondholders.