The Reserve Bank of India (RBI) on April 7, 2021 announced a new programme — Government Securities Acquisition Programme (G-SAP) — through which it will purchase government securities worth Rs 1 lakh crore in the first quarter of Financial Year 2021-22.
- The RBI periodically purchase Government bonds from the market through Open Market Operations (OMOs). The G-SAP is also an OMO but here the RBI has committed to the markets that it will purchase bonds worth a specific amount.
- Through this operation, the RBI’s intent to keep the yield down to lower the borrowing cost of the Government. The Government has planned a Rs 12.05 lakh crore borrowing plan for fiscal year 2022.
What are Open market operations?
- The Reserve Bank of India (RBI) sales and purchases Government securities (G-Secs) to and from the market through Open market operations or OMOs.
- The objective behind these operations is to adjust the rupee liquidity conditions in the market on a durable basis.
- When the RBI feels that there is excess liquidity in the market, it resorts to sale of securities thereby sucking out the rupee liquidity. Similarly, when the liquidity conditions are tight, RBI may buy securities from the market, thereby releasing liquidity into the market.
