The Reserve Bank of India (RBI) on 27th December implemented the Government Securities Lending Directions, 2023, effective immediately.
In February 2023 of the same year, the central bank had released draft norms for lending and borrowing of government securities aimed at expanding participation in the securities lending market.
Key provisions
- Government securities issued by the central government (excluding Treasury Bills) are eligible for lending and borrowing in Government Securities Lending (GSL) transactions.
- Furthermore, both government securities issued by the central government (including Treasury Bills) and those issued by state governments are eligible for use as collateral in GSL transactions.
- The minimum tenor of a GSL transaction will be one day and the maximum tenor shall be the maximum period prescribed to cover short sales.
- All GSL transactions will settle on a Delivery versus Delivery basis.
About Government Security (G-secs)
- Government Security is a tradable instrument issued by the Central government or the state governments.
- It acknowledges the government’s debt obligation.
- These securities are either short term (known as 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).
- Central government issues both treasury bills and bonds or dated securities while the state governments issue only bonds or dated securities which are referred to as State Development Loans (SDLs).
- G-Secs carry practically no risk of default and hence are called risk free instruments.
- In order to invest in government securities, investors are meant to open RBI Direct Gilt accounts under the RBI Retail Direct Scheme. This is a one-stop solution to facilitate investment in government securities by individual investors.
- Under this scheme, individual retail investors can open an account with the RBI.
