RBI announces Second Tranche of purchase under G-SAP 1.0

The Reserve Bank of India recently announced that the second tranche of open market purchase of Government Securities is to be held on May 20, 2021. This is to be held under G-Sec Acquisition Programme. This second tranche is to be conducted for Rs 35,000 crores.

Background

• In April 2021, the Reserve Bank of India launched the Government Security Acquisition Programme 1.0. It was held on April 15, 2021. RBI purchased Rs 25,000 crores of Government securities.
• Earlier in May 2021, RBI announced that the second tranche is to be purchased under G-SAP 1.0.

A detailed announcement

Though RBI had announced about the second Tranche earlier, it has now said that it will purchase seven Government Securities of different maturities. Also, the apex bank announced that there will be not security-wise notified amount.

What is Security-wise Notified amount?

It includes details such as source securities, destination securities, amount of source securities and also the maturing date. These details are usually published by RBI.

E-Kuber

The Government Securities are issued through auctions conducted by the apex bank. These auctions are conducted on the electronic platform called E-Kuber.

Why should one invest in Government Securities?

This is because holding cash in hand does not give any returns. On the other hand, the investment in gold and Government securities increases the returns over the period of time.

Different types of Auctions of Government Securities

• Yield Based Auctions and Price based auctions
• Yield Based Auctions are conducted when a new government security is issued.
• Price Based Auctions are conducted when GoI re-issues securities that were already issued earlier.

Month: Current Affairs - May, 2021