RBI stepped up Government Security buys in the last 2 weeks: Current Affairs Special Series

Team Adda247 and BankersAdda are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is RBI stepped up Government Security buys in the last 2 weeks.

RBI stepped up Government Security buys in the last 2 weeks

The central bank of India, RBI has stepped up sovereign bond purchases in the past two weeks for helping lower borrowing costs, signaling its commitment to go beyond announced plans as growth revival temporarily upstage inflation management.

The central bank has purchased net Rs.34, 175 crores of sovereign papers from the secondary market from April 22 to May 4 to ensure lower borrowings costs amid concerns that the second Covid wave would divert the emerging economic recovery. Market experts believed that this could well be a record for a two-week period. The effort of RBI which is silently driving efforts to arrest the rise in yields is good when our economy is battling to limit the cost of a second wave. These unusual tools like OMO (Open Market Operations) or GSAPs (G-Secs Acquisition Programme) are fine, such as secondary market purchase should help balance the funding costs- in line with the record low-rate regime. G-Secs Acquisition Programme (GSAP) and open-market operations (OMO) are the influencing tools of the central bank.  

According to Government’s principal money manager, they have bought both Treasury Bills (T-Bills) and long-term papers in seven tranches. RBI is continuously trying to keep the benchmark gauge around 6% but the yield fell three basis points to 6.02% between April 22 and May 4, then RBI has canceled auctions worth Rs.39, 000 crores, and these included benchmark papers worth Rs.28, 000 crores and the rest from a five-year series.

In this financial year, RBI purchased Rs. 32, 220 crores via Open Market Operations while it infused Rs.25, 000 crores of liquidity via GSAP. The Banking System has a net durable surplus of Rs.7.26 lakh crore with the supply of securities increasing. Government plans to borrow Rs.12.05 lakh crore this fiscal year.