RBI Announces G-SAP 2.0 Of Rs 1.2 Lakh Crore For 2nd Quarter Of Current Fiscal

The Reserve Bank of India (RBI), in its bi-monthly Monetary Policy Committee (MPC) Statement, said that another round of the Government Securities Acquisition Programme (G-SAP 1.0) worth Rs 40,000 crore will be conducted on June 17. Out of this, Rs 10,000 crore will constitute the purchase of state development loans or SDLs. RBI Governor Shaktikanta Das said that the central bank does not expect the market to respond appropriately to the announcement of G-SAP 2.0. (Also Read: RBI Monetary Policy Highlights: Lending Rates Unchanged, Growth Projected At 9.5% )

The specific dates and securities under the G-SAP 2.0 operations will be announced separately. The Reserve Bank planned a G-SAP of Rs 1 lakh crore for the first quarter of the current fiscal.

In its first bi-monthly monetary policy committee for fiscal 2021-22 held in April, the Reserve Bank had announced the secondary market G-SAP 1.0 scheme. As part of the program, the central bank committed upfront to a specific amount of open market purchases of government securities to ensure a stable and orderly evolution of the yield curve amid comfortable liquidity conditions.

''The announcement of G-SAP 2.0 to the tune of Rs. 1.2 lakh crores will ensure adequate liquidity in the system. Upward revision of inflation rate will raise bond yields marginally in the short run,'' said Dr. Rajeev Singh, Director General, Indian Chamber of Commerce (ICC).

Shaktikanta Das said in his statement that during the current year so far, the RBI has undertaken regular OMOs and injected additional liquidity to the tune of Rs 36,545 crore, up to May 31, which is in addition to Rs 60,000 crore under the G-SAP 1.0 scheme.

RBI Governor added that a purchase and sale auction under the operation twist was conducted on May 6, to facilitate the easy evolution of the yield curve. Meanwhile, the redemption of government securities worth around Rs 52,000 crore in the last week of May fully neutralised the cash reserve ratio (CRR) restoration.

''As part of its objective to ensure adequate liquidity, RBI has continued with its GSAP 1.0 programme for Q1FY22 with a scheduled Gsec purchase of Rs 40,000 crore in June and importantly, taking it forward with GSAP 2.0 with the planned acquisition of another Rs 1.2 lakh crore in Q2FY22,'' said said Mr Suman Chowdhury, Chief Analytical Officer, Acuité Ratings & Research.

Along with the use of other tools such as OMOs and Operation Twist, these announcements are a clear message to the market participants that RBI would like to provide necessary support and facilitate a slightly downward bias on the bond yields,'' he added.