RBI Notifications

Government Securities Acquisition Programme (G-SAP)


From UPSC perspective, the following things are important :

Prelims level: Government Securities Acquisition Programme (G-SAP)

Mains level: Open market operations

What is the first phase of operation?

  • The RBI has officially notified that it would conduct the first phase of G-SAP 1.0 operations on April 15, 2021.
  • It will begin with the purchase of five dated securities for an amount aggregating to Rs 25,000 crore.
  • The first phase of G-SAP purchase will happen using the multiple price method under which the bidders pay at the respective rate they had bid.
  • The RBI has notified four securities for the G-Sec purchase in different maturities.
  • In addition to the G-SAP plan, the RBI will also continue to deploy regular operations.
  • This would be under the LAF, longer-term repo/reverse repo auctions, forex operations and open market operations including special OMOs.
  • This is to ensure that the liquidity conditions evolve in consonance with the stance of monetary policy.

What are the concerns?

  • Interest rates – For the Government, the RBI keeping the yield down is a good news because the overall borrowing costs go down.
  • But, the RBI artificially keeping the interest rates lower in the financial system has caused concerns.
  • In healthy economic system, the interest rates pricing should be driven by demand-supply.
  • It shouldn’t be artificially suppressed by the central bank; this might lead to distortions and have other consequences.
  • Savers – Cheaper rates will be good news to big, top rated companies who can issue bonds to raise money and to the government.
  • But low interest rates coupled with high inflation is a systemic worry for savers.
  • Already, savers are getting negative returns on their deposits if one takes into account the inflation adjusted rates or real rates.
  • Rupee – Government resorting to massive bond purchase to keep the rates low is not good news for the local currency.
  • The Indian Rupee, notably, came under pressure after the RBI announced the massive Rs 1 lakh crore bond purchase programme.
  • The fear of investors pulling capital out of India in a low interest environment is hurting the local currency.


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