ForumIAS announcing GS Foundation Program for UPSC CSE 2025-26 from 19 April. Click Here for more information.
ForumIAS Answer Writing Focus Group (AWFG) for Mains 2024 commencing from 24th June 2024. The Entrance Test for the program will be held on 28th April 2024 at 9 AM. To know more about the program visit: https://forumias.com/blog/awfg2024
Contents
What is the News?
Reserve Bank of India(RBI) has announced that it will conduct an open market purchase of government securities worth Rs 25,000 crore under the G-sec Acquisition Programme (G-SAP 2.0).
About G-Sec Acquisition Programme(G-SAP):
- G-Sec Acquisition Programme(G-SAP) is basically an unconditional and a structured open market operation (OMO), of a much larger scale and size.
- The word ‘unconditional’ here connotes that RBI has committed up front that it will buy G-Secs irrespective of the market sentiment.
Aim of G-SAP:
- The aim of G-SAP is to enable a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions.
Benefits of G-SAP:
- G-SAP is expected to bring down the cost of borrowings for the government. Further, it will counter the upward pressure on yields due to a higher government borrowing programme.
- Yield: It is the annual percentage rate of return earned on a security. Yield is a function of a security’s purchase price and coupon interest rate. But, the yield fluctuates according to numerous factors, including global markets and the economy.
Concerns:
- Experts are of the opinion that with the announcement of G-SAP, the rupee has already depreciated. There is a trade-off between a tumbling rupee and lower borrowing costs.
- Additionally, too much liquidity will drive up inflation.
