RBI announces Rs1 trillion Govt-security purchase programme
RBI announces Rs1 trillion Govt-security purchase programme

The Reserve Bank of India (RBI) on Wednesday announced a secondary market govt security acquisition programme in which the RBI will purchase government bonds worth Rs1 trillion from the secondary market in the first quarter of this fiscal

 The first such purchase would be for an aggregate amount of 250 bln rupees on Apr 15. The announcement provides a reprieve to bond market traders worried about the large supply of dated securities in this financial year. The Centre's gross borrowing target for this financial year is 12.06 trln rupees, of which the government will borrow 7.24 trln rupees in Apr-Sep.

Last financial year, the RBI conducted outright open market operations and Operation Twist to keep a rein on the sovereign yield curve. The central bank devolved gilts on primary dealers at auctions and also cancelled auctions. The central bank conducted open market operations worth over 3 trln rupees last financial year.

 The RBI has repeatedly emphasised the need for an orderly evolution of the yield curve. Market participants believe that today's announcement allows the central bank to keep a lid over the government's borrowing cost. Reserve Bank of India Governor Shaktikanta Das said that the G-sec acquisition programme is distinct in character from other tools, such as OMOs, as it outlines the quantum of bond purchases for an entire quarter.

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