RBI approves lending, borrowing in government securities to deepen bond market

The Reserve Bank of India (RBI) on Wednesday launched pointers for lending and borrowing in government securities in an effort to strengthen the bond market. The Government Securities (G-Sec) market will achieve depth and liquidity through a wholesome securities lending and borrowing market, which can facilitate efficient value discovery, in accordance to a notification. 

In February, the central financial institution got here out with the draft RBI (Government Securities Lending) Directions, 2023 and primarily based on the feedback acquired on the draft, the instructions have been finalised. G-Secs issued by the central government, excluding Treasury Bills, can be eligible for lending/borrowing underneath a Government Security Lending (GSL) transaction.

Eligibility for GSL transaction

The securities obtained underneath a repo transaction, together with by RBI’s Liquidity Adjustment Facility or borrowed underneath one other GSL transaction would even be eligible to be lent underneath a GSL transaction, as per the notification.

Further, it mentioned that G-Secs, together with T-Bills and state government bonds, can be eligible for putting as collateral underneath a GSL transaction. As regards maturity, RBI mentioned the minimal tenor of a GSL transaction can be someday and the utmost can be the utmost interval prescribed to cowl quick gross sales.

Benefits of G-Secs lending and borrowing

The lending and borrowing of G-Secs are anticipated to increase the present market for ‘particular repos’. The system is predicted to facilitate wider participation in the securities lending market by offering traders an avenue to deploy idle securities and improve portfolio returns. 

(With inputs from PTI)

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