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RBI announces G-SAP2.0 worth Rs 1.2L cr for liquidity support
In a bid to infuse more liquidity in the market, the Reserve Bank of India (RBI) has announced undertake Government Securities Acquisition Program (G-SAP) 2.0 during the second quarter of FY22 and conduct secondary market purchase operations of Rs 1.20 lakh crore.
The specific dates and securities under G-SAP 2.0 operations, however, will be indicated separately.
"We do expect the market to respond appropriately to this announcement of G-SAP 2.0," said the RBI Governor Shaktikanta Das in his statement post the Monetary Policy Committee meeting.
He noted that the foremost endeavour of RBI throughout the pandemic has been to create conducive financial conditions so that financial markets and institutions keep functioning normally.
Accordingly, adequate system level liquidity has been ensured and targeted liquidity to stressed institutions and sectors has been provided.
As a result, borrowing costs and spreads have been reduced to historic lows, Das said, adding that This has incentivised a record amount of private borrowing through corporate bonds and debentures in FY2020-21.
Reserve money rose by 12.4 per cent (y-o-y) as on May 28, 2021, while money supply (M3) grew by 9.9 per cent (y-o-y) (as on May 21), and bank credit by 6.0 per cent (y-o-y) (as on May 21). G-SAP operations and some instances of cancellations, devolvement and exercise of greenshoe options in G-Sec auctions have conveyed the Reserve Bank's views to the market.
"With the second wave intensifying this financial year, the focus of the Reserve Bank is increasingly turning from systemic liquidity to its equitable distribution. In fact, the enduring lesson from the experience of the pandemic in the Indian context has been the deployment of unconventional monetary policy measures that distribute liquidity among all stakeholders," he said.
The Governor said that RBI shall continue with its proactive and pre-emptive approach, relying on market-based channels of transmission as we strive to mitigate the toll of the pandemic and return the economy to a path of high and durable growth.