RBI to conduct two auctions in August to pump Rs 50,000 Cr under G-SAP 2.0

The Reserve Bank of India (RBI) Governor Shaktikanta Das on Friday said that the RBI will look to conduct more auctions to continue supporting the evolving macroeconomic and financial conditions in the country. The RBI proposes to conduct two more auctions of Rs 25,000 crore each on August 12 and 26 under the secondary market government securities acquisition programme or G-SAP 2.0. The undertaking worth Rs 50,000 crore will be held to enable an orderly evolution of the yield curve.

"Our recent G-SAP auctions that have focussed on securities across the maturity spectrum are intended to ensure that all segments of the yield curve remain liquid. We will continue to undertake these auctions and other operations like open market operations (OMOs) and operation twist (OT) among others and calibrate them in line with the evolving macroeconomic and financial conditions," the RBI Governor Shaktikanta Das said while announcing the third bi-monthly monetary policy.

The Governor also noted that the RBI’s secondary market G-sec acquisition programme (G-SAP) has been successful in yielding keen responses from market participants. The RBI through its market operations, both conventional and unconventional, has managed to maintain ample surplus liquidity since the onset of the COVID pandemic. The RBI through such undertakings has ensured easing of financial conditions in support of domestic demand.

Markets have adapted the VRRR, says RBI Governor

Meanwhile, access to the fixed-rate overnight reverse repo has been kept open, the Governor said. Das also added that the markets have adapted and even welcomed the VRRR in view of the higher remuneration it offers in comparison to the fixed-rate overnight reverse repo. “Fears that the recommencement of the VRRR tantamount to liquidity tightening have been allayed. We have seen a higher appetite for the VRRR in terms of the bid-cover ratio in the auctions,” he noted. The Governor informed the VRRR auctions of Rs 2.5 lakh crore will be held fortnightly on August 13, 2021; Rs 3 lakh crore on August 27, 2021; Rs 3.5 lakh crore on September 9, 2021; and Rs 4 lakh crore on September 24, 2021.

"Our options are always open to including both off the run and on the run securities in the G-SAP auctions and operation twist. It is expected that the secondary market volumes would pick up and market participants take positions that lead to two-way movements in yields" he added. Das, while explaining the stakes said the central bank's endeavour as the debt manager of both Central and state governments to ensure orderly completion of their borrowing programmes with minimised risks have worked well. While G-sec yields serve as a benchmark and have a high signalling value for other segments of the debt market, the RBI handed guidance on the orderly path of yields through auction cutoffs, devolvements, cancellations and exercise of greenshoe options in primary market operations.

IMAGE: PTI