G-SAP

Subject : Economy

Context : Recently, the governor of RBI has announced a new programme called Government Securities Acquisition Programme (G-SAP).

Concept :

Government Securities Acquisition Programme (G-SAP)

Under G-SAP, the RBI will purchase government securities worth Rs 1 lakh crore in the first quarter of FY22.
It is a structured purchase program which will definitely calm investors’ nerves and help market participants to bid better in scheduled auctions and reduce volatility in bond prices.

Significance of G-SAP

The G-SAP aims to provide more comfort to the bond market in the backdrop of the government’s elevated borrowing for this year, which the RBI has to ensure goes through without causing disruption.
It will provide certainty to the bond market participants with regard to RBI’s commitment of support to the bond market in FY22.
The market participants have always wanted to know the RBI’s Open Market Operations (OMO) purchase calendar, and the RBI has now provided that to the market through G-SAP.
It will help reduce the spread between the repo rate and the 10-year government bond yield which will help to reduce the aggregate cost of borrowing for the Centre and states in FY22.