Government Securities: The system is expected to facilitate wider participation in the securities lending market by giving investors an opportunity to enhance portfolio returns by using passive securities.
Government Securities: The Reserve Bank of India (RBI) issued draft regulations regarding lending and borrowing of government securities. Earlier this month, in the review of monetary policy, the RBI had proposed to start the system of lending and borrowing of government securities. The system is expected to facilitate wider participation in the securities lending market by giving investors an opportunity to enhance portfolio returns by using passive securities.
According to the Reserve Bank’s draft Directions (Borrowing of Government Securities), 2023, the lending and borrowing (GSL) deal of government securities will be for a minimum of one day and a maximum of 90 days. The central bank has asked banks, market participants and other relevant parties to respond in this regard by March 17, 2023.
Does not include treasury bills
According to the draft instructions, the securities issued by the Central Government will be eligible for lending and borrowing. It does not include treasury bills. Securities (including Treasury Bills) issued by the Central Government and State Governments will be eligible for guarantee under GSL transactions.
An entity eligible to undertake repo transactions in Government securities and any other entity approved by the Reserve Bank shall be eligible to participate in GSL transactions as a lender of securities.
