In a bid deepen the bond market, Reserve Financial institution of India, on Wednesday, issued tips for lending and borrowing in authorities securities.
A well-functioning marketplace for securities lending and borrowing will add depth and liquidity to the Authorities Securities (G-Sec) market, aiding environment friendly worth discovery.
In February, the central financial institution had come out with the draft RBI (Authorities Securities Lending) Instructions, 2023 and primarily based on the feedback obtained on the draft, the instructions have been finalised, in line with a notification.
G-Secs issued by the central authorities, excluding treasury payments, can be eligible for lending/borrowing below a Authorities Safety Lending (GSL) transaction.
The securities obtained below a repo transaction, together with by RBI’s Liquidity Adjustment Facility or borrowed below one other GSL transaction would even be eligible to be lent below a GSL transaction, as per the notification.
Additional, it mentioned that G-Secs, together with T-Payments and state authorities bonds, can be eligible for putting as collateral below a GSL transaction.
As regards maturity, RBI mentioned the minimal tenor of a GSL transaction can be sooner or later and the utmost can be the utmost interval prescribed to cowl brief gross sales.
The lending and borrowing of G-Secs are anticipated to enhance the present marketplace for ‘particular repos’.
The system is predicted to facilitate wider participation within the securities lending market by offering buyers an avenue to deploy idle securities and improve portfolio returns.
