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With reference to the Government Securities Acquisition Programme, consider the following statements:
1. It is part of RBI’s Open Market Operations (OMOs).
2. It will help reduce the difference between the repo rate and the 10-year government bond yield.
Which of the statements given above is/are correct?
- a)1 only
- b)2 only
- c)Both 1 and 2
- d)Neither 1 nor 2
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
With reference to the Government Securities Acquisition Programme, con...
- Recently, the Reserve Bank of India’s (RBI) decision to step up purchase of Government Securities (G-Sec) under the Government Securities Acquisition Programme (G-SAP) led to the yield on the benchmark 10-year bond falling below 6%.
- The RBI, for the year 2021-22, has decided to put in place a secondary market G-SAP 1.0.
- It is part of RBI’s Open Market Operations (OMOs). Hence, statement 1 is correct.
- Under the programme, the RBI will commit upfront to a specific amount of Open Market Purchases of G-Secs.
- The objective is to avoid volatility in the G-sec market in view of its central role in the pricing of other financial market instruments across the term structure and issuers, both in the public and private sectors.
- It will provide certainty to the bond market participants with regard to RBI’s commitment of support to the bond market in Financial Year (FY) 2021-2022.
- It will help reduce the difference between the repo rate and the 10-year government bond yield. Hence, statement 2 is correct.
- That, in turn, will help to reduce the aggregate cost of borrowing for the Centre and states in FY 2021-22.
- It will enable a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions.
Most Upvoted Answer
With reference to the Government Securities Acquisition Programme, con...
Government Securities Acquisition Programme
1. It is part of RBI's Open Market Operations (OMOs):
- The Government Securities Acquisition Programme (G-SAP) is indeed a part of the Reserve Bank of India's (RBI) Open Market Operations (OMOs).
- Under this programme, the RBI commits to purchasing a certain amount of government securities to infuse liquidity into the market.
- By conducting OMOs like G-SAP, the RBI aims to regulate the money supply, manage interest rates, and support the government's borrowing programme.
2. It will help reduce the difference between the repo rate and the 10-year government bond yield:
- One of the objectives of the Government Securities Acquisition Programme (G-SAP) is to reduce the spread between the repo rate and the 10-year government bond yield.
- By purchasing government securities through G-SAP, the RBI aims to bring down long-term bond yields, thereby narrowing the gap between the repo rate (short-term interest rate set by the RBI) and the 10-year government bond yield.
- Reducing this spread can help in anchoring borrowing costs for the government and corporates, thus supporting economic recovery and growth.
Therefore, both statements are correct as the Government Securities Acquisition Programme is indeed a part of RBI's Open Market Operations and aims to reduce the difference between the repo rate and the 10-year government bond yield.
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With reference to the Government Securities Acquisition Programme, consider the following statements:1. It is part of RBI’s Open Market Operations (OMOs).2. It will help reduce the difference between the repo rate and the 10-year government bond yield.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?
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With reference to the Government Securities Acquisition Programme, consider the following statements:1. It is part of RBI’s Open Market Operations (OMOs).2. It will help reduce the difference between the repo rate and the 10-year government bond yield.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? for Current Affairs 2024 is part of Current Affairs preparation. The Question and answers have been prepared according to the Current Affairs exam syllabus. Information about With reference to the Government Securities Acquisition Programme, consider the following statements:1. It is part of RBI’s Open Market Operations (OMOs).2. It will help reduce the difference between the repo rate and the 10-year government bond yield.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer? covers all topics & solutions for Current Affairs 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With reference to the Government Securities Acquisition Programme, consider the following statements:1. It is part of RBI’s Open Market Operations (OMOs).2. It will help reduce the difference between the repo rate and the 10-year government bond yield.Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'C'. Can you explain this answer?.
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