Why is it in the news?
- The Reserve Bank of India (RBI) has implemented Government Securities Lending (GSL) Directions, 2023.
More about the news
- GSL refers to the lending of eligible Government Securities (G-Secs) for a fee, from the owner (lender) to a borrower. This lending is done against collateral in the form of other G-Secs and for a specified period.
- G-Secs issued by the Central government, excluding Treasury Bills (T-Bills), are eligible for lending/borrowing.
- Under GSL transactions, G-Secs issued by the Central Government, including T-Bills, and State Government bonds are eligible for use as collateral.
Objectives:
- Permitting lending and borrowing of G-Secs aims to add depth and liquidity to the G-sec market, facilitating efficient price discovery.
- The move is expected to expand participation in the securities lending market by investors.
- GSL is anticipated to enhance the operational efficiency of government bonds, particularly for insurers.
| About Government Securities (G-Secs) · G-Sec is a tradeable instrument issued by the Central or state Governments, acknowledging the government’s debt obligation. · G-Secs can be short-term, known as Treasury Bills (T-Bills), with maturities of less than one year, or long-term, referred to as Government bonds or dated securities with a maturity of one year or more. · G-Secs carry virtually no risk of default, earning them the designation of risk-free gilt-edged instruments. |
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