RBI changes G-Sec Auction Methodology

Why in news ?

Reserve Bank of India (RBI), while reviewing market conditions and market borrowing program of government, has decided that benchmark securities of 2-year tenor, 3-year tenor, 5-year tenor, 10-year tenor & 14-year tenor and Floating Rate Bonds (FRBs) will be issued using uniform price auction method. However, for benchmark securities of 30-year and 40-year, auction will continue to be multiple price-based auction.

1. What is Government Security?

G-sec is a tradable instrument which is issued by Central Government or State Governments. It acknowledges Government’s debt obligation. G-Secs are of two types:

2. Short Term– They is usually called treasury bills. They have original maturities of less than one year. It is issued in three tenors viz., 91-day, 182-day and 364-day.
3. Long Term– They are usually called Government bonds or dated securities having original maturity of one year and more.