RBI Issues Draft Norms For Lending And Borrowings Of  G-Secs.

• Recently, the Reserve Bank of India (RBI) proposed introduction of securities lending and borrowing in government securities (G-secs).
• Aim-to facilitate wider participation in the securities lending market.

Highlights

• Government Securities Lending (GSL) transactions shall be undertaken for a minimum period of one day and a maximum period of ninety days.
• Government securities issued by the central government excluding Treasury Bills would be eligible for lending/borrowing under a GSL transaction.
• Government securities issued by the central government (including Treasury Bills) and the state governments would be eligible for placing as collateral under a GSL transaction.
• An entity eligible to undertake repo transactions in government securities, and any other entity approved by the Reserve Bank of India would be eligible to participate in GSL transactions as lender of securities.

About Government securities (G-secs)

• G-Sec is a tradeable instrument issued by Central or state Governments. It acknowledges government’s debt obligation.
• Securities can be either
  • short term -usually called T-Bills, with maturities of less than one year or
  • long term usually called Government bonds or dated securities with maturity of one year or more.
• Central Government issues both, T-bills and bonds or dated securities while State Governments issue only bonds or dated securities, called State Development Loans (SDL).
• G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.