RBI Approves Investor-Friendly Changes Before the Start of the New Year allow Lending-Borrowing in G-Sec to Benefit Investors with New Liquidity Options
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Just before the commencement of the new year, the Reserve Bank of India (RBI) has gifted investors with a significant change. The RBI has granted approval for investors to participate in government securities transactions, introducing a fresh and attractive option for liquidity. Investors can now engage in lending and borrowing in government securities, a move aimed at providing them with additional avenues for earning.
RBI released new guidelines on Wednesday, allowing investors to borrow and lend in government securities, with the exception of treasury bills. This change in the RBI’s stance is expected to widen the scope of the bond market. The guidelines specify that under the Government Securities Lending (GSL) transaction, treasury bills and state government bonds can be used as collateral.
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The RBI emphasizes that GSL transactions will have a minimum tenor of one day, ensuring effective functioning of lending and borrowing in the short-sell market. The maximum tenor will be determined based on the necessary cover for short-sell transactions.
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The central bank’s move is seen as an effort to expand the domain of the bond market and enhance the functioning of securities lending and borrowing markets. This strategic move by the RBI is expected to provide substantial assistance to investors, presenting them with a fresh and impressive option for managing liquidity. Investors will now have the opportunity to engage in lending and borrowing activities specifically in government securities, enhancing their flexibility in the financial market.
The initiative, outlined by the RBI, is set to bring about positive changes in the landscape of financial transactions, providing investors with increased choices and potential benefits. This move aligns with the central bank’s efforts to adapt to evolving market dynamics and cater to the diverse needs of investors in the financial sector.