RBI Issues Draft Norms For Lending & Borrowing Of Government Securities

The Reserve Bank of India (RBI) on February 17th, 2023, issued draft norms for lending and borrowing of government securities.

In the February monetary policy, the RBI first announced the borrowing and lending of government securities.

The RBI said government securities lending (GSL) transactions can be undertaken for a minimum period of one day and a maximum period of 90 days.

An entity eligible to undertake repo transactions in government securities, and any other entity approved by the RBI will be eligible to participate in government securities lending transactions as a lender of securities.

Statement of Reserve Bank of India

The central bank said in a release, “Comments on the Draft Directions are invited from banks, market participants, and other interested parties by March 17, 2023”.

It further said that government securities issued by the central government excluding Treasury Bills shall be eligible for lending and borrowing under a GSL transaction.

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“Government securities issued by the Central Government (including Treasury Bills) and the State Governments shall be eligible for placing as collateral under a GSL transaction,” the bank said.

It further added that GSL transactions may use any mutually agreed trading process, including but not limited to bilateral or multilateral quote-driven or order-driven processes, anonymous or otherwise.

The move is aimed at improving liquidity and price discovery in the market.

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