G-Sec Acquisition Programme(G-SAP) – UPSC Prelims

G-Sec Acquisition Programme(G-SAP):
  • G-Sec Acquisition Programme(G-SAP) is basically an unconditional and a structured open market operation (OMO), of a much larger scale and size.
  • Aim of G-SAP: The aim of G-SAP is to enable a stable and orderly evolution of the yield curve amidst comfortable liquidity conditions.
  • Benefits of G-SAP: G-SAP is expected to bring down the cost of borrowings for the government. Further, it will counter the upward pressure on yields due to a higher government borrowing programme.
  • Yield: It is the annual percentage rate of return earned on a security. Yield is a function of a security’s purchase price and coupon interest rate. But, the yield fluctuates according to numerous factors, including global markets and the economy.
  • Concerns:
    • Experts are of the opinion that with the announcement of G-SAP, the rupee has already depreciated. There is a trade-off between a tumbling rupee and lower borrowing costs.
    • Additionally, too much liquidity will drive up inflation.

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