MONPOLICY: QUANTI TOOLS: OMO → G-SAP

Question 1

What is G-SAP?

Answer 1

G-SAP stands for Government Securities Acquisition Programme. It is a mechanism used by the Reserve Bank of India (RBI) to proactively manage liquidity in the financial system.

Question 2

How does G-SAP work?

Answer 2

G-SAP involves the RBI purchasing government securities (G-Secs) from the secondary market. This injects liquidity into the system and helps to bring down interest rates. The RBI announces a specific timetable for the G-SAP purchases.

Question 3

What are the primary objectives of G-SAP?

Answer 3

Manage Liquidity: Ensure adequate liquidity in the financial system. Lower Interest Rates: Facilitate the reduction of interest rates, making borrowing more affordable. Support Economic Growth: Promote investment and economic growth through easier credit availability.

Question 4

When was G-SAP introduced?

Answer 4

G-SAP was first introduced in 2021 in response to the economic stresses caused by the COVID-19 pandemic.