RBI to suspend the GSAP system

Context

The Reserve Bank of India has decided to suspend the Government Securities Acquisition Programme (G-SAP).

What is GSAP?

• GSAP is a dedicated cash-generating window where RBI buys large amounts of paper to invest in a banking system.
• It also sold paper under the window to maintain the balance of the goods in the system.

G-Sec Market

• Globally, the G-Sec market is the majority of the institutional market, where major stakeholders are banks and long-term investors, including investment funds, insurance funds, retirement funds.

The RBI's multi-faceted role as a monetary policy authority, manager of systemic liquidity, government debt manager, a regulator of interest rate and foreign exchange markets, a regulator of payment and settlement system, and overseer of financial stability makes the G-Sec market critical for the effective discharge of these responsibilities.