RBI issues draft norms for lending and borrowing of G-secs

The Reserve Bank of India on Friday came out with draft norms for lending and borrowing of government securities with wider participation in the securities lending market. Earlier this month, the RBI proposed the introduction of securities lending and borrowing in government securities (G-secs) with an aim to facilitate wider participation in the securities lending market by providing investors an avenue to deploy idle securities and enhance portfolio returns.

"Government Securities Lending (GSL) transactions shall be undertaken for a minimum period of one day and a maximum period of ninety days," said the draft Reserve Bank of India (Government Securities Lending) Directions, 2023.

It has invited comments from banks, market participants and other interested parties by March 17, 2023. The draft said government securities issued by the central government excluding Treasury Bills would be eligible for lending/borrowing under a GSL transaction.

Government securities issued by the central government (including Treasury Bills) and the state governments would be eligible for placing as collateral under a GSL transaction, it added. An entity eligible to undertake repo transactions in government securities, and any other entity approved by the Reserve Bank would be eligible to participate in GSL transactions as a lender of securities.