RBI to take steps to enhance participation in Government Securities market

The Reserve Bank of India today announced two policy initiatives to enhance participation in the Government Securities market.

These initiatives relating to Short Sale and When issued market in government secuirities would be contained in separate circulars to be issued by

the end of this month, RBI said in the Statement of Developmental and Regulatory policies issued alongside the latest review of the RBI policy for the

current fiscal on Wednesday

With regard to Short Sale, RBI said it propsed to liberalise the eligible short sle participants base as well as relax the entity wise and security category

wise limits for short selling in G-Secs. THe Rbi had in February 2006 introduced short sale in Central Government Securities to provide participants with

a tool to express two-way view on interest rates and thereby enhance price discovery. Currently, scheduled commercial banks, primary dealers and certain

well-managed Urban Cooperative Banks (UCBs) are permitted to undertake short sale transactions. There are entity-wise and (liquid or illiquid) security-wise

limits for undertaking short sale transactions. With an objective to deepen further the G-Sec and repo market, it is proposed to liberalise the eligible short sale

participants’ base as well as relax the entity-wise and security category-wise limits for short selling in G-Sec the Apex bank said

The ‘when issued’ (WI) market in the Central Government Securities (G-Secs) RBI proposedto liberalise the eligible participants’ base and relax the entity-wise

limits for taking positions in the when issued market. When isued market was introduced in May 2006, in light of the Fiscal Responsibility and Budget Management (FRBM) Act 2003, to strengthen the debt issuance framework via better management and distribution of auction risk.