The central bank should remain the regulator for the government securities (G-sec) market. Do you agree with this view? Comment. (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· The RBI has been facing criticism, of late, due to the manner in which it is controlling government bond yields.
· While the central bank has reiterated that the yield management is critical for keeping borrowing costs in the economy low, it has also acknowledged that low bond yields are needed to control the government’s interest burden.
· The central bank currently needs all its powers to support the government in the ongoing crisis.
· Control over the G-sec market is critical in order to discharge many of its key functions such as management of systemic liquidity, regulating foreign exchange market and maintaining financial stability.
· With the central bank being the repository of G-secs and overseeing the trading in these securities, it can efficiently balance system liquidity and manage the liquidity caused by foreign portfolio and FDI flows, thus keeping exchange rate stable and interest rates across maturities under check in order to foster growth.
· It is uncertain if moving primary issuances of government bonds to stock exchanges will work as the composition of participants in equities is quite different from the G-sec market, which is institution-driven.
· India began working towards this bifurcation in 2018 with the proposal to set up public debt management cell in the Budget division but there has not been much progress on this since.
Aariff 3 years
Hi Sir/ Mam,
Waiting for your comments.Thank you
IAS Parliament 3 years
Try to provide data to support your answers and bring coherence i the answer. Keep Writing.
