RBI to conduct open market operation under G-SAP 2.0

Apart from managing the liquidity in the economy, RBI’s monetary policies also affect borrowing costs for the government. Elaborate. (150 words)

Approach:

• Introduce by giving a simple definition of Monetary Policy
• Briefly describes various instruments used by RBI for implementing its monetary policy
• Describe how RBI affects costs of borrowing for the government by changing market interest rates and managing the yield curve by acquiring G-secs.
• Conclude by briefly describing recent RBIs actions that have affected the cost of borrowings for the government.