Liquidity in secondary market for G-secs hugely improved in the past decade

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Liquidity in the secondary market for government securities (G-secs) has hugely improved over the past decade. The average daily volume in G-secs trading, including in state development loans or SDL (bonds issued by the states), has remained higher than that in corporate bonds and the equity markets. Liquidity in G-Secs is mainly in a few benchmark securities, particularly the 10-year bench­mark. The average bid-ask spread for liquid securities in the G-Sec market has remained at less than a basis point during the past few years.

There has been a conscious and continuous effort by the Reserve Bank of India to expand the investor base — and thereby liquidity — of the markets it regulates, while preserving financial stability. The investor base for G-Secs has expanded over the past decade in terms of an increase in the share of holdings by insurance companies and corporate entities, and a corresponding decrease in the share of commercial banks.


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