Reserve Bank of India (RBI) has given the go-ahead for the introduction of "when issued" market in government securities.In a when issued market, trading is done in government securities that are about to be auctioned by the government. The trading happens just after the auction is announced based on expectations of the price at which the market will bid for the paper.The central bank said guidelines covering permissible categories of securities and participants, surveillance system, limits on positions, internal control and reporting requirements have been prepared in consultation with market participants.RBI is also working out the modalities for consolidation of central government securities by buying illiquid securities from the market and replacing the stock with liquid securities.In order to streamline state finances, governments have been encouraged to progressively increase the share of market borrowings under auction instead of opting for the on-tap sale route. While auction helps states in getting market related rates for raising funds, the rate of interest is fixed by the RBI under on-tap sales.States have also been advised to develop an advance indicative open market borrowing calendar in line with the half yearly indicative calendar for dated government of India securities. This, according to RBI, would enable institutional and retail investors to plan their investments.
