Mumbai, Feb 12: The Reserve Bank of India is all set to introduce the 28-day treasury bill in the securities market. This will add further depth to the debt market which currently features 14-day, 91-day and 364-day treasury bills apart from government of India securities. The new security will qualify for repos and is likely to have a notified amount.The central bank has also decided against the entry of foreign institutional investors (FIIs) in the treasury bills market. At present, FIIs are allowed to invest 30 per cent of their corpus in gilts. The dedicated gilt funds are also barred from picking up T-bills.
"The RBI will not allow them in this segment as of now," sources close to the central bank said. FIIs have been clamouring for investment in short-term securities like treasury bills for quite some time now.
In yet another development, the Reserve Bank is set to introduce screen-based money market deals in the next four months. Various banks are being roped in to participate and logisticaldelays are proving to be a dampner. These are likely to be removed in due course and officials in the central bank are hopeful that the new system will be put in place by May. "The screen-based trading will bring in transparency," sources said.
Explaining the delay in putting place the network, sources said that while some banks are interested in investing the amount, other banks are taking time to formalise their views. The tender is yet to be awarded to any bidder. Reuters and Bridge are in the race for setting up the network.
Sources close to the central bank indicated that the decks for the 28-day treasury bill have been cleared and will be introduced "any time".
The apex bank had in the busy season credit policy in October 1997 decided to auction the 28-day treasury bill to meet the cash management requirements of various segments of the economy.
According to sources, all issues regarding the clearance of the 28-day T-bill have been cleared by the government.
"The new instrument will helpbanks and corporates to invest their short-term surpluses at zero risk," a treasury head of a private bank said.
Moreover, market sources feel that the instrument is likely to be traded in the secondary market unlike the 14-day T-bill. The 14-day T-bill, which was introduced in May 1997 for the same purpose of short-term cash management, witnesses very little trading in the secondary market.
"The 28-day T-bill will certainly be traded in the secondary market when there is enough liquidity in the market," a money market dealer explained.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
