The central bank has, in fact, been able to bring down the net RBI credit to the government considerably in the past one week, the RBI officials said.

"We are not bothered that the M3 has reached 20 per cent. Most of the money that is flowing into the system is being sterilised trough open market operations (OMO). We have been able to mop up quite a bit through the OMO," Usha Thorat, chief general manager at the RBI, said on the sidelines of a debt seminar organised here.

According to her, the net RBI credit to the government, which has grown by 20 per cent on a year-on-year (YoY) basis for the week ended September 4, will be down by a huge amount for the week ended September 11. The RBI had reduced the net RBI credit to the government from its peak level of Rs 21,789crore on July 10 to Rs 6,163 crore on August 28, showing a reduction of Rs 15,626 crore.

Admitting that the treasury bills put on sale by the RBI were well below the secondary market, Thorat said that the central bank had not pegged the yields in accordance with the secondary market. "There is a refinance facility available, so any one who is interested in availing of the refinance should be in a position to buy the security," Thorat said.

The RBI is selling 91- and 364-day treasury bills through its sale window to sterilise the short-term excess money on account of the inflow of the RIB.

The Reserve Bank is also pressuring the Primary Dealers Association of India (PDAI) and the FIMMDA to kick off screen-based trading in the money market. "We have told them that the entire system should be futuristic enough so that there should not be problems. The earlier they kick off, the better it is," Thorat said.

She added that with the formation of the SROs, the RBI had shifted the burden of establishing ascreen based trading format in the money market to the PDAI and FIMMDA.