The Reserve Bank of India (RBI) on Monday announced the auction of 35-day government cash management bills for a notified amount of Rs 6,000 crore. The auction will be conducted on May 11, using the multiple-price auction method. The cash management bills will be repaid on par on June 16. Dealers say there will be good demand for this short-term money market instrument.
?Most market participants will look at investing in this particular instrument with the market expecting the yields to harden further,? said S Srinivasa Raghavan, vice-president & head of treasury at IDBI Gilts. The government could get a coupon of 3.25-3.50% for this Bill.
In August 2009, the government, in consultation with RBI, had decided to issue a new short-term instrument to meet the temporary cash flow mismatches of the government. The press release issued by RBi and the government at that time said the new instrument, known as Cash Management bills, will be non-standard, discounted instruments issued for maturities less than 91 days.
The tenure, notified amount and date of issue of the proposed cash management bill will depend upon the temporary cash requirement of the government. However, the tenure of the proposed bills will be less than 91 days. The bills will be issued at discount to the face value through auctions, as in the case of the treasury bills. The announcement of the auction of the proposed bills will be made by RBI through separate press release to be issued one day prior to the date of auction and the settlement of the auction will be on T+1 basis.
?The proposed bills will be tradable and qualify for ready forward facility. Investment in the proposed bills will be reckoned as an eligible investment in government securities by banks for SLR purpose,? RBI said.
