Mumbai: The Union government will issue a new short-term money market instrument called ‘cash management bills’ to meet its temporary cash flow mismatches, the Reserve Bank of India (RBI) said in a statement on Monday. Currently, the government borrows from RBI under a system called ‘ways and means advances’ to meet such mismatches.
These bills will be issued for maturities of less than 91 days and will be similar to treasury bills, or those government papers that have a maturity period of less than a year.
According to a senior dealer with a bond dealing house, the bill will allow the government to get the money it requires even if RBI cancels any of its auctions such as the one last week when the central bank rejected all bids for Rs12,000 crore of dated bonds.
This new bill, which will also be sold through RBI, will help the government raise money at cheaper rates for some time, the dealer said. “The proposed bills will be issued at discount to the face value through auctions, as in the case of the treasury bills,” RBI said. The bills will be eligible for the mandated bond investment of banks and will be tradeable.