The Reserve Bank of India will issue new short-term debt instruments called Cash Management Bills to help the Government of India meet temporary cash flow mismatches. These bills will mature in less than 91 days and will be similar to Treasury Bills. They will be auctioned by RBI at a discount to face value to allow the government to raise money at competitive rates to address short-term funding needs.

1. Govt introduces cash management bills
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
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.
Banks go for cash management bills
Mumbai: Cash management bills (CMBs) issued by the Reserve Bank of India (RBI) are
being favoured by banks to park their surplus liquidity thanks to the „arbitrage opportunity‟.
The cut-off yields on the CMBs, which are fairly liquid, are about 25-30 basis points higher
than the call money market rates.
J Moses Harding, head of global markets, IndusInd Bank, said, “Banks which have surplus
cash like to invest in cash management bills as they get 20-30 basis points more than the
overnight rates.”
The 49-day cash management bill auctioned by the central bank on Monday had a cut-off
yield of 8.285%, which is 15-25 basis points higher than the rates in the overnight segment.
The speedy income tax refunds this time around has prompted more issuances of cash
management bills. The government raises money through CMBs to meet its short-term
requirements and most auctions have seen large over-subscriptions. The 49-day CMBs
worth...
R6,000 crore, auctioned last Monday, received bids to the tune of R10,380 crore.

2. “The cash management bill auctions are bound to see oversubscription as as banks are not
losing out on yields,” said ADM Chavli, treasury, Bank of Baroda. “There is a good arbitrage
opportunity and the paper can be used to borrow through repo auctions,” he added.
On August 2, the RBI auctioned R8,000 crore worth of CMBs which attracted bids worth
R23,520 crore at a cut-off yield of 8.3612%.
Says Mohan Shenoy, group treasurer, Kotak Mahindra Bank, “CMs are a good short term
paper to invest in if you have surplus cash. Even if banks need cash in case of a mismatch,
they can refinance themselves through the LAF window at a lower rate at 8%.” ...
Issuance of Government of India Cash Management Bills
The Government of India, in consultation with the Reserve Bank of India, has decided to
issue a new short-term instrument, known as Cash Management Bills, to meet the temporary
cash flow mismatches of the Government. The Cash Management Bills will be non-standard,
discounted instruments issued for maturities less than 91 days.
The Cash Management Bills will have the generic character of Treasury Bills and their sale
will be subject to the terms and conditions specified in the General Notification No. F.2 (12)-
W&M/97 dated 31st March 1998 issued by Government of India and as amended from time
to time.
The Cash Management Bills will have the following features.
a) The tenure, notified amount and date of issue of the proposed Cash Management Bills
will depend upon the temporary cash requirement of the Government. However, the tenure of
the proposed Bills will be less than 91 days.
b) The proposed Bills will be issued at discount to the face value through auctions, as in
the case of the Treasury Bills.

3. c) The announcement of the auction of the proposed Bills will be made by the Reserve
Bank of India through separate Press Release to be issued one day prior to the date of auction.
d) The settlement of the auction will be on T+1 basis.
e) The Non-Competitive Bidding Scheme for Treasury Bills will not be extended to the Cash
Management Bills.
f) 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 under Section 24 of the Banking Regulation Act, 1949.