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The Reserve Bank of India (RBI) on Tuesday said it will conduct an auction of a 84-day Government of India Cash Management Bills (CMB), on May 28, aggregating to ₹80,000 crore. These funds will help the government meet temporary mismatches in its cash flow.
The size of the auction suggests the government is borrowing about 27 per cent of what it borrowed via this route in FY20 (₹3-lakh crore). This is the first auction of CMB in FY21.
According to CCIL data, the government borrowed ₹3-lakh crore in FY20 via CMBs, up 58 per cent over the ₹1.9-lakh crore it borrowed in FY19. The weighted average cut-off on these bills in FY20 was lower at 5.02 per cent, against 6.59 per cent in FY21.
The government, in consultation with the RBI, introduced the CMB in 2010. CMBs have the generic character of Treasury-bills but are issued for maturities less than 91 days. They are tradable and qualify for ready forward facility. An investment in these securities is also reckoned as an eligible investment in government securities by banks for statutory liquidity ratio purposes.
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