Why in News
- Reserve Bank of India rejected all bids in Treasury Bill auction
- Government planned to raise ₹35,000 crore
- Move aimed at boosting banking system liquidity before financial year end (March 31)
What RBI Did
- Cancelled auction of:
- 91 day Treasury Bills
- 182 day Treasury Bills
- 364 day Treasury Bills
- No borrowing by government
- First full cancellation in 13 months
What are Treasury Bills
- Short term government borrowing instruments
- Issued by Government of India
- Managed by Reserve Bank of India
- Zero coupon securities
- Sold at discount, redeemed at face value
- Types of T Bills: 91 day Treasury Bills, 182 day Treasury Bills and 364 day Treasury Bills.
Why RBI Cancelled Auction
1. Improve Banking Liquidity
- Government not borrowing means:
- Money remains in banking system
- Banks have more funds to lend
- Liquidity boost estimated: ₹35,000 crore
2. Financial Year End Liquidity Needs
- Banks need funds for:
- Balance sheet adjustments
- Meeting regulatory requirements
- Managing withdrawals
3. Tax Inflows to Government
- Government recently received: Advance tax payments and GST collections
- Reduced need for immediate borrowing
4. Avoid Market Pressure
- Higher yields expected in auction
- RBI avoided: Interest rate spikes and Market volatility
| [2018] Consider the following statements: 1 The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities. 2 Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments. 3 Treasury bills offer are issued at a discount from the par value. Select the correct answer using the code given below: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only (d) 1, 2 and 3 |
