Govt to raise funds via new short term papers

The government will mop up funds through a new kind of instrument -- cash management bills -- to meet its temporary mismatches in cash requirements.

"The government of India, in consultation with the RBI, has decided to issue a new short-term instrument, known as cash management bills, to meet the temporary cash flow mismatches of the government," a Finance Ministry statement said today.

The cash management bills will have maturities of less than 91 days and will have the broader features of treasury bills.

Treasury bills are also of short maturity of less than a year, but not as short as these new instruments. Treasury bills are issued for 91 days, 182 days and 364 days.

 

The new bills will be issued at discount to the face value through auctions, and the holder will get the full face value at the time of maturity. However, he can also trade the bills in the market.

Analysts said since the new instruments are of short maturity, they are not expected to crowd out private sector from the market.

To meet its burgeoning expenditure requirements, the government has pegged its market borrowings at more than Rs 4.5 crore in the current fiscal, bulk of which will be raised in the first half itself.