FII arbitrage pumps up treasury bill volumes

 This is even as the Reserve Bank of India (RBI) has pruned rates on NRE deposits to check foreign exchange inflows from non-resident Indians (NRIs).

 NRIs are, however, unable to arbitrage as the board lot in T-bills market stands at Rs 5 crore,. Some expats are, however, investing in foreign mutual funds which invest in T-bills, banking sources said.

 FIIs are heavily investing in 91-day T-bills. As a result of which primary dealers are aggressively bidding in the primary auction, said Darashaw officials.

 Last week saw 91-day T-bills cut-off yields ruling at a 20-25 basis point discount to the repo rate of 4.5 per cent.

 FIIs are, however, not taking interest in dated government securities on account of the high volatility in prices and the fact that they are short-term players, said Sharukh Wadia, senior vice-president & head treasury, IndusInd Bank.

 He added: