RBI to auction 84-day CMBs worth Rs 80,000 crore

CMBs are used to meet the temporary mismatches in the cash flow of the government. This instrument has the generic character of treasury bills but is issued for maturities less than 91 days.

The Reserve Bank of India (RBI) on Tuesday announced the auction of 84-day cash management bill (CMB) through which the government intends to raise Rs 80,000 crore. The auction will be conducted on Thursday, the RBI notified.

CMBs are used to meet the temporary mismatches in the cash flow of the government. This instrument has the generic character of treasury bills but is issued for maturities less than 91 days.

Siddharth Shah, head of treasury at STCI Primary Dealer, said in current times of excessive systemic liquidity, CMBs seem to be a better option for the government to raise funds needed for temporary requirements.

“The 84-day CMBs come cheaper as compared to utilising the ways and means advances for temporary cash requirements as the latter is priced at the repo rate. This auction should sail through easily considering the high liquidity environment and it is likely to get priced somewhere close to the reverse repo rate,” Shah said.

The central bank had recently cut the policy repo rate by 40 bps to 4% with the reverse repo rate currently standing at 3.35%.

Latest RBI data shows that banks are still parking over Rs 7 lakh crore with the RBI using the reverse repo window.