RBI updates auction schedule for treasury bills.

Synopsis : The RBI has revised the auction schedule for treasury bills, reducing the sales volume and introducing new bonds for buyback operations to enhance bank liquidity, with flexible adjustments based on government needs and market conditions.

The Reserve Bank of India (RBI) has announced a revised schedule for the auction of Government of India treasury bills, which are short-term debt instruments issued to meet the government's borrowing needs. These T-bills are known for their high liquidity and security, offering maturity options of 91, 182, and 364 days.

Following consultations with lenders, the RBI has reduced the volume of treasury bill sales and introduced a new selection of bonds for the government’s buyback operations. This adjustment is intended to free up cash for banks.

According to the RBI, "The Reserve Bank of India, in consultation with the Government of India, will have the flexibility to modify the notified amount and timing for auction of Treasury Bills depending upon the requirements of the Government of India, evolving market conditions, and other relevant factors, after giving due notice to the market." The central bank added that the auction calendar is subject to change due to circumstances such as intervening holidays, with any changes to be communicated via press releases.

After market hours on Friday, the RBI stated it would auction Rs 72,000 crore worth of T-bills weekly between May 22 and June 26, a significant reduction from the previously announced Rs 1.32 lakh crore. This reduction aligns with the government's plan to repurchase bonds during its next buyback operation scheduled for May 21.

T-bills are sold at a discount to their face value, with the difference between the purchase price and the nominal value representing the investor's return. By decreasing the issuance of T-bills, the RBI releases additional liquidity for banks, which would have otherwise been tied up in these securities.

Related Questions

1. What are Government of India treasury bills?

Government of India treasury bills (T-bills) are short-term debt instruments issued to meet the government's borrowing needs, offering maturity options of 91, 182, and 364 days.

2. Why has the RBI reduced the volume of treasury bill sales?

The RBI has reduced the volume of treasury bill sales to free up cash for banks and align with the government's plan to repurchase bonds during its next buyback operation.

3. How often will the RBI auction T-bills between May 22 and June 26?

The RBI will auction Rs 72,000 crore worth of T-bills weekly between May 22 and June 26.

4. What flexibility does the RBI have regarding the auction of Treasury Bills?

The RBI has the flexibility to modify the notified amount and timing for the auction of Treasury Bills depending on the requirements of the Government of India, evolving market conditions, and other relevant factors.

5. What is the benefit of decreasing the issuance of T-bills for banks?

By decreasing the issuance of T-bills, the RBI releases additional liquidity for banks, which would have otherwise been tied up in these securities.