The Reserve Bank of India (RBI) today announced a second auction of cash management bills to enable the Centre to raise Rs 6,000 crore through 28-day bills, which are similar to treasury bills but have a shorter tenure.
Last week, the central bank had auctioned 35-day cash management bills to help the Centre mop up Rs 6,000 crore.
The second auction is due tomorrow and the bills are to be repaid on June 16.
The instrument, which was launched last August, was designed to help the government tide over temporary cash flow problems. However, till last, week the Centre did not use the cash management bill.
Market sources said that the two issuances will help in offsetting a part of the expected cash crunch in the middle of June as companies are due to pay the first installment of advance tax. This year, payment of spectrum fee for which auction is currently underway could add to the pressure and might push up short-term rates, bankers said.
The government has been borrowing heavily from RBI through the ways and means advances (WMA) route. At the end of April, WMA advances were estimated at nearly Rs 29,000 crore.