In a move that is expected to provide banks with an attractive short-term investment avenue, the government has announced the introduction of 14-day treasury bills.
These treasury bills will be auctioned on pre-specified dates by the Reserve Bank of India at a discounted price which will be announced on the day of the auction. Unlike the 91-day treasury bills, a notified amount will not be specified. The RBI will issue press releases from time to time indicating particulars about the date of auction, announcement of results and the date for making payments.
The 14-day treasury bills duration coincides with the reporting cycle of banks. They will be issued for a minimum amount of Rs 25,000 and multiples thereof. These bills will form part of the borrowings of the central government and will be an approved instrument for statutory liquidity ratio purposes. The bills may be purchased by any persons resident in India, firms, companies, corporate bodies and institutions. State governments, eligible provident funds and the Nepal Rashtra Bank will also be allowed to bid in the auctions as non-competitive bidders.
The yields at the 14-day treasury bills auctions are expected to throw up a new benchmark in the market.