The adoption of better fiscal management practices, healthy tactics collections, and a build-up of cash by state governments have resulted in a spike in cash balances
With central and state governments’ cash balances surging due to less spending and robust revenue collections, there has been a sharp drop in yields of treasury bills (T-bills) across tenures. The yield on 91-day T-bills fell to 6.55%, its lowest since January 2023, and is only 5 basis points above the Reserve Bank of India’s (RBI’s) key policy rate. The spread between the two is — the lowest since May 2022. Yields on 180-day and 364-day bills fell 5-6 basis points each.
As a result, the RBI has decided to cancel the T-Bill auction for the remaining two weeks in the quarter ending September for better cash management. On Thursday, the central bank cancelled the auction of two T-bills worth Rs 20,000 crore each, scheduled for this month.
Cancelling T-Bills auction is just a part of better cash management strategy of the RBI,” a dealer with a primary dealership said. He also added that it denotes that revenue growth and revenue collection have been pretty good, leading to a huge pile up of cash surplus.