91-day t-bills, Financial Management

91-Day T-Bills

Starting from July, 1965, 91-day T-bills were issued at a discount rate ranging from 2.5-4.6 percent per annum. Till July, 1974, the discount rate was 4.6 percent. Even later, the discount rate hovered around the same. The extremely low yield on these bills was totally out of alignment with the other interest rates in the system. Moreover, the Central Bank readily rediscounted these bills due to which the yield for these bills remained more or less artificial. The banks used these instruments to park their funds for a very short period of 1-2 days. This resulted in violent fluctuations of volumes of outstanding T-bills. The RBI had introduced two measures in order to cope with the situation. Firstly, to recycle the T-bills (from October, 1986) under which the bills are rediscounted by the RBI and are resold to the banks. Secondly, an additional early rediscounting fee was imposed, if the banks rediscounted the T-bills within 14 days of purchase. Although this resulted in a decline in weekly fluctuations, the T-bills market did not become an integral part of the money market and the interest rates did not rise considerably as the bulk of T-bills continued to be held by the RBI. The weekly auctions of 91-day T-bills were started in January 1993, which in due course resulted in gradual decline of the T-bills outstanding with the RBI.

 

Posted Date: 9/11/2012 4:09:02 AM | Location : United States







Related Discussions:- 91-day t-bills, Assignment Help, Ask Question on 91-day t-bills, Get Answer, Expert's Help, 91-day t-bills Discussions

Write discussion on 91-day t-bills
Your posts are moderated
Related Questions
FORMS OF DIVIDEND Cash Dividend Many Companies pay dividend in cash. Often cash dividend may be supplemented by a bonus issue (stock dividend).  When the company chooses

Clearing and Settlement The Treasury Bills are available in physical form if an investor desires so. The market is mostly dominated by institutional players who have a facility

Securities Exchange Act of 1934 With this Act, the Congress created the Securities and Exchange Commission. The Act empowers the SEC with broad authority over all aspects of th

Q. Example on compound value of the single flow? Mr. X invests Rs. 1000 at 10% is compounded yearly for three years. Compute value after three years. FV = PV (1+i) n FV

Analysis of Company Position Associated International Supplies Ltd Circulation: Associated International Supplies Ltd (AIS Ltd.) Author: A. Consultant, AXY Consultin

Role of Sponsor In the establishment of mutual fund trust, the main role is played by the sponsors. Both the trustees and the fund managers or the asset management company have


Q. Explain demerits of accept-reject criteria? Demerits of ARR:- (i) It utilizes accounting income rather than cash flows: - The principal short coming of ARR schema is th

Fraud and Society and Analytical Techniques: Fraud and Society - The effects and financial consequences of fraud in society including the individual, older people, financial

Monitoring and Controlling Budgets: The preparation of budgets is only part of the budget cycle.  Once set, an organisation should actively monitor actual revenue and expenditu