Issuing procedure of treasury bills, Financial Management

Issuing Procedure of treasury bills

As discussed above, the RBI on behalf of central government, announces the auctioning of T-bills by tender notification through the press. The bills are sold by the RBI, Public Accounts Department (PAD), Mumbai, on an auction basis. The date of auction and notified amount are announced by the RBI from time to time. Though the tender is invited for competitive bids, bids will be allotted to both competitive and non-competitive bids. Under Non-competitive bidding, bidders such as State Governments, PFs would be able to participate in the auctions of dated government securities without having to quote the yield or price in the bid. They will not have to worry about whether this bid will be on or off-the-mark; as long as they bids in accordance with the scheme, they will be allotted securities fully or partially. A non-competitive bidder will submit only one bid. There is no need for bidding in case of non-competitive bids. These bids are accepted at the weighted average of the successful bids if the notified amount is not fully subscribed to. Non-competitive bidders will Telex\Facsimile the amount of tender before the day of auction or on the day of the auction before the close of banking hours to the Manager, RBI, Mumbai.

Eligible investors intending to procure the instruments need to submit their tender for the issue of bills in the form as prescribed for the purpose, which can be obtained from RBI, PAD, Mumbai. An investor can submit multiple tenders filling separate forms stating different prices. Successful competitive bids will be accepted up to the minimum discounted price called ‘cut-off' price determined at the auction. Partial pro rata allotments are common for bids submitted at cut-off price. The bids above the cut-off price are accepted completely and other bids at offer prices lower than cut-off price are rejected.

Result of the auction is displayed at RBI, PAD, Mumbai. Reserve Bank has the full discretion to accept or reject any or all the bids, both competitive and non-competitive bids either wholly or partially if deemed fit without assigning any reason. The tenderer needs to check for himself the result of the auction and if successful, should collect the letter of acceptance of the tender from the RBI. The bidders will be allotted the Treasury Bills at the respective prices at which the bids have been made. For 91-day T-bills, the successful bidders at the auction have to make the payment on the next working day following the Friday auction; and for 364-day T-bills, the payment has to be made by successful bidders on Thursday following the Wednesday auction. Successful bidders at the auction are required to make the payment by cash/cheque drawn in favor of the Reserve Bank of India or by Banker's Pay Order. Payments by competitive bidders are effected by debiting their current account with PAD, Mumbai, if RBI is authorized to that effect.

If the day of payment falls on any public holiday, the payment is made on the day after the holiday. Otherwise, the required amount shall be deposited with RBI, PAD, on the following working day of the announcement either in cash or through crossed Banker's cheque.

 

Posted Date: 9/11/2012 3:47:09 AM | Location : United States







Related Discussions:- Issuing procedure of treasury bills, Assignment Help, Ask Question on Issuing procedure of treasury bills, Get Answer, Expert's Help, Issuing procedure of treasury bills Discussions

Write discussion on Issuing procedure of treasury bills
Your posts are moderated
Related Questions
Manage a project or clearly defined piece of work from beginning to end. This may include setting up a budgetary system.

The Pennington Corporation issued a new series of bonds on January 1, 1979. The bonds were sold at par ($1,000), have a 12 percent coupon, and mature in 30 years, on December 31,

What factors would you consider in evaluating the political risk related with making FDI in a foreign country? Answer: Factors to be considered as follow: a) The host countr

Bond are formal certificates issued by the companies or government agencies acknowledging the indebtedness. To the investors, they are proofs of investment. In th

The approaches that Blin could accept regarding the relative proportions of long- and short-term finance to meet its working capital needs have been described as moderate, conserva

Explain Hard capital rationing and Soft capital rationing The NPV decision rule to admit all projects with a positive net present value requires the existence of a perfect cap

Q. Importance of the Cost of Capital? Importance of the Cost of Capital:- (1) Useful in Designing the Capital Structure: - The perception of cost of capital plays a very imp

Calculate the Operating Cashflows from 2007 - 2011 using the indirect method to add back depreciation. Suppose that depreciation will grow at the similar rate as sales.

FUNCTIONS / RESPONSIBILITIES / CHALLENGES FACING THE FINANCE MANAGER Today's finance manager is facing a lot of challenges, which are the direct result of the dynamic growth in

How would you incorporate political risk into the capital budgeting process of foreign investment projects? One method is to adjust the cost of capital upward to imitate politi