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.