Question

Cash Management Bills (CMBs) were introduced in 2010 as a flexible tool for the Government of India. Which of the following statements correctly describes their regulatory and operational framework?
I. They are issued specifically to meet temporary mismatches in the cash flow of the Government of India.
II. They have the generic character of Treasury Bills but are issued for maturities of less than 91 days.
III. They are ineligible for SLR (Statutory Liquidity Ratio) purposes to distinguish them from standard T-Bills.
IV. They are issued at a discount to the face value through an auction process conducted by the RBI.

Q: Answer-Cash Management Bills (CMBs) were introduced in 2010 as a flexible tool for the Government of India....

Cash Management bills are short-term instruments. The bills are issued by the RBI on behalf of the government. Hence the CMBs are short-term money market instruments that help the government to meet its temporary cash flow mismatches They are issued at discount. The maturity is less than 91 days. CMBs are issued at a discount and redeemed at face value at maturity. Investment in CMBs is eligible for SLR Statutory Liquidity Ratio purposes for banks under Section 24 of the Banking Regulation Act, 1949. They are treated as Government Securities.