Q. Consider the following statements regarding “Cash Management Bill (CMB)”:
1.They are non-standard and discounted instruments issued for maturities of more than 91 days.
2.They are tradable and qualify for ready forward facility.
Which of the statements given above is/are not correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: A
Notes:

Explanation: The Government of India, in consultation with the RBI, decided to issue a new short-term instrument, known as Cash Management Bills, since August 2009 to meet the temporary cash flow mismatches of the government.

  • The Cash Management Bills are non-standard and discounted instruments issued for maturities less than 91 days.
  • CMBs have the generic character of Treasury Bills (issued at discount to the face value); are tradable and qualify for ready forward facility; investment in it is considered as an eligible investment in government securities by banks for SLR.

Source: Ramesh Singh

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