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Sujai Adithya
Business Development and Banking & Financial Services Expert
Asked a question last year

What are the differences between Commercial Bills, Treasury Bills and Cash Management Bills?

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Shubham Talwar
e- commerce and service sector Expert

cash management bills are introduced to supplement other short-term cash raising measures, including ways & means advances and treasury bills.The new bill will allow the government to raise finance only when it needs and avoid holding excess cash for longer duration.

The finance ministry, at present, finances the governments' short-term need for funds through three types ofTreasury Bills are basically instruments for short term (maturities less than one year) borrowing by the Central Gov issued for 91 to 364 days and ways & means advances, which is borrowing from the RBI.

The treasury bills have a variable spread while the ways & means advances carry the same rate of interest as the repo rates. Therefore, in both cases there is an interest cost, which, given the scale of its operation, can be massive. The CMBs will carry a lower rate of interest and will, thus, benefit the government. The Indian finance ministry has, however, stated that its cash management bills will be issued for maturities of less than 91 days.

Sujai Adithya
Business Development and Banking & Financial Services Expert

Commercial Bills (CBs) :

  • Negotiable instruments which are issued by all India FIs, NBFCs, SCBs, Merchant banks & Mutual funds.
  • Drawn by seller on the buyer (buyer gives seller), hence also called trade bills.

Treasury Bills:

  • Issued by RBI5 on behalf of govt.
  • Govt uses them to meet their short-term liquidity crunch. 
  • T-bills are sovereign zero risk instruments.
  • At present, 3 types of T-bills are there : 91-day, 182-day, 364-day. 
  • State govt can not issue T-bills.
  • They are issued by Market Stabilization Scheme (MSS).
  • Available for a minimum amount of Rs 25000 or in multiples of that.

Cash Management Bills (CMBs):

  • It's a comparatively new short-term instrument issued by RBI on behalf of Govt.
  • Issued to meet temporary mismatches in cash flow of Govt.
  • They resemble T-bills in character but are issued for less than 91 days only.