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.