Every Wednesday 91 day T-Bills are auctioned, and after Rajan’s first RBI policy, we have a moderation in T-Bill auction yields to 9.7% from the recent highs of over 12%.
The government accepted about 2.5x of the issue (which was Rs. 7000 cr.) which is part of the game recently.
A higher T-Bill auction size than notified will give the government extra cash. The banks don’t mind – even at the 9.7% rate, it’s higher than the rate they borrow in the MSF window (9.5%) and they can offer the T-Bills as collateral (with a 5% haircut). Of course the difference isn’t much, but this probably even helps make up their SLR as well.