Money Market Operations [3/3]

Money Market Operations as on 13th June
Reserve Bank of India - Press Releases

The third part of the report consists of RESERVE POSITION. The reserve position includes the total cash position of the central bank, minimum cash at cash reserve rate with the banks and the surplus cash balance of Government of India with RBI

G. Cash Reserve Position of Scheduled Commercial Banks
I. Cash balances with RBI - This amount is the total cash balance with RBI

II. Average Daily Cash Reserve Requirement for the fortnight ending - This figure reveals the average of preceding fortnight of the daily cash reserve maintained by banks as per the cash reserve requirement ratio decided in the monetary policy

H. Government of India Surplus Cash balance Reckoned for Auction

Government of India Surplus Cash balance Reckoned for Auction can be understood as follows:

As banker to the government, RBI manages several banking needs of the government.

It receives and pays money on behalf of various government departments. The public accounts department takes care of all the banking requirements of government. It executes government borrowing, provides interest bearing advances to governments, arranges for investments of surplus cash.

As per scheme introduced in 1976, every ministry and department of central govt has been tied-up with a specific public sector to handle their transactions. As RBI has its offices and sub-offices in 29 locations, these appointed banks help RBI perform banking functions for government. In return, banks receive fees.

The process of issuing and redeeming loans/debt on behalf of govt is called public debt management. This is managed by internal debt management department at central office of Mumbai and public debt department/office at offices/branches of the Reserve Bank of India. It’s the union budget that decides the annual borrowing amount of central government but it is RBI’s duty to help govt raise that amount from the public.

As an efficient manager of govt debt, it focuses on interest rate, timing and manner of raising new rupee loans, payment of interest rate, redemption of loans, liquidity conditions in the market, policies related to participation of foreign and domestic investors in debt market.
This ultimately helps RBI manage cost of debt, roll-over risks and create a liquid secondary market for govt securities.

As a banker to govt, RBI computes overall fund position and informs the finance ministry daily showing the balances in its books, Ways and Means Advances and investments made from the surplus fund.

Central Accounts department at Nagpur takes care of final compilation of government accounts.

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Ways and Means Advances