InvestorQ : Will the government borrowing Rs.80,000 crore by CMBs add to its overall debt burden?
NISHA Nayak made post

Will the government borrowing Rs.80,000 crore by CMBs add to its overall debt burden?

Answer
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4 months ago


Not exactly, because CMBs are like short term bridge loans and will be repaid when the long term bond monies are raised. Government will be borrowing Rs.80,000 crore via 84-day cash management bills (CMB). Now CMBs are short term treasury bills to fill up temporary liquidity mismatches. The good thing is that CMB is an off balance sheet item and does not show up in the total borrowings of the government. However, It will be useful in reducing the excess system liquidity in the market to the tune of Rs.7.30 trillion. The CMBs will be repaid out of the enhanced borrowing target of Rs.12 trillion (hiked from Rs.7.8 trillion). This is an indication that despite the WMA, liquidity with government will not be enough due to COVID-19 outflows. This could put strain on bond yields.