PASS Securities Operations and Risk Management Examination Difficulty: Beginner 2 Questions   5 min read
📌 Chapter 1.3 — MONEY MARKET

Picture a busy Wednesday afternoon in your firm’s treasury desk, where the team is preparing to bid for a large block of 91-day Treasury Bills. As an operations professional, your role is to ensure the electronic bid entry on the NDS-OM platform matches the client’s mandate exactly, as even a minor discrepancy in yield or quantity can lead to a failed bid or unintended market exposure.

Unlike equity trades where you interact with the stock exchange, T-bill auctions are conducted by the Reserve Bank of India, and understanding this mechanism is critical for managing the firm’s short-term liquidity.

The auction process for T-bills typically follows a competitive bidding framework where primary dealers and institutional participants submit bids in terms of the implicit yield. When your firm participates, you are essentially competing against other large entities to secure a piece of the government’s borrowing program. Once the auction concludes, the RBI determines the cut-off yield, and successful bidders are allotted securities based on their bid levels relative to this cut-off.

For the back office, the real challenge begins after the allotment, as you must reconcile the electronic allotment files from the Clearing Corporation of India Ltd (CCIL) with your internal ledger to ensure the security holdings are correctly reflected in the firm’s or client’s demat account.

From a risk management perspective, failing to account for the T+1 settlement cycle of these instruments can trigger a liquidity gap in your firm’s daily cash flow report. If you misinterpret the auction results or fail to clear the pay-in obligations, you risk regulatory scrutiny and potential penalties for non-delivery of funds.

Furthermore, when valuing these assets for margin purposes, understanding the difference between the face value and the purchase price—determined by the auction’s discount—is essential for accurate collateral haircut calculations. By maintaining precision in these settlement cycles and auction processes, you safeguard the firm’s financial integrity and ensure that the treasury team can operate without unnecessary friction.

Always remember that in the world of government securities, the auction is the starting point of the asset’s lifecycle. A clear understanding of the bid-to-cover ratio and the cut-off yield will not only help you pass the examination but will also make you a reliable custodian of the firm’s capital and operational workflows.

Nuance

⚠️ Nuance
Many candidates incorrectly assume that T-bills are bought at ‘par’ and pay periodic interest like corporate bonds. In reality, T-bills are zero-coupon instruments issued at a discount to face value, meaning the ‘interest’ is the difference between the purchase price and the redemption value at maturity. For a back-office professional, failing to distinguish between ‘price’ and ‘yield’ during auction data entry is a common error that leads to rejected bids and reconciliation headaches.

Check Your Understanding

Practice Question 1

During an RBI auction for 182-day T-bills, a brokerage firm submits a bid at a yield higher than the final cut-off yield determined by the RBI. What is the status of this bid?

Practice Question 2

Which of the following best describes the settlement timeline for a successful T-bill auction in the Indian market?

This is a companion read for Section 1.3 — MONEY MARKET from PASS Securities Operations and Risk Management Examination by Akhilesh Gururani, available on Amazon Kindle.

Copyright © 2026 `Akhilesh Gururani. All rights reserved.