Treasury Bill: Notes for Indian Economy

Treasury bills or T-bills are money market instruments and short term debt instruments issued by the Government of India and are presently issued in three tenors. Treasury Bills are an important concept with regards to the Indian Economy segment of the IAS Exam.

This article will detail the definition and use of Treasury Bills.

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Definition of  Treasury Bill

Treasury Bills are short term (up to one year) borrowing instruments of the Government of India or by a central authority of any country which enable investors to park their short term surplus funds while reducing their market risk. They are auctioned by the Reserve Bank of India (RBI) at regular intervals and issued at a discount to face value.

The bill market is a sub-market of the money market in India. There are two types of bills viz. Treasury Bills and commercial bills. While Treasury Bills or T-Bills are issued by the Central Government; Commercial Bills are issued by financial institutions.’

T-bills have an advantage over the other bills such as zero risk weightage associated with them. They are issued by the government and sovereign papers have zero risks assigned to them, High liquidity because 91 days and 36 days are short term maturity.

Types of Treasury Bills

Treasury Bills are basically instruments for short term (maturities less than one year) borrowing by the Central Government. Treasury Bills were first issued in India in 1917. At present, the active T-Bills are 91-days T-Bills, 182-day T-Bills and 364-days T-Bills. The 91-day T-Bills are issued on a weekly auction basis while 182-day T-Bill auction is held on Wednesday preceding Non-reporting Friday and 364-day T-Bill auction on Wednesday preceding the Reporting Friday. In 1997, the Government had also introduced the 14-day intermediate treasury bills. Auctions of T-Bills are conducted by RBI.

Relevant Questions Regarding Treasury Bills

Who can buy Treasury Bills?

Individuals, Firms, Trusts, Institutions and banks can purchase T-Bills. Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 days, 182 days and 364 days.

Are Treasury Bills worth buying?

 Treasury bills are a popular and accessible form of investment. One need not be rich to afford them, and they are simple and virtually risk-free. Treasury bills have a face value of a certain amount, which is what they are actually worth

Can the state govt issue treasury bills?

The State governments do not issue any treasury bills. Interest on the treasury bills is determined by market forces.

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