Question

Explain the following money market instrument "Treasury Bill".

Answer 1

Treasury Bills:

Treasury bills, also known as Zero Coupon Bonds are the instrument of short term borrowing with maturity period of less than one year.

This instrument is issued by Reserve Bank of India on behalf of the Central Government for fulfilling short term requirements of funds. They are issued at discount and are paid at par.

This difference between the issue and the redemption price is the interest payable. They are highly liquid and no risk of default of payment is there. They are issued of Rs.25, 000 or in multiples thereof.