Treasury Bills, Cash management Bills, Dated Securities, Gilt-edged securities

Government securities are either for a short span, which is usually referred to as treasury bills and cash management bills, with maturities of less than about a year, or long term like Cash Management Bills. In India, both treasury bills and dated securities are issued by the Central Government, while the State Governments issue only bonds, which are termed State Development Loans (SDLs). There is a minimum to zero risk of default associated with a G-Sec. A G- Sec is issued by the central government from the financial market to sort out its fiscal deficit.

A Treasury Bill

When the governments need funding for a short period of time, Treasury bills (T- Bills) are issued. T-bills are issued by India’s central government, and the interest or coupons are determined by market forces.

Treasury Bills were printed and auctioned for the first time in India by the Reserve Bank of India in 1917. T-Bills can be purchased by individuals, trusts, organizations, and banks. Treasury notes have a distinct advantage over other money market products in that they are risk-free in comparison to other instruments. The maximum maturity time for Treasury bills is one year.

Banks give the RBI treasury bills in exchange for cash through Repurchase Agreements (Repo), which are short-term contracts for selling securities. They use it to meet their Statutory Liquid Ratio (SLR) obligations, as well.

Cash Management Bills

Cash Management Bills(CMBS) are issued by the Reserve Bank of India on behalf of the central government to meet urgent financial requirements. Cash management bills minimum amount is offered to fulfill the immediate cash needs of the government. These bills are simply short-term instruments of the money market that serve the temporary emergencies a that the government is ought to meet. 

There are some features of Cash Management Bills

1. These bills mature in less than 91 days of time frame.
2. Cash Management Bills are redeemed at face value during the time of maturity. 
3. The term of maturity notified amount depends on the temporary cash needs of the government.
4. Under Section 24 of the Banking Regulation Act, 1949, Cash Management Bills are eligible as SLR securities. 

Cash Management Bills have a similar character to treasury bills and are subject to terms and conditions that are specified when being sold. The introduction of Cash Management Billsamounts to the transfer of excess liquidity of funds in the banking sector to the Reserves Bank of India

Cash Management Bill vs Treasury Bill

When we opt for the distinction of Cash Management Bill vs Treasury bill, there is a thin line of difference. In comparison, Cash Management Bills are issued for less than a term of ninety days, whereas T Bills can be issued for about a one-year time frame. 

Treasury Bills have a variety of interest rates which are comparatively higher, and cash management bills minimum amount to much fewer interest rates.

Dated  Securities

Dated Government Securities are long-term securities that have fixed interest rates, which are paid after specific periods (mostly half-yearly). The Public Debt Office of RBI manages Dated securities and its adjoining concerns. 

The essential features of Dated Securities are:

1. Such securities are sold at their face value. 
2. The interest rate is fixed at the time of issue and remains constant throughout 
3. The tenor of Dated Securities remains fixed.
4. Securities are redeemed at face value during the time of maturity. 

RBI issues the securities on behalf of the government. It pays interests and provides bank money at the time of maturity. The public debt office of the RBI manages these affairs. The Reserve Bank of India sells securities through auction by the Negotiated Dealing System (NDS), and primary dealers usually buy these. 

Unlike treasure Bills which are short-term instruments of the money market, Dated Securities are long-term money market instruments issued by the central government for a span of five years to thirty years.

Gilt Edged Securities

Gilt-edged Securities are bonds issued by national governments and some private organizations. These are high-quality bonds issued for the long term. These bonds are concerned with minimum risk and are much more reliable as compared to other investment instruments. The essential features of Gilt-Edged Securities are:

1. Gilt-Edged Securities originated at the Bank of England.
2. These are mostly issued by national governments and large private organizations with the aim of generating revenue.
3. Investors prefer these bonds because of the minimum risk of default. 

Conclusion

The above discussion about Government securities clearly outlines the various types of securities and money market instruments. The context highlights the specific differences between Treasury Bills, Cash Management Bills, Dated Securities, and Gilt-Edged Securities. The discussion marks the feasibility of each security for investors to chalk out as per their necessity and for individuals. To get a clear picture of the same. Investors should have a clear picture regarding instruments of the money market, and the above content shall provide the necessary information.