Treasury Bills

Introduction

• Treasury bills or T-bills are short term debt instruments issued by the Government of India and are presently issued in three maturity periods of 91 days, 182 days, and 364 days. 
• Treasury bills are zero-coupon securities as they do not carry any interest. Rather, these are issued at a discounted value and redeemed at the face value at the time of maturity.
• For example, a 182-day Treasury bill of Rs, 1000/- (face value) may be issued at say Rs. 998.20, that is, at a discount of say, Rs. 1.80 and would be redeemed at the face value of Rs. 1000/-

Features of Treasury Bills

• A treasury bill is a promissory note issued by the RBI on behalf of the central government to meet the short-term liquidity requirement of the government. 
• Treasury bills are highly liquid instruments. 
• Return earned on treasury bills is the difference between the issue price and the face value. It  is also known as the interest on the investment.
• Treasury bills (T-bills) offer short-term investment opportunities with almost no market risk. The maturity period of T-Bills is generally up to one year.
• There are no treasury bills issued by the State Governments.
• Treasury bills are sovereign and no transaction is charged unlike any other forms of investment. They are also issued under the Market Stabilization Scheme (MSS).
• Treasury bills are available for a minimum amount of Rs. 25,000 and in multiples of Rs. 25,000.
• Treasury bills are usually held by financial institutions including banks. They have a very important role in the financial market beyond investment instruments. Banks give treasury bills to the RBI to get money under repo. Similarly, they can keep it as part of SLR.