All About Treasury Bills and Commercial Papers (in Hindi)

Lesson 4 of 7 • 25 upvotes • 10:56mins

Vikas Kumar Singh Tomar

Treasury bills a) Treasury Bills are short term (up to one year) borrowing instruments of the Government of India which enable investors to park their short term surplus funds while reducing their market risk. b) They are auctioned by Reserve Bank of India at regular intervals and issued at a discount to face value. c) Any person in India including Individuals, Firms, Companies, Corporate bodies, Trusts and Institutions can purchase Treasury Bills. d) Treasury Bills are eligible securities for SLR purposes. e) Treasury Bills are available for a minimum amount of Rs. 25,000 and in multiples of Rs. 25,000 thereafter. f) At present, RBI issues T-Bills for three different maturities: 91 days, 182 days and 364 days. Commercial Papers- a) A CP is a short term security (7 days to 365 days) issued by a corporate entity (other than a bank), at a discount to the face value. b) Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note. c) CPs normally give a higher return than fixed deposits & CDs. d) CP can be issued in denominations of Rs. 5 lakh or multiples thereof. Amount invested by a single investor should not be less than Rs. 5 lakh (face value). e) Only corporates who get an investment grade rating can issue CPs, as per RBI rules. It is issued at a discount to face value. f) Bank and FI’s are prohibited from issuance and underwriting of CP’s.