Treasury Bills

About Treasury Bills:

• T-Bills are money market instruments.
• These are short-term debt instruments issued by the Government of India.
• Tenure: These are presently issued in three tenors, namely, 91 days, 182 days and 364 days. 
• These are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity.

When were treasury bills introduced? 

• Treasury bills were first issued in India in 1917. They are issued via auctions conducted by the Reserve Bank of India (RBI) at regular intervals.

Who can buy it?

• Individuals, trusts, institutions and banks can purchase T-Bills. But they are usually held by financial institutions.
• 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 also keep it to fulfil their Statutory Liquid Ratio (SLR) requirements.

 How do T-bills work?

• Treasury bills are issued at a discount to the original value, and the buyer gets the original value upon maturity.
• For example, a Rs 100 treasury bill can be availed of at Rs 95, but the buyer is paid Rs 100 on the maturity date. The return on treasury bills depends on the liquidity position of the economy. When there is a liquidity crisis, the returns are higher, and vice versa.