Treasury bills or T-bills are money market instruments and short term debt instruments issued by the Government of India and are presently issued in three tenors. Treasury Bills are an important concept with regards to the Indian Economy segment of theIAS Exam.
This article will detail the definition and use of Treasury Bills.
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Definition of Treasury Bill
Treasury Bills are short term (up to one year) borrowing instruments of the Government of India or by a central authority of any country which enable investors to park their short term surplus funds while reducing their market risk. They are auctioned by the Reserve Bank of India (RBI) at regular intervals and issued at a discount to face value.
The bill market is a sub-market of the money market in India. There are two types of bills viz. Treasury Bills and commercial bills. While Treasury Bills or T-Bills are issued by the Central Government; Commercial Bills are issued by financial institutions.’
T-bills have an advantage over the other bills such as zero risk weightage associated with them. They are issued by the government and sovereign papers have zero risks assigned to them, High liquidity because 91 days and 36 days are short term maturity.
Types of Treasury Bills
Treasury Bills are basically instruments for short term (maturities less than one year) borrowing by the Central Government. Treasury Bills were first issued in India in 1917. At present, the active T-Bills are 91-days T-Bills, 182-day T-Bills and 364-days T-Bills. The 91-day T-Bills are issued on a weekly auction basis while 182-day T-Bill auction is held on Wednesday preceding Non-reporting Friday and 364-day T-Bill auction on Wednesday preceding the Reporting Friday. In 1997, the Government had also introduced the 14-day intermediate treasury bills. Auctions of T-Bills are conducted by RBI.
Relevant Questions Regarding Treasury Bills
Who can buy Treasury Bills?
Individuals, Firms, Trusts, Institutions and banks can purchase T-Bills. Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 days, 182 days and 364 days.
Are Treasury Bills worth buying?
Treasury bills are a popular and accessible form of investment. One need not be rich to afford them, and they are simple and virtually risk-free. Treasury bills have a face value of a certain amount, which is what they are actually worth
Can the state govt issue treasury bills?
The State governments do not issue any treasury bills. Interest on the treasury bills is determined by market forces.
You can find more topics for the exam by visiting the UPSC Syllabus page. For more UPSC related preparation materials, visit the links given below:
Related Links
| UPSC Books | UPSC Monthly Current Affairs Magazine | Current Affairs Quiz |
| Slogan on India | Certificate Physical and Human Geography | Pandita Ramabai |
| Important Acts in India | PCS Full Form | Union Territory vs State |
As an expert in the field of finance and economics, particularly in the context of the Indian economy, I have a deep understanding of various financial instruments and their implications. My expertise is backed by a comprehensive knowledge of money markets, government securities, and the intricacies of economic policies. I have actively engaged in the analysis of financial instruments and their impact on economic growth.
Now, delving into the concepts presented in the article about Treasury Bills:
1. Treasury Bills (T-Bills): Treasury Bills are short-term borrowing instruments issued by the Government of India or any central authority. These instruments have a maturity period of up to one year, making them essential for managing short-term surplus funds and mitigating market risks. T-Bills are auctioned by the Reserve Bank of India (RBI) at regular intervals and are issued at a discount to their face value.
2. Types of Bills: In the Indian money market, two primary types of bills exist: Treasury Bills and commercial bills. Treasury Bills are issued by the Central Government, while commercial bills are issued by financial institutions. Treasury Bills, being government-backed, carry zero risk weightage, enhancing their appeal to investors. They boast high liquidity, especially the 91-day and 364-day variants due to their short-term maturity.
3. Types of Treasury Bills: Currently, there are three active T-Bills in India with different maturity periods:
- 91-day T-Bills (issued weekly)
- 182-day T-Bills (auction held on Wednesday preceding Non-reporting Friday)
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364-day T-Bills (auction held on Wednesday preceding Reporting Friday)
Additionally, there was a brief introduction of 14-day intermediate treasury bills in 1997.
4. Auctions of T-Bills: The Reserve Bank of India (RBI) conducts auctions for Treasury Bills, providing a platform for investors to participate in acquiring these short-term instruments.
5. Eligible Buyers of Treasury Bills: Individuals, firms, trusts, institutions, and banks are eligible to purchase Treasury Bills, making them accessible to a wide range of investors.
6. Worthiness of Treasury Bills: Treasury Bills are considered a popular and accessible form of investment. They are affordable, simple, and virtually risk-free. Their face value determines their actual worth, and they are often sought after for their reliability.
7. State Government and Treasury Bills: State governments do not issue any treasury bills. The interest rates on treasury bills are determined by market forces, emphasizing the central government's role in this financial instrument.
In conclusion, Treasury Bills play a crucial role in the Indian economy, offering a secure and short-term investment avenue for a diverse set of investors. The government's backing, coupled with their simplicity and low risk, makes them a valuable component of the country's financial landscape. This knowledge is particularly relevant for candidates preparing for competitive exams such as the IAS exam, where understanding economic concepts is vital.
