What is the Maturity of Treasury Bills?

Hey Pal,

Before understanding the treasury bills maturity period, one should know that to fulfil its financial obligations, the Indian government requires money. In order to raise money, they make contact with the public. Offering various financial instruments is one way to raise the funds. The government produces money market instruments, such as Treasury bills, to meet its short-term funding needs. These financial instruments can include debt securities, bonds, money market instruments, and a wide variety of others.

What are treasury bills?

T-bills sometimes referred to as Treasury Bills, are short-term financial securities. On behalf of the government, the RBI aims to reduce liquidity shortages. It is a promissory note that includes a promise to pay at a later time. The money raised is typically used by the government for immediate needs. Additionally, it is employed to lower the nation's overall budget imbalance.

T-bills, also known as Treasury Bills, have zero-coupon rates, meaning that no interest is paid on them. T-bills are available for purchase by individuals at a discount from face value. They are then redeemed for a nominal amount, allowing the investors to profit from the difference. As an illustration, a person buys a reduced 91-day T-bill with a face value of Rs. 95 and a 91-day T-bill face value of Rs. 100.

The T-bill holder receives Rs. 100 at maturity, earning the individual a profit of Rs. 5.

As a result, it is a crucial piece of currency that the Reserve Bank of India employs. It assists RBI in both raising money and controlling the total amount of money in the economy.

What is the maturity period of treasury bills in India?

Treasury bills, often known as T-bills, are short-term debt securities issued by the Government of India and are now available in three tenors: 91 days, 182 days, and 364 days. T-bills are money market instruments. Treasury bills are interest-free securities with zero coupon payments. 

They are instead issued at a discount and redeemed at face value when they reach maturity. For instance, a 91-day Treasury note with a face value of $100 may be issued at 98.20, or at a discount of, say, 1.80, and redeemed for that amount. The difference between the issue price and the maturity value, which is 100, is the return to investors.

I hope this clarifies your query on what is the maturity of treasury bills.

How to buy treasury bills?

Through RBI auctions, T-bills are issued in the primary market. Participation in a competitive or non-competitive bidding auction is permitted for eligible investors.

• Competitive Bidding:

Institutional investors who are eligible to submit competitive bids include financial institutions, banks, mutual funds, primary dealers, and insurance companies.

• Non-Competitive Bidding: 

Any party may submit a non-competitive bid, including people, HUFs or trusts, businesses, corporations, institutions, provident funds, and others. Non-competitive bidders are permitted to participate in the auctions without providing a price or yield estimate. As a result, there is no need to worry about whether the bid is accurate or not. The bidder will receive either a full or partial allocation in accordance with the plan.

I would like to conclude here about what is treasury bills, the treasury bills maturity period, and the process to purchase the same.

Read More: