What is Treasury Bill?

Hey,

There are now three tenors available for the government of India's Treasury bills, also known as T-bills, which are money market securities and short-term debt instruments. Regarding the IAS Exam's Indian Economy section, what is treasury bill in India is an important concept to understand.

Treasury Bills allow investors to lodge their short-term surplus funds while lowering their market risk. They are short-term (up to one year) borrowing instruments issued by the Government of India or by a central authority of any country. The Reserve Bank of India (RBI) regularly auctions them and issues them at a discount to face value.

In India, a segment of the money market is the bill market. Treasury bills and commercial bills are two different forms of bills. Commercial Bills are issued by financial institutions as opposed to the central government, which issues Treasury Bills, or T-Bills. ’

T-bills have an advantage over other bills, such as the fact that there is no risk weighting applied to them. They are issued by the government, have zero risks attached to them, and have high liquidity due to their short maturities of 91 and 36 days.

Treasury bills of four different categories are auctioned. The holding time of these treasury bills serves as their main point of differentiation.

• 14-day Treasury bill

After 14 days from the date of issuance, these bills reach their full maturity. On Wednesday, they are put up for auction, and the money is paid on the following Friday. Every week, the auction takes place. The minimum investment amount is similarly Rs. 1 lakh, and these bills are sold in multiples of Rs. 1 lakh.

• 91-day Treasury bill

On the 91st day after the issuance date, these bills reach their full maturity. On Wednesday, they are put up for auction, and the money is paid on the following Friday. They go up for auction each week. The minimum investment in these bills is similarly Rs. 25000, and they are sold in multiples of that amount. I hope this clarifies your query, what is 91 day treasury bill.

• 182-day Treasury bill

182 days after the date of issuance is needed for these notes to mature. On the following Friday, when the period expires, the money is paid after the Wednesday auction. They are put up for auction every other week. The minimum investment in these bills is similarly Rs. 25000, and they are sold in multiples of that amount.

• 364-day Treasury bill

The maturity date of these bills is 364 days following their issuance. After the Wednesday auction, the funds are disbursed on the following Friday when the time period ends. They are offered for sale once every two weeks. Similar to other bills, the minimum investment in these ones is Rs. 25000, and they are offered in multiples of that sum.

As already stated, each bill has a fixed holding period. The face value and discount rates of Treasury bills, however, can change cyclically. This depends on the monetary policies of the RBI, the need for money, and the total volume of bids received.

Additionally, the Reserve Bank of India publishes a calendar for auctioning Treasury Bills. Before each auction, the precise date, the amount to be auctioned, and the maturity dates are announced.

I hope this answer clarifies your query,  what is treasury bill in India.

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