TREASURY BILLS

GS3 – ECONOMICS 

Treasury Bills (T-Bills) are short-term government securities issued by the Reserve Bank of India (RBI) on behalf of the Indian government. They are used as a tool for managing the country’s short-term liquidity and are typically issued at a discount, with the government repaying the face value at maturity. T-Bills are considered a low-risk investment because they are backed by the government.

Types of T-Bills:

1. 91-Day T-Bills: These have a maturity period of 91 days (approximately 3 months).
2. 182-Day T-Bills: These have a maturity period of 182 days (approximately 6 months).
3. 364-Day T-Bills: These have a maturity period of 364 days (approximately 1 year).

Key Features:

• Issuance: T-Bills are issued through regular auctions conducted by the RBI, typically on a weekly basis.
• Discounted Price: T-Bills are issued at a discount to their face value, and the difference between the issue price and face value is the interest earned by the investor.
• Liquidity: T-Bills are highly liquid, as they can be easily traded in the secondary market.
• Risk: As they are issued by the government, T-Bills carry minimal risk of default.

Usage and Benefits:

• Monetary Policy Tool: The RBI uses T-Bills to manage the money supply and liquidity in the economy.
• Investment: T-Bills provide a safe and short-term investment option for investors, particularly for those seeking low-risk, short-term returns.
• Short-Term Financing: T-Bills also serve as a way for the government to meet its short-term financial needs without resorting to long-term borrowing.

Taxation:

• The income from T-Bills is subject to tax as per the investor’s tax bracket. However, T-Bills are exempt from the Goods and Services Tax (GST).