The types of Treasury Bills in India include 91-day, 182-day, and 364-day bills, differentiated by their maturity periods. They are short-term debt instruments issued by the Government of India and are auctioned by the Reserve Bank of India to fulfill short-term borrowing needs.
Content Id:
- Treasury Bill Market Meaning
- Different Types Of Treasury Bills
- How To Buy Treasury Bills In India
- Types Of Treasury Bills In India – Quick Summary
- Different Types Of Treasury Bills – FAQs
Treasury Bill Market Meaning
The Treasury Bill market refers to the buying and selling of short-term government securities, known as Treasury Bills. These bills are highly liquid, low-risk debt instruments used by governments to raise short-term funds, and are actively traded in the money markets by investors seeking stable and secure investments.
The Treasury Bill market is a segment of the financial market where government-issued short-term securities are traded. These bills, typically maturing in a year or less, are sold to meet the government’s short-term funding requirements.
Investors favor this market for its low risk and high liquidity. Treasury Bills are considered safe investments since they are backed by the government. The market attracts a range of participants, including financial institutions and individual investors, looking for stable returns.
For example: An investor purchases a 91-day Treasury Bill issued by the Indian government with a face value of ₹1,00,000 at a discounted price of ₹98,000. Upon maturity, the government pays the investor the full face value, earning them a return of ₹2,000.
Different Types Of Treasury Bills
The types of Treasury Bills include 91-day, 182-day, and 364-day bills, each named for their respective maturity periods. Issued at a discount, their return is the difference between the purchase price and the face value, offering a secure, short-term investment backed by the government.
- 91-day Treasury Bills: These have the shortest maturity period, typically used for very short-term investments. They mature in 91 days from the date of issuance.
- 182-day Treasury Bills: These bills mature in six months or 182 days, offering a middle ground between short and slightly longer-term investment horizons.
- 364-day Treasury Bills: The longest maturity among the three, these bills mature in one year or 364 days, suitable for investors looking for a longer short-term investment option.
- Cash Management Bills (CMBs): Occasionally issued, these are very short-term instruments, introduced to meet temporary mismatches in the government’s cash flow. Their maturity period can be less than 91 days.
How To Buy Treasury Bills In India
In India, Treasury Bills can be purchased through auctions conducted by the Reserve Bank of India. Investors can participate either directly, if eligible, or through intermediaries like banks and financial institutions. Bids can be submitted under the competitive or non-competitive bidding categories in these auctions.
- Eligibility Check: First, determine if you’re eligible to directly participate in Treasury Bill auctions, or if you need to go through an intermediary.
- Choose an Intermediary: If required, select a bank or financial institution to bid on your behalf.
- Understand Auction Types: Know the difference between competitive and non-competitive bidding. Competitive bidding requires specifying the yield, while non-competitive allows purchase at the average yield.
- Register for the Auction: If eligible for direct participation, register with the RBI’s electronic platform (E-Kuber). Otherwise, instruct your intermediary.
- Submit Your Bid: Place your bid in the auction, either directly or through your intermediary.
- Auction Results: After the auction, check if your bid was successful.
- Payment and Receipt: If successful, make the payment and receive the Treasury Bills, either directly in your Demat account or through the intermediary.
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Types Of Treasury Bills In India – Quick Summary
- The Treasury Bill market involves trading short-term government securities. These bills, known for their high liquidity and low risk, are instruments for governments to acquire short-term funding and are favored in money markets for their stability and security.
- Types of Treasury Bills in India are categorized into 91-day, 182-day, and 364-day types, reflecting their maturity durations. Sold at a discount, the profit for investors is the gap between the buying price and the face value, providing a government-backed, low-risk short-term investment option.
- Treasury Bills in India are acquired via RBI-conducted auctions, where eligible investors can bid directly or through banks and financial institutions. These bids are placed as either competitive, specifying the yield, or non-competitive, accepting the average auction yield.
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Different Types Of Treasury Bills – FAQs
Different Treasury Bills in India include the 91-day, 182-day, and 364-day bills, each named after their respective maturity periods. They offer short-term investment opportunities and are issued at a discount to their face value.
Treasury bills are short-term government debt securities with maturities ranging from a few days to one year. Issued at a discount, they are repaid at face value on maturity, providing a return to the investor.
In India, there are mainly three types of Treasury Bills based on their maturity periods: the 91-day bills, the 182-day bills, and the 364-day bills, each catering to different short-term investment needs.
An example of a Treasury Bill is a 91-day T-Bill issued by the government, purchased for ₹95,000 and redeemed at maturity for ₹100,000. The ₹5,000 difference represents the investor’s earnings from this short-term investment.
Treasury bills are typically bought by individual investors, financial institutions, banks, and mutual funds. They are favored for their safety and liquidity, making them a popular choice for managing short-term cash needs in diversified portfolios.
Treasury bills are issued by the government, specifically the Ministry of Finance. In India, they are issued through the Reserve Bank of India (RBI), acting as the government’s debt manager and banker.
