Treasury Bills:

The Government of India issues Treasury Bills, which are money market instruments in the form of promissory notes that are guaranteed to be repaid at a later date. The money raised through such measures is often utilised to fund the government’s immediate needs, hence lowering the overall fiscal deficit of the nation.

With a maximum tenure of 364 days and zero coupons (interest), they are typically short-term borrowing instruments. They are issued at a lower price than the government security’s nominal value, which is advertised (G-sec).

Types of T-Bills:

1. 14-day Treasury bill
2. 91-day Treasury bill
3. 182-day Treasury bill
4. 364-day Treasury bill

Treasury bills are offered at a discount from their original value, and when they reach maturity, the buyer receives the full amount. For instance, a 100 rs treasury note can be purchased for 97 rupees, but the buyer receives 100 rupees when the bill matures. Treasury bill returns are influenced by the economy’s liquidity situation. The returns are higher during liquidity crises and vice versa.

The zero-risk weighting attached to Treasury Bills gives them an advantage over other market vehicles. T-Bills have a more extensive trading range and a very active secondary market.