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Treasury bills (T-Bills) are short-term debt instruments issued by the Government of India to manage liquidity and fiscal deficits, available in maturities of 91, 182, and 364 days. They are non-interest-bearing, sold at a discount, and provide a safe investment option with government backing, although they come with limitations such as lower returns compared to long-term securities. The increasing popularity of T-Bills among retail investors reflects a shift towards safer, short-term investment strategies amid changing market conditions.

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14 views10 pages

Markets

Treasury bills (T-Bills) are short-term debt instruments issued by the Government of India to manage liquidity and fiscal deficits, available in maturities of 91, 182, and 364 days. They are non-interest-bearing, sold at a discount, and provide a safe investment option with government backing, although they come with limitations such as lower returns compared to long-term securities. The increasing popularity of T-Bills among retail investors reflects a shift towards safer, short-term investment strategies amid changing market conditions.

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PRESENTATION FLOW

- INTRODUCTION TO TREASURY BILLS

- OBJECTIVE AND IMPORTACE OF ISSUING TREASURY BILLS

- TYPES AND KEY FEATURES OF TREASURY BILLS

- YIELD CALCULATION

- ADVANTAGES AND MARKET INSIGHT

- LIMITATIONS AND TAX IMPLICATIONS

- RELEVANCE TO INVESTORS AND THE ECONOMY

- TREASURY BILLS IN TRANSITION : A JOURNEY FROM


CERTIFICATES TO CLICKS
INTRODUCTION TO TREASURY
BILLS
WHAT ARE TREASURY BILLS ?

- Short-term debt instruments issued by the Government of India

- through the Reserve Bank of India (RBI) to finance short-term liquidity needs.

- They do not carry any interest but are issued at a discount and redeemed at face
value upon maturity (Zero Coupon Securities)

MATURITIES - 91 days, 182 days, and 364


days
DENOMINATIO - Minimum investment is ₹25,000 and in multiples
N thereof
NATURE - Risk-free, highly liquid, and actively traed on the secondary
market
EXAMPLE - If a 91-day T-Bill is issued at ₹97 for a face value of ₹100, the
investor earns ₹3 upon maturity.

SOURCE Reserve Bank of India. (2024). Government Securities Market.


OBJECTIVES AND IMPORTANCE OF ISSUING TREASURY
BILLS
WHY ARE TREASURY BILLS
ISSUED?
-The primary objective is to bridge the fiscal deficit by raising short-term
capital.
-These instruments are also an effective tool for liquidity management
and implementing monetary policy.

MONETARY
- Used in Open Market Operations to control inflation and money
REGULATIO supply
N
CASH FLOW
- Helps the government meet mismatches in revenue and
MANAGEMENT expenditure

STABILIZING - By absorbing excess liquidity during inflation or releasing it


THE during slowdowns.
ECONOMY
In FY2024-25, the Indian government plans to raise over ₹3.9 trillion through T-Bills in Q4 alone, reflecti
RECEN ng their increasing reliance on short-term borrowing.
T (Business Standard. (2024). Govt plans to borrow ₹3.9 trillion via treasury bills in Q4 FY25)
TYPES AND KEY FEATURES OF TREASURY
BILLS
- T-Bills are classified based on their maturity
period.
- Regardless of the type, all T-Bills are non-interest-bearing and sold at a
discount.
91-day T- - Most actively traded; weekly
Bill auctions

TYPES 182-day T- - Mid-term maturity; moderate investor


Bill interest

364-day T- - Longest maturity; used for slightly higher


Bill returns
KEY FEATURES
- Issued via auctions conducted by RBI every Wednesday.
- Issued at a discount; no periodic interest payments.
- Safe and default-free, backed up by sovereign guarantee.
- Minimum investment amount is ₹25000
- Highly liquid and can be traded in the secondary market.
RECENT
STATISTICS

- As of October 2023, the RBI set the cut-off yields for 91-day, 182-day, and
364-day T-Bills at 6.93%, 7.14%, and 7.16% respectively.

SOURCE

Business Standard. (2023, October 25).


Weekly Treasury bills' yield rise as bank liquidity deficit
nears Rs 1 trillion.
Retrieved from Business Standard.
YIELD CALCULATION
YIELD
CALCULATION
FORMULA

KEY
COMPONENTS
Face Value (FV):
The amount the investor receives upon maturity of the T-Bill. Typically ₹100 or its multiples.
Purchase Price (P):
The amount paid to buy the T-Bill at auction. It is always less than the face value because T-Bills are issued
at a discount.
Days to Maturity (D):
The actual number of days left until the T-Bill matures (e.g., 91, 182, or 364 days).
365:
The number of days in a year. Used to annualize the yield, so investors can compare T-Bill returns to other
annual investment options.
Yield (%):
The annualized return earned by the investor, calculated as a percentage of the amount invested (Purchase
Price).
Example: If a 91-day T-Bill having a Face Value of ₹100 is bought at ₹98, Yield
= 8.19%
ADVANTAGES AND MARKET
INSIGHT
ADVANTAGES

- Safe investment with government


backing.
- Short-term maturity reduces interest rate
risk.
- Provides liquidity to investors.
- Attractive returns compared to traditional savings
instruments.
MARKET INSIGHT

Retail investors are increasingly favouring T-Bills over traditional fixed


deposits due to higher returns and safety.

Business Standard. (2023, September 19).


SOURC
E Retail investors prefer treasury bills over sovereign government bonds.
LIMITATIONS AND TAX IMPLICATIONS

LIMITATIONS
- Lower returns compared to long-term
securities.
- Not suitable for long-term investment goals.

- Subject to reinvestment risk upon maturity.

TAXATION
- Gains from T-Bills are considered short-term capital gains and taxed as
per the investor's income tax slab.
- No Tax Deducted at Source (TDS) on T-Bill investments.

In April-September 2025, India plans to raise ₹8 trillion through bond sales, with
T-Bills playing a significant role in short-term borrowing strategies.
Reuters. (2023, March 27).
SOURC India expects gross borrowing of 8 trillion rupees in April-September. Retrive
RELEVANCE TO INVESTORS AND THE
ECONOMY
T-Bills play a dual role - supporting government funding needs and offering
safe, short-term investment options for market participants.

RELEVANCE FOR INVESTORS

- Ideal for conservative investors and institutions needing short-term parking of surplus
funds.
- Popular with mutual funds, insurance companies, and corporates.

RELEVANCE FOR THE


ECONOMY
- Helps in smooth cash flow
-management.
Used by RBI for macroeconomic stability and inflation
targeting.
- Acts as a benchmark for other short-term
instruments.
RECENT Retail investor participation in T-Bill auctions has grown over 34% YoY (FY 2023)
TREND , according to Clearing Corporation of India.
S
SOURCE www.moneycontrol.co
TREASURY BILLS IN TRANSITION :
A JOURNEY FROM CERTIFICATES TO
CLICKS
THEN

NOW
UPSTO

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