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What are Treasury Bills (T-bills)?

Governments raise / borrow funds by issuing government securities to finance a variety of projects and activities.

What is Government Security (G-Sec)?

Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. 

G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

What are the types of G-Secs?

Government security Term Issued by
Treasury Bills (T-bills) Short-term Central Government
Cash Management Bills (CMBs) Short-term Central Government
Bonds or Dated G-Secs Long-term Central Government
State Development Loans (SDLs) Long-term State Governments

What are Treasury Bills (T-bills)?

Debt obligations of the Government that have maturities of one year or less are normally called Treasury Bills or T-Bills.

What are the features of T-bills?

  • T-bills are money market instruments.
  • T-bills are short-term debt instruments issued by the Government of India.
  • T-bills are issued in 3 tenors, namely, 91 day, 182 day and 364 day.
  • T-bills are zero coupon securities and do not earn any interest. Instead, they are issued at a discount and redeemed at the face value at maturity. For example, T-bill of ₹100/- (face value) issued at ₹ 98.20, that is, at a discount of ₹1.80 and redeemed at the face value of ₹100/-. 

Auction and Settlement of T-bills

  • Reserve Bank of India (RBI) releases a quarterly calendar of T-bill issuances for the upcoming quarter in the last week of the preceding quarter. For example, calendar for April-June period is notified in the last week of March.
  • The auctions of T-bills are held every Wednesday.
  • The minimum bid amount for T-bills is ₹10,000 and in multiples thereof.
  • Bids can be places by investors under both Competitive Bidding and Non- Competitive Bidding. The aggregate allocation of all non-competitive bids is restricted to a maximum of 5% of the aggregate nominal amount of the issue within the notified amount.
  • Settlement for the T-bills auctioned is made on T+1 day i.e. on the working day following the trade day. On the settlement date, the fund accounts of the participants are debited by their respective consideration amounts and their securities accounts are credited with the amount of securities allotted to them. 


References

Reserve Bank of India. (2020, April 01). 'Government Securities Market in India – A Primer'. Retrieved from https://www.rbi.org.in/Scripts/FAQView.aspx?Id=79


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