Question

What is a Treasury Bill?

Answer 1

Treasury Bill is a short term promissory note issued by the Reserve Bank of India on behalf of the Central Government of India. They are issued to fulfil the short-term fund requirements of the Government of India. Maturity period of Treasury Bills ranges from 14 days to 364 days. Generally, these bills are brought by commercial banks, LIC, UTI, non-baking financial companies, etc. They are also called Zero-Coupon Bonds. Treasury bills are highly liquid instruments because of the fact that the RBI is always ready to purchase these bills. Moreover, they are also considered to be the safest instrument as they are issued by the RBI. They are available for a minimum amount of Rs 25,000 and in multiples thereof. Treasury Bills are issued at a discount i.e. they are issued at a price which is lower than the face value and are redeemed at par. Herein, the discount (the difference between the price of issue and the redemption value) is the interest received at the time of redemption.