Benefits Of Treasury Bills For Cautious Investors You Need To Know

• Treasury bills (T-bills) are issued by the RBI on behalf of the Indian government, making them a safe investment with guaranteed returns.

• T-bills have a maximum tenure of 364 days and are issued at a discount but redeemed at face value, offering fixed returns without market fluctuations.

• The RBI issues T-bills to manage inflation, control money supply, and boost liquidity during slowdowns, playing a crucial role in economic regulation.

• You can buy T-bills through RBI’s E-Kuber platform via competitive or non-competitive bidding, making them accessible to both institutional and retail investors.

The Reserve Bank of India issues treasury bills on behalf of the Indian government. The government issues Treasury bills to finance urgent obligations, making them a low-risk investment option. 

This is due to the reason that even during an economic crisis, the funds have to be paid back as the government is the highest authority of the country. As treasury bills act as liabilities to the government, they must be paid within the determined tenure. 

Treasury bills in India are money market instruments issued by the RBI on behalf of the Indian government. They are promissory notes with a guaranteed repayment date and are short-term borrowing tools. 

With the funds collected using treasury bills, the government meets their short-term needs, such as salaries and balances the fiscal deficit of the country. These tools have a maximum tenure of 364 days and come with zero interest rates. These bills are issued at a discount to the investors and redeemed at the face value of the government security.

Treasury bills aim to meet current government obligations, such as managing inflation and handling economic deficit. Under an Open Market Operation (OMO) strategy, the RBI issues these bills to investors during higher economic growth. 

The government issues high-value treasury bills to the public, reducing the aggregate money supply in the economy. It helps control increasing demands and high prices, leading to inflation affecting the poor sections of society. 

The RBI also issues this bill in times of recession and economic slowdowns. It helps in boosting the cash flow, ensuring a productivity boost for companies. Due to this positive productivity impact, GDP increases and it helps level aggregate demand in the economy. 

With a maximum maturity tenure of 364 days, there are four types of Treasury bills:

• 14-day treasury bill

• 91-day treasury bill

• 182-day treasury bill

• 364-day treasury bill

One of the most crucial benefits of a T-bill is that they are a short-term investment option with substantial profits at the time of redemption. 

One of the most significant benefits of a T-bill is that the RBI issues them on behalf of the government. The promissory note comes with a guarantee, making it a risk-free investment. The initial amount you invest in a T-bill provides you with additional returns until the maturity date. 

The significant benefit of a T-bill is that it comes with fixed return rates, until your maturity date, throughout the tenure. The rates remain unchanged, and it is an attractive option as T-bill returns are fixed.

It is the process of understanding the market value of a T-bill depending on how much people want to buy or sell. This price varies due to factors like interest rates, the economy and the total buyers who are willing to pay. You can check out the price factor based on some market research to know if you wish to invest in it or not. 

If you wish to invest in a Treasury bill, you can purchase it through the RBI’s electronic platform E-Kuber. This process was initially done through an auction conducted by the bank at regular intervals.

• E-Kuber: The central bank initially auctioned T-bills, but now, this process takes place on the electronic platform E-Kuber. Banks, primary dealers, and institutional investors bid their amount for a bill on this platform. 

• Through RBI: Other than banks, institutions and their trusts, you can also purchase T-bills directly from the RBI. Banks offer these bills to the RBI to get funds at the repo rate while fulfilling their SLR (Statutory Liquidity Ratio) needs.

1. They make an announcement weeks before the auction date. The information includes data about the securities amount, bidding close time, and eligibility.

2. Participants, including institutional and retail investors, submit bids categorised as competitive or non-competitive.

3. Up to 30 days in advance, the bids are accepted.

4. The auctioneer selects the best bid, but they determine the final offering price after reviewing and sorting all bids.

Competitive bidding refers to when you specify the discount rate or the discounted yield you are willing to accept. In case the bid is lower than the discount rate, it will be accepted. Alternatively, you accept the offered discounted rate determined during an auction in a non-competitive auction. This type is mainly dedicated to small investors. 

Opt for Treasury Bills if you want a low-risk investment and require guaranteed returns. In addition, if you have a short-term goal and surplus, you can invest in a T-bill. These are good alternatives for fixed deposits and liquid funds. 

Due to the reason that T-bills are risk-free investment options and backed by the government, they come with a guarantee. Even if an economic slowdown or recession occurs, you will receive returns as per the initially determined rate after the maturity. 

If your financial goals include investing in short-term options with excellent liquidity, you can opt for a T-bill.

Treasury bills are short-term debt securities, whereas bonds or treasury bonds are long-term debt securities. While the Treasury bill's maturity is 364 days, the maturity for Treasury bonds can last up to 30 years.

The minimum investment amount for T-Bills is ₹25,000. If you wish to make more investments, you can do so in multiples of ₹25,000.

No. T-Bills are not suitable for long-term growth as the maximum maturity tenure provided is 364 days. 

The Reserve Bank of India holds Treasury bill auctions in the market every Wednesday on behalf of the government. 

Yes. You have the option to sell T-bills before maturity in the secondary market. However, the estimated price you will receive will be less than the face value, depending on market conditions.

Return to Goal