Why in the News?
India extended critical financial assistance to the Maldives by rolling over a $50 million Treasury Bill, continuing its support under a government-to-government arrangement since 2019.
About Treasury Bill:
- A T-Bill is a short-term debt instrument issued by the GoI through the Reserve Bank of India (RBI).
- They are part of Government Securities (G-Secs) and are used to raise short-term funds.
- They are zero-coupon securities, meaning they do not carry periodic interest payments.
- Instead, they are issued at a discount and redeemed at face value upon maturity.
- They were first introduced in India in 1917.
- They are ideal for investors seeking safety and liquidity over short periods.
Features of the T-Bills:
- Tenures Available: 91-day, 182-day, and 364-day maturity periods.
- Issued at a Discount: T-Bills are sold at a lower price than their face value. The return (yield) is the difference between purchase price and face value.
- Minimum Investment: Starts at ₹25,000, and in multiples of ₹25,000 thereafter.
- Zero-Coupon Nature: No interest payments during the tenure. Investors earn via the discounted purchase price.
- Risk-Free Investment: Backed by the Government of India, making it virtually risk-free.
- High Liquidity: Due to short tenure, T-Bills can be easily converted to cash.
- Auction Mechanism: Sold through competitive and non-competitive bidding at RBI auctions.
- Taxable Gains: Returns are treated as short-term capital gains and are taxable.
- Sensitive to Inflation: Fixed returns can be impacted by rising inflation, reducing real returns.
| [UPSC 2018] Consider the following statements:
1.The Reserve Bank of India manages and services GoI Securities but not any State Government Securities. 2.Treasury bills are issued by the GoI and there are no treasury bills issued by the State Governments. 3.Treasury bills offer are issued at a discount from the par value. Which of the statements given above is/are correct? Options: (a) 1 and 2 only (b) 3 only (c) 2 and 3 only * (d) 1, 2 and 3 |
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