‘Treasury Bills are the instruments of
short term borrowing by the Central/State
government under discount for a specified
period and promises to pay the specified
amount to the bearer on due date’.
•First issued in India in 1917.
•The period does not exceed a year.
Types of treasury
Ordinary Or Regular Treasury Bills:
•Issued to public and other financial institutions
•These bills are freely marketable
•Issued in favor of RBI only.
•They are not sold through tender or auction.
•Service to government:
1. They replenish cash balances of the central
government and can rise finance.
2. They provide an investment medium to invest the
temporary surpluses of state government, semi
government ,departments and foreign central banks.
Classification on the basis of
91 days treasury bills
•Issued at a fixed discount rate of 4% and sold through auctions.
•It can be rediscounted at any time after 14 days of their
purchase but before 14 days a penal rate is charged.
•The RBI holds 91 days TB’s and are issued on tap basis
throughout the week.
182 days treasury bills
•No fixed discount rate.
• Discount rate are quoted in auction by the
participants and accepted by the authorities and the
rate is called Cut Off Rate.
364 days treasury bills
Sold through auction conducted once in fortnight.
•The date of auction and the last date of submission
of tenders are notified by the RBI through a press
•The next working day : the date of auction ,the
accepted bids with the prices are displayed.
•The successful bidders have to collect letters of
acceptance from the RBI and deposit the same
along with a cheque within 24 hours of the
announcement of auction results.
•Investors maintain a Subsidiary General Ledger(SGL)
account with the RBI. Purchases and the sales of TBs
are recorded in this account and investors who do not
have SGL account can do it through DFHI.
•The DFHI is actively participating in the auctions of
•It plays a significant role in secondary market also by
quoting daily buying and selling rates.
•It also gives buy-back and sell- back facilities for
periods upto 14 days at an agreed rate of interest to
I. RBI and SEBI
II. Commercial banks
VI.Financial institutions like LIC , GIC
, UTI, IDBI, ICICI, IFCI, NABRD
Ideal short term investment
Ideal fund management
Statutory liquidity requirement
Source of short term funds
Non inflationary monetary tool
Absence of competitive bids
Absence of active trading