2. What is Treasury Bill?
DEFINITION
• A treasury bill is nothing but a promissory
note issued by the Government under dis
count for a specified period stated therein.
• Treasury Bills are money market instrume
nts to finance the short term requirements
of the Government of India.
3. What is Treasury Bill?
• These are discounted securities and thus
are issued at a discount to face value
• The return to the investor is the difference
between the maturity value and issue
price.
4. Treasury Bill Market
• Treasury bill market refers to the market
where treasury bills are brought and sold.
6. Ordinary Treasury Bill
• Ordinary treasury bills are issued to the
public and other financial institutions for
meeting the short-term financial
requirements of the Central Government.
• These bills are freely marketable and they
can be brought and sold at any time and
they have secondary market also.
7. AD-HOCS
• ‘Ad hocs’ are always issued in favor of the
RBI only.
• They are not sold through tender or
auction. They are purchased by the RBI
and the RBI is authorized to issue
currency notes against them.
8. AD-HOCS
Ad hocs serve the Government in the
following ways:
• They replenish cash balances of the
central Government. Just like State
Government get advance from the RBI,
the Central Government can raise finance
through these ad hocs.
• They also provide an investment medium
for investing the temporary surpluses of
State Government, semi-government
departments and foreign central banks.
9. On basis of periodicity
Type Of T Bill periodicity Day Of Auction
91-days Weekly Every Wednesday
182-days Fortnightly Alternate Wednesday
354-days Fortnightly Alternate Wednesday(with
no -182-days T bill auction)
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• 91 days treasury bills are issued at a fixed
discount rate of 4% as well as through
auctions.
• 364 days bills do not carry any fixed rate.
The discount rate on these bills are
quoted in auction by the participants and
accepted by the authorities. Such a rate is
called cut off rate.
11. PARTICIPANTS
• RBI and SBI
• Commercial banks
• State Governments
• Financial institutions like LIC,IDBI, ICICI,
• IFCI, NABARD, etc.
• Corporate customers
• Public
12. IMPORTANCE OF TB
• Safety
• Liquidity
• Ideal Short-Term Investment
• Ideal Fund Management
• Non-Inflationary Monetary Tool
13. Disadvantage of TB
• Poor Yield: The yield form TBs is the
lowest.
Long term Government securities fetch
more interest and hence subscriptions for
TBs are on the decline in recent times.
• Absence Of Competitive Bids: Though
TBs are sold through auction in order to
ensure market rates for the investors, in
actual practice, competitive bids are
conspicuously absent.
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The RBI is compelled to accept these non-
competitive bids. Hence adequate return is
not available. It makes TBs unpopular.
• Absence Of Active Trading: Generally,
the investors hold TBs till maturity and
they do not come for circulation. Hence,
active trading in TBs is adversely affected.
