2. • Treasury bills are short term instruments issued by the Reserve Bank on behalf of the
government
• It is used by the government to raise short-term funds to bridge seasonal or temporary
gaps between its receipts and expenditure
• They are repaid at par on maturity
• They are issued at a discount
• The difference between the issue price and the price paid at maturity is the interest rate
earned on the investment
• Central Government issues treasury bills and dated securities, State Governments issue
only bonds or dated securities
3. • They are negotiable securities
• They are highly liquid
• Default risk is absent
• They have an assured yield, low transaction cost
• They are eligible for inclusion in the securities for SLR purposes
• The purchase and sale of Treasury bills are effected through subsidiary general ledger
• They are available for a minimum amount of Rs. 25,000 and in multiples thereof.
5. • Introduced in 1955
• Government to maintain a cash
balance of not less than Rs. 50 crores
on Friday's and Rs. 4 crores on all
other days
• When the balance falls below
minimum, Ad-hoc TB (91 day) will be
issued on behalf of RBI
• Resulting in monetization of
government's budget deficit
• This put a constraint on RBI conduct of
monetary policy
• They were discontinued on April, 1
1997
6. • Readily available
• They can be bought from the Reserve Bank at any time
• Interest yield 4.66 percent
• They were discontinued from April 1, 1997, as they had
lost much of their relevance
7. • Introduced in April 1992
• Active money market instrument
• Reserve Bank auctions the bills to various participants and issues the bills subject to
some cut-off limits
• The yield on the bill is market determined
• They are not rated instruments
• They cannot be re-discounted with the Reserve Bank
• At present the RBI issues TB of three maturities-91, 182 and 364 days
9. Mid 1950
91 day TB
introduced
Uncontrolled
monetization of
central govt deficit
Active TB market
Mid 1960
Auctioned 91 day
replaced with on-tap
bills
Rates aligned with
bank rates
After 1974
Uniform rate on
adhoc and on-tap @
4.6%
Market loses its
shine
1986, November
182 day auction
based TB introduced
1988
DFHI constituted as
a money market
institution
1992
182 day TB
discontinued
364 day auction bill
introduced
1993
91 day TB introduced
1997
existence of 91day
tap and ad hoc TB
continued till 1997,
March
14 day TB
introduced,
April, 1997
182 day TB
reintroduced
1998
Uniform price based
auction for 91 day
introduced
It has been
successfully adopted
from then on
2001
14 and 182 day TB
discontinued
2005
182 day TB
introduced
