Context:
Recently, the Government of India, in consultation with the Reserve Bank of India notified the calendar for the issuance of Treasury Bills for the quarter ending June 2024.
Relevance:
GS III: Indian Economy
About Treasury Bills
Definition and Nature:
- Treasury bills, commonly known as T-bills, are money market instruments.
- These are short-term debt instruments issued by the Government of India.
Maturity Period:
- Currently, T-bills are available in three maturity periods: 91-day, 182-day, and 364-day.
Financial Structure:
- T-bills are zero-coupon securities, meaning they do not pay interest.
- They are issued at a discount to their face value and redeemed at the full face value upon maturity.
Ownership and Utility:
- T-bills can be purchased by individuals, trusts, institutions, and banks, with financial institutions being the primary holders.
- Apart from being investment tools, T-bills play a crucial role in the financial market.
- Banks utilize T-bills for obtaining funds from the Reserve Bank of India (RBI) through repo operations and can also maintain them to meet their Statutory Liquidity Ratio (SLR) obligations.
Functioning:
- T-bills are issued at a discounted price, and the holder receives the full face value upon maturity.
- For instance, a Rs 100 T-bill might be purchased for Rs 95, but the holder will receive Rs 100 upon maturity.
- The yield on T-bills is influenced by the liquidity conditions within the economy. Higher returns are observed during liquidity crunches, and lower returns during surplus liquidity periods.
