What are Treasury Bills?
The treasury bills are short-term promissory notes issued by Government of India at a discount for 14 days to 364 days. Treasury bills provide a temporary outlet for short-term surplus. They also provide financial instruments of varying short-term maturities to enable dynamic asset-liabilities management.
Various Treasury Bills
The various treasury bills so far issued include 14 days, 28 days, 91 days and 364 days TBs on auction basis.
14 days Treasury bills
In order to provide investors with instruments of varying short-term maturities, Government of India introduced the auction of 14 days TBs since June 1997.
91 days Treasury Bills
In order to develop TBs market and moving towards market rate of interest on Government securities, the auction of 91 days TBs was first introduced in January 1993.
In each auction, amount to be auctioned will be pre-announced and cut off rate of discount and the entire corresponding issue price will be determined. The amount and rate of discount are determined on the basis of the bids at the auctions.
Features of 14 days Treasury Bills
The salient features of 14 days TBs (Tap) are—
1. Sold for a minimum amount of Rs. 1,00,000 and in multiples of Rs. 1,00,000.
2. Issued only in book entry form.
3. Not transferable.
4. Discount rates are set at quarterly intervals.
5. Re-discounted at 50 basis points higher than the discount rate.
6. On re-discounting, the TBs are extinguished.