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Questions and Answers
What are treasury bills?
What are treasury bills?
Treasury bills are money market instruments issued by the Government of India as a promissory note with guaranteed repayment at a later date.
What is the maximum tenure of treasury bills?
What is the maximum tenure of treasury bills?
364 days
How do individuals profit from treasury bills?
How do individuals profit from treasury bills?
Individuals profit by purchasing treasury bills at a discount and receiving the full nominal value at maturity.
What are the types of treasury bills based on tenure?
What are the types of treasury bills based on tenure?
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Treasury bills yield interest on total deposits.
Treasury bills yield interest on total deposits.
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What is the minimum investment amount for treasury bills?
What is the minimum investment amount for treasury bills?
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What role does the Reserve Bank of India (RBI) play in treasury bills?
What role does the Reserve Bank of India (RBI) play in treasury bills?
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What is a non-competitive bidding in the context of treasury bills?
What is a non-competitive bidding in the context of treasury bills?
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Study Notes
Treasury Bills
- Treasury bills are short-term debt instruments issued by the Indian government.
- The government uses these bills to finance short-term needs and manage the fiscal deficit.
- Treasury bills are offered at a discount to their face value and are redeemed at face value on maturity, providing investors with a return.
- They are zero-coupon securities, meaning they do not pay interest during their tenure.
- The Reserve Bank of India (RBI) utilizes treasury bills as part of its Open Market Operations (OMO) strategy to regulate money supply and influence inflation.
Types of Treasury Bills
- Treasury bills are categorized based on their maturity periods:
- 14-day treasury bills
- 91-day treasury bills
- 182-day treasury bills
- 364-day treasury bills
- The face value and discount rate of treasury bills fluctuate based on the RBI's monetary policy and funding needs, as well as demand in the market.
Features of Treasury Bills
- Risk-Free: Guaranteed by the Indian government, these bills offer a high level of security for investors.
- Liquidity: Short maturity period (maximum 364 days) makes them easily marketable, allowing investors to convert their holdings into cash if needed.
- Non-Competitive Bidding: Investors can participate in weekly auctions without submitting bids for price or yield, making them accessible to retail investors.
- Minimum Investment: The minimum investment amount required for a treasury bill is Rs. 25,000, and further investments must be multiples of this amount.
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Description
This quiz covers key concepts related to Treasury bills, including their functionality as short-term debt instruments issued by the Indian government. Participants will learn about the types of Treasury bills based on maturity periods and their features, such as being risk-free and zero-coupon securities. Test your understanding of how RBI uses these bills in monetary policy.
