Treasury Bills

Treasury bills are short term instruments issued by central bank on behalf of Govt. These are short term

credit instruments for a period ranging from 91 to 364. These are negotiable instruments. Hence, these

are freely transferable. These are issued at a discount. These are repaid at par on maturity. These are

considered as safe investment.

Thus treasury bills are credit instruments used by the Govt. to raise short term funds to meet the

budgetary deficit. Treasury bills are popularly called Tbills.

The difference between the amount paid by the tenderer at the time of purchase (which is less than the

face value), and the amount received on maturity represents the interest amount on T-bills and is

known as the discount.

·     Features of T-Bills

·     They are negotiable securities.

·     They are highly liquid.

·     There is no default risk (risk free). This is because they are issued by the Govt.

·     They have an assured yield.

·     The cost of issue is very low.

On the basis of periodicity T-bills may be classified into four. They are as follows :

·     91-Day T-Bills

·     14-Day T-Bills

·     182-Day T-Bills

·     364-Day T-Bills