T-Bills: Your New Investment Best Friend
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Personal Finance
- Swati Tripathi
- 03 min read
#investment tips

Have a short-term goal that you need to have sufficient savings? Maybe a holiday three months down the road or making plans to present your mother and father with something big? Many short-term funding alternatives in India help you cope with your near-time financial goals. Among those are Treasury Bills, which the government backs. The Central government issues numerous monetary instruments to raise funds for their obligations. The general public can purchase those monetary instruments, which include debt securities, bonds, money marketplace instruments, and more. For example, a treasury bill is one of those money market instruments used to elevate the budget for the government's short-term requirements.

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What is Treasure Bill?

T-bills are issued as promissory notes that are guaranteed to be repaid later. They are used to meet short-term needs, thus helping the government to reduce the country's fiscal deficit. In addition, Treasury bill holders do not receive interest as these financial instruments have a zero-coupon rate. These money market instruments are issued at a discounted price from par. In addition, upon maturity, Treasury Bills may be redeemed at face value. This allows holders of these accounts to profit from the amount they originally invested.

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How do T-bills work?

T-bills are issued to meet obligations over the government's annual revenues. The idea is to reduce the overall budget deficit and regulate the money flow. Short-term government bonds are issued by the Reserve Bank of India (RBI) as part of its open market operations. When inflation is high, especially when the economy is booming, the issuance of treasury bills reduces the money supply to the economy. This lowers the demand rate and thus lowers the high price. During a recession, both T-Bills circulation and discounts are likely to decrease. In this way, investors choose to invest in other securities, such as stocks, instead, making most firms more productive, thereby increasing GDP and demand. Treasury discount bills can be purchased at a discounted price and redeemed at the nominal price to earn the difference. As previously mentioned, treasury bills are zero-coupon securities, and holders of such bills do not earn interest on their deposits. Instead, profits after redemption are treated as capital gains. The minimum investment amount for T-bill is Rs 25,000 as per RBI guidelines. All other investments can be made in multiples of Rs 25,000. These invoices are issued electronically and deposited in the owner's sub-ledger account (SGL) or physical form. On behalf of the Center, the RBI auctions securities such as T-bills each week based on the total bids made on the exchange. Custody participants, commercial banks, primary dealers, or mutual funds can offer these exchanges to their investors. It takes T+1 day to complete the treasury bill transfer process. Short-term 91-day bonds are auctioned in a single auction, while 364-day bonds are auctioned in multiple auctions. There are various types of T-bills T-bills in India can be one of four types depending on the tenor they are issued. 14-day T-bill These T-Bills are due 14 days from the date of issue. They are auctioned every Wednesday and issued in multiples of Rupees. 10,000 rupees. 91-day T-bill These T-Bills have a maturity of 91 days. These securities are also auctioned weekly and issued in multiples of Rs. 25,000. 182-day T-bills These bonds mature 182 days from the date of issue. They are auctioned every two weeks and sold at multiples of Rs. 25,000. 364-day T-bills 364-day government bonds mature 364 days after issuance and are auctioned every two weeks. The issue amount is in multiples of Rs. 25,000.

Yield The annual yield percentage from a treasury bill is calculated using this formula- Y= (100-P)/Px[(365/D)x100]. Y is the yield or return % P is the discounted price of the bill D is the tenure of the bill.

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Are these T-bills a safe investment instrument?

Treasury Bills are advantageous over other market instruments due to the associated zero-risk weighting. As a result, the secondary market for T-Bills is very active and highly tradable. Treasury bills are one of the most popular short-term government programs issued by the RBI and supported by the central government. However, such tools are a liability to the Government of India as they must be repaid within stipulated deadlines. Individuals enjoy comprehensive security for the total amount invested, as it must be protected by the country's highest authority and paid even during the economic crisis. As mentioned above, government bonds are issued as a short-term funding tool for governments and have a maximum maturity of 364 days. Therefore, individuals who want short-term gains from safe investments can deposit their funds in such securities. Also, such G-sec can be resold on the secondary market, allowing individuals to convert their holdings into cash in an emergency. Treasury bills are auctioned weekly by the RBI by non competitive bidding, allowing individual and individual investors to bid without disclosing yields or prices. This will increase amateur investors' exposure to the government bond market and cash flow to the capital markets. Limitations of Treasury Bill The main drawback of government T-bills is that they are known to have relatively low yields compared to standard stock market investment vehicles. Treasury bills are zero coupon securities issued to investors at a discounted price. Therefore, the total return generated by such securities remains constant throughout the bond's life, regardless of economic conditions or business cycle fluctuations. This is in contrast to the stock market, where market fluctuations significantly impact the returns produced by both equity and debt instruments. As a result, if the stock market rises, the returns on related tools will be significantly higher than the capital gains generated by investing in G-Sec.


Short Term Capital Gains (STCG) realized on these bills are subject to STCG tax at the applicable rate according to the investor's income tax records. However, the main advantage of such G-Sec programs is that retail investors do not have to pay withholding tax (TDS) on the repayment of these bonds. Taxable income category

Who should consider investing in T-bills?

Treasury bills are an ideal investment vehicle for individuals who wish to secure their surplus funds in a secure investment tool for greater returns. RBI facilitates the non-competitive bidding process for such bonds, allowing retail investors to participate by bidding at the respective primary dealers of ordinary commercial banks. In addition, retail investors enjoy complete transparency in the investment process as discount rates, and denomination details are publicly disclosed in advance. Treasury bills are, therefore, one of the safest forms of investment in the country. Ideal for risk-averse individuals who are tired of stock market commodities but also among experienced investors who invest part of their funds in government securities, diluting the overall risk to their bodies. It is also popular for portfolio diversification. Moreover, these government bonds play an important role in regulating the overall money supply in the economy and influence the money pooled in the capital markets

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