Treasury Bills:

• When the central government is in need of funds for short term, it issues treasury bills into the financial market. Anyone willing to buy them such as individuals, firms, etc. can buy these bills.
• Thus, a treasury bill is a short term financial instrument (government security). It is issued by Reserve Bank of India on behalf of Government of India.
• Treasury bill is an important component of money market all over the world.
• Treasury bill is also known as T-Bills’.
• The lock-Mn period or maturity of these bills is 91 days, 182 days or 364 days.
• The minimum amount of a T-bill is ₹ 25,000/- and then in multiples of ₹ 25,000/-.
• Government does not pay any interest to people who buy T-bills, but sells these bills at a discounted rate. Hence, T-bill is also called ‘zero coupon bond’.
• For example, government might sell Treasury bill of ₹ 25,000 at ₹ 23,500 to the investor. The investor would then be paid the actual value i.e. ₹ 25,000 on maturity date. Thus, the difference between the purchase amount and redemption amount becomes the profit for the investor.