Treasury Bills – Types, Features and Advantages of Government Treasury Bills

Investment is what grows your money. But investments should also be safe. You cannot just blindly dump your money into an investment avenue without considering the safety of your investments. So, if you are looking for a safe place to put your money, then treasury bills or T-bills are a good option. T-bills are short-term investment options offered by the Government of India and do not pay regular interest like fixed deposits. Instead, you buy them at a lower price and earn a profit when you get the full amount at maturity.

In this blog, we will explain what treasury bills are, their types, features, how to buy them and how they are different from other government securities.

What are Treasury Bills?

Treasury bills or T-Bills are short-term loans taken by the Indian government from individuals or investors. When you buy a T-Bill, you are actually lending some money to the government for a short time.

These bills are issued by the RBI (Reserve Bank of India) on behalf of the government. When you buy these bills at a price lower than their face value, you do not get regular interest. But when you sell them at full face value upon maturity, you earn profits.

Example: If the face value is ₹100 and you buy it for ₹96, after the maturity period, you get ₹100. So, your profit is ₹4.

Types of Treasury Bills in India

There are three types of treasury bills in India, based on the treasury bills’ maturity period:

• 91-day T-Bills: These T-Bills mature in 91 days (about 3 months). They are short-term and perfect for quick investments.
• 182-day T-Bills: These are for 182 days and offer slightly better returns.
• 364-day T-Bills: These mature in 364 days and offer the best returns among the three types.

Key Features of T-Bills

Here are some important features of treasury bills issued by the RBI:

• It is a short-term investment for 91, 182 or 364 days.
• As T-Bills are backed by the Government of India, the investment is safe.
• You do not earn interest. T-bills are sold at a discount and repaid at full face value.
• T-Bills are issued through weekly auctions by the RBI.
• You can invest in T-bills with a minimum of ₹25,000.
• You can sell T-Bills before maturity in the market.
• The earnings or profits are taxable.

Advantages of Investing in T-Bills

Here are some of the benefits of investing in treasury bills:

• Your money is safe as the government guarantees it.
• Perfect for short-term investments.
• You can easily sell them even before maturity.
• The process is transparent as it is managed and auctioned by the RBI.

How to Buy Treasury Bills

It is easy to buy T-Bills. Here’s how you can purchase treasury bills in India:

• Through the RBI: For this, you need to open an account on the Retail Direct Platform by the RBI.
• Through Banks and Brokers: Several banks and stockbrokers also offer T-Bills through their platforms. However, here, you would need a demat account to hold your T-Bills.

T-Bills vs Other Government Securities

Conclusion

If you are looking for short-term investment options with complete safety, you can go for treasury bills. Choose from 91, 182, or 364-day options depending on your needs. But keep in mind that the treasury interest rates may change every week.

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