Understanding the Treasury Bill Market

Understanding the Treasury Bill Market

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The Treasury Bill market bargains in Treasury Bills which are the short term (i.e., 91, 182 and 364 days) liabilities of the Indian Government. In theory, these bills are issued to meet the government's short-term financial needs. However, in reality, they are now the government's primary source of funding. Long-term bonds are created from a portion of Treasury Bills each year. There are two types of Treasury bills: specially appointed and ordinary. Foreign central banks, semi-government and State government departments receive ad hoc Treasury Bills. They are not marketable and are not sold to banks or the general public.

The regular Treasury Bills, on the other hand, are freely marketable and sold to banks and the general public. The Reserve Bank of India sells both ad hoc and regular Treasury Bills on behalf of the Central Government. In comparison to the markets for Treasury Bills in the United States and the United Kingdom, India's market is less developed. In the United States and the United Kingdom, Treasury Bills are the most important money market instrument:

(a) Treasury Bills are a risk-free, highly profitable, and liquid investment vehicle for short-term financial institution surpluses.

(b) Depository Bills from a significant wellspring of raising asset for the public authority

c) The Treasury Bills serve as the primary instrument for the Central Bank's open market operations. On the other hand, the Reserve Bank of India is the only dealer on the Indian Treasury Bill market. Some Treasury Bills are held by commercial banks, state governments, and semi-governments, in addition to the Reserve Bank. Yet, these Depository Bills are not famous with the non-bank monetary establishments, companies, and people chiefly in view of nonattendance of a created Depository Bill market.