DEFINITION:

A treasury bill is a promissory note or a finance

bill issued by the government under discount for a
specific period stated therein.

Treasury Bills are money market instruments to

finance the short term requirements of the
Government of India. These are discounted
securities and thus are issued at a discount to face
value. The return to the investor is the difference
between the maturity value and issue price
It refers to the market where treasury bills are
bought and sold.
1.Treasury bills are issued only by the RBI on the
behalf of the government.
2.Form:
The treasury bills are issued in the form of promissory note
in physical form

3.Eligibility:
All entities registered in India like banks, financial
institutions, Primary Dealers, firms, companies,
corporate bodies, partnership firms, institutions, mutual
funds, Foreign Institutional Investors, State
Governments, Provident Funds, trusts, research
organisations, Nepal Rashtra bank and even individuals
are eligible to bid and purchase Treasury bills.
3.Repayment:
The treasury bills are repaid at par on the expiry of
their tenor at the office of the Reserve Bank of India,
Mumbai.

4. Availability:
All the treasury Bills are highly liquid instruments
available both in the primary and secondary market.

5. Day Count:
For treasury bills the day count is taken as 365 days
for a year.
7.Yield Calculation:

The yield of a Treasury Bill is calculated as

per the following formula:

(100-P)*365*100
Y = ---------------------
P*D

Wherein Y = discounted yield

P= Price
D= Days to maturity
In India, there are two types of treasury billls
A. Ordinary or regular treasury bills
B. Ad hoc known as “ad hocs”.

A. Ordinary or regular treasury bills

They are issued to the public and other
financial institution for meeting the short term
financial requirement of the central government.
these bills are freely marketable and they can
be bought and sold at any time.
B. Ad hoc known as “ad hocs”.
Ad hoc treasury bills are issued in the favour of
the RBI only.
they are not sold through tenders or auctions.
they are purchased by RBI only.
They are not marketable in India but holders of
these bills can sell them back to the RBI.ocs
Ad hocs serve the government in the following
ways:
1.They replenish cash balance of the central
government. Just like state government get
advance from the RBI, the central government
raise through these ad hocs.
2.They also provide an investment medium for
investing the temporary surpluses of state
government, semi-government depatment and
forien central bank.
On the basis of periodicity, treasury bills may be
classified into 3 they are:-
1.91 days treasury bills:-these bills are issued at
the fixed discount rate of 4% as well as through
auction.91 days treasury bills can be rediscounted
with the RBI at any time after 14 days of their
purchase.
2.182 days treasury bills
3.365 days treasury bills:-these bills do not carry
any fixed rate. the discount rate on these bills
are quoted in auction by the participants and
accepted by the authorities
1. No tax deducted at source
2. Zero default risk being sovereign paper

3. Highly liquid money market instrument

4. Better returns especially in the short term

5. Transparency

6. Simplified settlement

7. High degree of tradability and active

secondary market facilitates meeting
unplanned fund requirements.