Context:
Government to borrow Rs 3.94 lakh crore via Treasury bills (T-bills): Reserve Bank of India (RBI).
Treasury Bills (T-Bills):
- Short-term debt instruments issued by the Central Government to meet short-term liquidity needs.
- Maturity Periods: Issued in 3 tenors – 91 days, 182 days, and 364 days.
- Issuance: Sold at a discount to face value and redeemed at face value on maturity.
- Interest Rate: No explicit interest rate; the difference between the purchase price and face value represents the profit earned.
- Purpose: Used to manage short-term liquidity mismatches and finance government expenditure.
- Risk: Considered risk-free as they are backed by the government.
Government Securities (G-Secs):
- Tradable debt instruments issued by the Central or State Governments to finance their fiscal deficit.
- Types:
- Treasury Bills (T-Bills): Short-term securities with maturities of less than one year.
- Cash Management Bills (CMBs): Short-term (maturities less than 91 days) instrument introduced by the GOI in 2010
- Dated Securities: Long-term securities with maturities ranging from 1 year to 40 years.
- State Development Loans (SDLs): Issued by State Governments, similar to dated securities.
- Issued by: RBI through an auction on its electronic, E-Kuber platform.
- RBI’s Public Debt Office (PDO) acts as its registry / depository
- Related Initiatives:
- G-Sec Acquisition Programme (G-SAP): RBI purchases G-Secs from the market to control volatility.
- RBI Retail Direct Scheme: Allows retail investors to open and maintain ‘Retail Direct Gilt Account’ with RBI to access the G-Sec platform.
Key Differences:
- Maturity: T-Bills are short-term (less than one year), while G-Secs can be long-term (up to 40 years).
- Interest: T-Bills do not have an explicit interest rate, while G-Secs can have a fixed or floating coupon rate.
- Issuance: Central Government can issue both, but only G-Secs (SDLs) are issued by State Governments.
Source: Business Standard
Previous Year Question
Consider the following statements:
1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
3. Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: (c)