How to invest in Indian treasury bills
What's the story
Indian treasury bills (T-bills) are short-term government securities issued to meet the short-term funding requirements of the government. They are sold at a discount and redeemed at face value. T-bills are issued in three maturities: 91 days, 182 days, and 364 days. They are considered a safe investment, as they are backed by the Indian government.
#1
Understanding treasury bills
T-bills are issued through auctions conducted by the Reserve Bank of India (RBI). Investors can participate directly or indirectly through banks and financial institutions.
The minimum investment in T-bills is ₹25,000, and it can be increased in multiples of ₹25,000.
The yield on T-bills is determined by the difference between the issue price and face value.
#2
Types of treasury bills
There are three types of T-bills based on maturity period: 91-day T-bills, 182-day T-bills, and 364-day T-bills.
The shorter the maturity period, the lower the risk involved, but also lower the returns.
Longer maturity periods may offer higher returns but come with more uncertainty regarding interest rates and inflation.
#3
How to invest in treasury bills
Investing in T-bills can be done through primary or secondary markets.
In primary markets, investors participate in auctions held by RBI.
In secondary markets, T-bills can be bought or sold through brokers at prevailing market prices.
Investors should keep track of auction dates and results to make informed decisions.
#4
Benefits of investing in treasury bills
T-bills provide several benefits, including safety, liquidity, and predictable returns.
They are ideal for risk-averse investors looking for short-term parking of funds with guaranteed returns.
Since they are highly liquid, they can be easily bought or sold without affecting the market price much.