Call/Notice Money   |   Treasury Bills   |   Term Money   |   Certificates of Deposits   |   Inter-Corporate Deposits Market   |  
Commercial Papers Market   |   Ready Forward Contracts   |    Commercial Bills   |   Terminology

2. TREASURY BILLS MARKET

In the short term, the lowest risk category instruments are the treasury bills.
RBI issues these at a prefixed day and a fixed amount.
These are four types of treasury bills.

14-day Tbill- maturity is in 14 days. Its auction is on every Friday of every week. The notified amount for this auction is Rs. 100 crores.
91-day Tbill- maturity is in 91 days. Its auction is on every Friday of every week. The notified amount for this auction is Rs. 100 crores.
182-day Tbill- maturity is in 182 days. Its auction is on every alternate Wednesday (which is not a reporting week). The notified amount for this auction is Rs. 100 crores.
364-Day Tbill- maturity is in 364 days. Its auction is on every alternate Wednesday (which is a reporting week). The notified amount for this auction is Rs. 500 crores.

A considerable part of the government's borrowings happen through Tbills of various maturities. Based on the bids received at the auctions, RBI decides the cut off yield and accepts all bids below this yield.

The usual investors in these instruments are banks who invest not only to part their short-term surpluses but also since it forms part of their SLR investments, insurance companies and FIs. FIIs so far have not been allowed to invest in this instrument.

These Tbills which are issued at a discount can be traded in the market. Most of the time, unless the investor requests specifically, they are issued not as securities but as entries in the Subsidiary General Ledger (SGL) which is maintained by RBI. The transactions cost on Tbill are non-existent and trading is considerably high in each bill, immediately after its issue and immediately before its redemption.

The yield on Tbills is dependent on the rates prevalent on other investment avenues open for investors. Low yield on Tbills, generally a result of high liquidity in banking system as indicated by low call rates, would divert the funds from this market to other markets. This would be particularly so, if banks already hold the minimum stipulated amount (SLR) in government paper.