Treasury Bills Explained: A Beginner’s Guide to Safe Investment Options in India

treasury bills india

Investing wisely is key to securing your financial future, and Treasury Bills (T-Bills) are among the safest investment options available in India. For beginners looking to understand and venture into the world of investments, T-Bills offer a low-risk avenue. This guide will walk you through everything you need to know about Treasury Bills, from what they are to how you can invest in them.

What Are Treasury Bills?

Treasury Bills, commonly known as T-Bills, are short-term government securities issued by the Reserve Bank of India (RBI) on behalf of the Government of India. They are used to meet short-term borrowing requirements of the government. T-Bills are considered one of the safest investment options as they are backed by the sovereign guarantee of the Indian government.

Types of treasury bills india

Key Features of Treasury Bills

  1. Short-Term Maturity: T-Bills have a short maturity period, typically 91 days, 182 days, or 364 days. This makes them an ideal choice for investors looking for short-term investment opportunities.
  2. Discount Pricing: T-Bills are issued at a discount to their face value and redeemed at face value upon maturity. The difference between the purchase price and the redemption value is the interest earned by the investor.
  3. No Coupon Payments: Unlike other bonds, T-Bills do not pay periodic interest. Instead, the interest is the difference between the discounted purchase price and the face value at maturity.
  4. High Liquidity: T-Bills can be easily bought and sold in the secondary market, providing high liquidity to investors.
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Benefits of Investing in Treasury Bills

  1. Safety: T-Bills are backed by the Government of India, making them one of the safest investment options with minimal risk of default.
  2. Predictable Returns: Since T-Bills are issued at a discount and redeemed at face value, the returns are known at the time of purchase, providing predictability.
  3. Liquidity: The short maturity period and the ability to trade in the secondary market offer high liquidity, allowing investors to access their funds relatively quickly.
  4. Diversification: Including T-Bills in your investment portfolio can help diversify risk, especially in volatile market conditions.

How to Invest in Treasury Bills

Investing in T-Bills is a straightforward process. Here’s a step-by-step guide:

  1. Eligibility: Any individual, institution, or corporate entity can invest in T-Bills.
  2. Application Process: T-Bills can be purchased through primary and secondary markets. In the primary market, T-Bills are issued through auctions conducted by the RBI. Investors can participate in these auctions through banks, primary dealers, or via the RBI Retail Direct platform.
  3. Bidding: There are two types of bids in T-Bill auctions – competitive and non-competitive. In a competitive bid, investors specify the yield they are willing to accept. In a non-competitive bid, investors agree to accept the yield determined by the auction, making it simpler for retail investors.
  4. Allotment and Settlement: Once the auction is complete, successful bidders are allotted T-Bills, and the settlement is done on a T+1 basis, where ‘T’ is the auction day.

Example of Treasury Bill Investment

Suppose the Government of India issues a 91-day T-Bill with a face value of ₹100. During the auction, the T-Bill is issued at a discounted price of ₹98. Upon maturity, the investor receives ₹100. The difference of ₹2 (₹100 – ₹98) represents the interest earned by the investor.

Tax Implications

The interest earned on T-Bills is considered as income from other sources and is taxable as per the investor’s income tax slab. However, T-Bills are exempt from wealth tax, making them an attractive investment option from a tax perspective.


Treasury Bills are an excellent option for investors seeking a safe, short-term investment with predictable returns. Their government-backed guarantee, high liquidity, and ease of investment make them a popular choice among risk-averse investors. By including T-Bills in your investment portfolio, you can achieve diversification and safeguard your investments against market volatility. Start investing in Treasury Bills today to enjoy the benefits of a secure and reliable investment avenue.