Features of treasury bills, Financial Management

Features of Treasury Bills

Treasury Bills are short-term, rupee denominations issued by the Reserve Bank of India (RBI) on behalf of the Government of India. T-bills are issued in the form of promissory notes or finance bills (a bill which does not arise from any genuine transaction in goods is called a finance bill) by the government to tide over short-term liquidity shortfalls.

These short-term instruments are highly liquid and virtually risk-free. These are the most liquid instrument after cash and call money, as the repayment guarantee is given by the central government.

Treasury bills do not require any grading or further endorsement like ordinary bills, as they are claims against the Government. These instruments have distinct features like zero default risk, assured yield, low transactions cost, negligible capital depreciation and eligible for inclusion in Statutory Liquidity Ratio (SLR) and easy availability, etc., apart from high liquidity.

Issuer

The Reserve Bank of India acts as a banker to the Government of India. It issues T-bills and other government securities to raise funds on behalf of the Government of India, by acting as an issuing agent.

Investors

Though various groups of investors including individuals are eligible to invest, the main investors found in treasury bills are mostly banks to meet their Statutory Liquidity Ratio (SLR) requirements. Other large investors include:

Primary Dealers.

  • Financial Institutions (for primary cash management).
  • Insurance Companies.
  • Provident Funds (PFs) (as per investment guidelines).
  • Non-banking Finance Companies (NBFCs).
  • Foreign Institutional Investors (FIIs).
  • State Governments.

Non-resident Indians (NRIs) and Overseas Corporate Bodies (OCBs) are also allowed to invest but only on non-repatriable basis. The RBI issues both bids on competitive and non-competitive basis. Eligible Provident Funds (i.e., the non-government provident funds governed by the Provident Fund Act, 1925 and employees PFs and Miscellaneous Provisions Act, 1952 whose investment pattern is decided by Government of India), State governments, and the Nepal Rastra Bank can participate in the auctions on ‘non-competitive' basis. The scheme of non-competitive bidding to encourage mid-segment investors like individuals, Hindu Undivided Families (HUFs), PFS, Urban Cooperative Banks (UCBs), NBFCs, Trusts, etc., to participate in the primary market of government securities, were operationalized in January 2002.

 

Posted Date: 9/11/2012 3:44:26 AM | Location : United States







Related Discussions:- Features of treasury bills, Assignment Help, Ask Question on Features of treasury bills, Get Answer, Expert's Help, Features of treasury bills Discussions

Write discussion on Features of treasury bills
Your posts are moderated
Related Questions
Q. Demerits of net present value method? (i) Difficult to Understand as well as Implement:- This method is tricky to understand as well as implement in comparison to the paybac

Valuation and Exit Valuation: The Net Asset Value is used as a base for ascertaining the prices applicable to investor subscriptions and redemptions. Fund administrator perform

What factors does Standard & Poor’s analyze in determining the credit rating it assigns a sovereign government? Answer: In rating a sovereign government, Standard & Poor’s anal

Define intermediation The financial system makes it probable for surplus and deficit economic units to come together, exchanging funds for securities, to their mutual advantage

Traditional   Capital Budgeting Techniques These techniques are usually very simple and easily catchable. But the fundamental drawback of these methods is that they don't cons

What is the decision rule for accepting or rejecting proposed projects while using net present value? While using the net present value decision rule any project along with a net

Which type of financing is appropriate to each firm

Seasonal Variation Under this variation, we observe that the variable under consideration shows a similar pattern during certain months of the successive years. An example of s

Accounting Principle Accounting principles are the primary assumptions, rules of operation, and necessary features that make up the framework for the construction of accountin

What are some of the government requirements imposed on a public corporation that are not imposed on a private, closely held corporation? Public corporations ought to tender au