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
What are a bank's primary reserves ? When the Fed sets reserve requirements, what is its primary goal? Vault deposits and cash in the bank's account at the Fed are used to pe

Q. Foreign exchange - Maximum loss? From Marton's point of view an adverse outcome is depreciation of the dollar against sterling as this lowers its income when converted into

Management Accounting: Management accounting on the other hand tends to focus internally. Reports generated through management accounting processes will be used by the organisa

Advantages of Floating rate notes: We know that the coupon rate is fixed for fixed rate bonds and that throughout its tenure the investor receives coupons at a predetermined in

Why is the replacement value of assets method not generally used to value complete businesses? The replacement value of assets method isn't often applied to entire business val

AB Corp expensed on the financial stmt $2,000,000 for depreciation expense during the year using straight line depreciation and deducted $3,000,000 of depreciation on the tax retur

What is triangular arbitrage?  What is a condition that will give increase to a triangular arbitrage opportunity? Answer:  Triangular arbitrage is the method of trading out of th

What kinds of U.S. companies would benefit most from a stronger dollar in the foreign exchange market?  Explain. U.S. companies that import merchandise from other countries wou

Cash Flow Statement Ratios: This ratio, which is defined as a percentage, compares a company's operating cash flow to its total sales or revenues, which provide investors an i

Exchange Requirements To ensure money supply, some central banks require some or all of its foreign exchange receipts (generally from exports) be exchanged for the local curren