When the government goes to the financial markets to raise money, it does so by issuing two types of debt instruments: Treasury bills and government bonds. Treasury bills are issued when the government needs money for a short period of time by the central government, and interest in them is determined by market forces.
Treasury bills, also known as T-bills, are short-term money market instruments. The RBI is supposed to curb liquidity bottlenecks on behalf of the government. It is a promissory note with a later payment guarantee.
The funds raised are generally used for short-term government purposes. It is also used to reduce the country’s overall budget deficit. Treasury bills, or treasury bills, have zero-coupon rates, meaning no interest is earned on them.
Individuals can purchase Treasury bills at a discount to face value. They are later redeemed at par, allowing investors to earn the difference. For example, a person buys a 91-day treasury bill with a face value of Rs.100 which will be reduced to 95 rupees.
At maturity, the Treasury Bill holder earns Rs 100, resulting in a profit of Rs 5 for the individual. Hence, it is an essential currency instrument used by the Reserve Bank of India. It helps the RBI regulate the entire money supply in the economy and raise funds.
Buying T-bills
Treasury bills are issued in the primary market via RBI auctions. A Qualified Investor may participate in a competitive or non-competitive bid auction. make competitive offers.
- Non-Competing Bidder: Non-competing bidders can be individuals, HUF/trusts, companies, corporations, institutions, provident funds and any other party. Non-competitive bidders can participate in auctions without having to state the price/yield. So you don’t have to worry about whether the offer is right or not. According to the plan, the bidder is partially or fully awarded the contract.
- Competitive Bidding: Institutional investors such as financial institutions, banks, mutual funds, primary dealers and insurance companies are eligible to compete.
The RBI issues an indicative auction schedule that includes information about the loan, the maturity band and the duration of the auction. Bids can be submitted during the auction on RBI’s electronic platform EKuber.Ekuber is the bank solution platform (CBS) from RBI.
Eligible bidders who maintain credit balances or a current account and a securities account (Subsidiary Ledger Account (SGL) with RBI are members of the EKuber platform.
All E-Kuber members can use this electronic platform to place bids at the auction. RBI publishes auction results within a set deadline for treasury bills at 1:30 p.m.
Non-competitive bidders can bid to purchase T-bills through merchant members of the NSE app or NSE goBID. The bonds awarded will be credited directly to the bidder’s Demat account. Therefore, non-competing bidders must have a Demat account. The following steps will help you place non-competitive bids offers for T-bills:
- Login to your Demat account.
- In the IPO section, select the T-bill you want to bid on.
- Click Apply.
- Make your offers.
- If the request is successful, you will be notified by the trading platform.
- The allocated bonuses will be credited to your account within T+1 days.
