scorecardresearchTreasury bills: Why should you invest in them?

Treasury bills: Why should you invest in them?

Updated: 31 Aug 2022, 04:27 PM IST

Treasury Bills are debt instruments with various maturities and can be an ideal option for parking money for less than one year.

Government securities are tradable debt instruments that the government offers in the form of bonds, treasury bills, or notes.

Government securities are tradable debt instruments that the government offers in the form of bonds, treasury bills, or notes.

Gone are the days when fixed deposits, PPF and other traditional saving instruments were individual investors’ only debt investment options. Thanks to the RBI Retail Direct Platform, investors can invest directly in debt securities such as treasury bills.

So, what are treasury bills?

Just like a company issues commercial papers to take care of its financial requirements, the government of India also needs money for their short-term needs. And for that, the government issues treasury bills. It is a money market instrument that aims to finance short-term financial requirements.

However, unlike forms of investments, treasury bills don’t offer a rate of return. What happens is that they are issued at a discount to face value. This means that they will not pay any interest upon maturity. An investor’s actual profit is determined by the difference between the issue price and the face value. For instance, if a T-bill with a face value of Rs. 10,000 is sold for Rs. 9,000, its interest is Rs. 1,000.

How to calculate yield?

Although treasury bills do not offer returns, you can calculate the annualised return you will get from investing in T-Bills. This can help you compare different investment options.

The following formula is used to determine the annual yield percentage from a treasury bill:

Y = [(365/D)x100] / [(100-P)/P]

  • The yield, or return, is expressed as Y
  • P represents the bill’s discounted price
  • The duration of the bill is D

According to the RBI’s report published on August 22, 2022, the yield on the primary market is 5.56%, 5.91% and 6.20% for 91-Day, 182-Day and 364-Day Treasury Bill.

So, we can see that the yield on the 364-Day looks more attractive than the one-year FD interest offered by top banks.

Types of T-bills

T-bills mature within a certain period, such as 14-day, 91-day, 182-day, and 364-day. They are put up for auction every Wednesday.


These bills mature 14 days after the date of issuance. These notes are offered in multiples of Rs. 1 lakh, with an Rs. 1 lakh minimum investment.


These bills mature 91 days after the date of issue. With an Rs. 25,000 minimum investment, these bills are sold in multiples of Rs. 25,000.


These bills mature 182 days after the date of issue. With an Rs. 25,000 minimum investment, these bills are sold in multiples of Rs. 25,000.


These bills have a 364-day maturity after the date of issuance. The minimum investment in these bills is Rs. 25,000, which are sold in multiples of Rs. 25,000.

Advantages of Treasury Bills

Here are some of the benefits of treasury bills:

No risk

Treasury bills are short-term government securities and carry no risk as the central government issues them. The government pays back the total face value of the treasury bill at maturity. As a result, investors can feel secure knowing that their investments are supported by the Indian government, which is the highest authority in the nation.

High Liquidity

The maximum maturity period of a T-bill is 364 days. So, as an investor, you don’t have to wait for years for the T-bill to mature. Additionally, T-bills are tradable on the secondary market. This allows investors to turn their investments into cash in a crisis.

Non-competitive bidding

The RBI holds weekly outbidding Treasury bill auctions. This makes it possible for retail investors to make non-competitive proposals. This increases investors’ exposure to the market for government securities like bonds and treasury bills.

Limitations on Treasury Bills

Lower returns than other investment options

Treasury bills produce lower returns than other stock market investing options because they are government-backed debt securities. They are distributed below face value and subsequently redeemed. Since treasury bills are zero-coupon bonds, investors receive no interest from them. As a result, investors in T-bills benefit from stable returns during the bond’s tenure regardless of the nation’s economy.

However, other investment options are influenced by the current state of the market. As a result, these investment options have the potential to earn higher returns than treasury bills.

High minimum amount

The minimum amount to start investing in treasury bills is Rs.25,000, which is steeper than the minimum investment amount for other investment options such as debt funds and fixed deposits.

Who can invest in Treasury Bills?

Treasury Bills are an extremely safe investment option. In the case of T-Bills, you will be aware of the date of issue, the maturity date, and the amount and the gains. This makes treasury bills an ideal option to park money for less than one year.

Moreover, there is non-competitive bidding for retail investors, so there is no competition problem as well. The details regarding the discount value and par value are published beforehand.

Treasury bills can also help to fulfil short-term financial goals. If the tenure of the goal coincides with the maturity of a T-Bill, then you can look at investing in treasury bills.

If you invest predominantly in equity investments and are looking forward to diversifying your investments to cater to short-term liquidity requirements, then you can invest in treasury bills.

Padmaja Choudhury is a freelance financial content writer. With around six years of total experience, mutual funds and personal finance are her focus areas.

Understanding Treasury bills
First Published: 31 Aug 2022, 04:27 PM IST