Treasury Bills Market

A Treasury bill is a particular type of finance bill or a promissory note issued by the government of any country.Treasury bills serve as the main instrument of short term borrowing by the government.Treasury bills are not self liquidating in the way genuine trade bills are, although the degree of their liquidity is greater than that of trade bills.According to their liquidity, the short term financial instruments lie as Cash, Call loans, Treasury bills and  Commercial bills.The reason behind the high liquidity of treasury bills is that, no guarantee of repayment could be better than a guarantee given by the government and also the central bank’s willingness to purchase or discount them.As being the “claims” against the government, treasury bills do not  require any grading or further endorsement or acceptance.The interest received on the treasury bills is the discount, which is the difference between the issuing price and redemption value.Some of the very important qualities of treasury bills are:

*High Liquidity
*Ready Availability on Tap
*Absence of risk of default
*Assured yield
*Low Transaction Cost
*Eligibility for Inclusion in Statutory Liquidity Ratio
*Negligible Capital Depreciation

Types of Treasury Bills:

There are two types of treasury bills which are in fashion in India.They are:

>Ordinary Treasury Bills- These are issued to the public and the RBI for enabling the government to meet the needs of supplementary short term finance.

>Ad hoc Treasury Bills- Also known as ad hocs in short, these are the treasury bills, which practice has been discontinued through the signing of two agreements between the government and the RBI.The system of issuing Ad hoc treasury bills started in India in 1937.In September 1994, the system of ad hocs was phased out because the Ad Hoc was becoming the vehicle for automatic monetization  of the budget deficit.The Ad hoc system was totally discontinued from 1997.

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