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Treasury Bills (TBS)

The treasury bill, on the other hand, is a short-term government security, usually of the duration of 91 days, sold by the central bank on behalf of the government. There is no fixed rate of interest payable on the treasury bills. These are sold by the central bank on basis of competitive bidding. The treasury bills are allocated to the person who is satisfied with the lowest rate of interest on the security. As treasury Bills are government papers having no risk, these are good papers for commercial Banks to invest short-term funds.
      Treasury bills are highly secured and liquid because of guarantee of repayment assured by the RBI who is always willing to purchase or discount them. Treasury bills are government sector instruments and do not require any grading or further endorsement or acceptance.
      Types of Treasury Bills. Treasury Bill's are basically of two types :
          (i) Ordinary/ Regular
          (ii) Adhoc
         (i) Ordinary/Regular TBs are issued to the public and the RBI by a process of auction or bidding. The objective is to meet the additional short-term financial needs of the government. Bids are invited usually for 14 days, 182 days, 91 days and 364 days treasury bills. The ordinary TBs can be got rediscounted with RBI.
          (ii) Adhoc-TBs are issued in favour of RBI with a view to replenish Governments cash balances by employing temporary surpluses of state government and semi-government departments.
          Banks are the main subscribers to such treasury Bills because they offer a stable and attractive returns, high liquidity and can be encashed at a very short notice with RBI.

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