Question

What is a Treasury Bill ?

Answer 1

Treasury Bill: A short-dated UK or US government security, yielding no interest but issued at a discount on its redemption price.

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Answer 2

SOLUTION :

Treasury bills are issued by Reserve Bank of India on the behalf of the central government of India. They are generally sold to banks, public, Financial institutions, insurance companies, cooperative house for a period of 91 days to 364 days.

They are negotiable instructions and freely transferable.  No interest is paid on treasury bills rather they are issued at discount. They are also known as deep discount bond.

Example : If a treasury bill with the face value of ₹ 1,000 is issued at ₹ 900 . The holder of the bill would get ₹ 1000 on the maturity. Here, the difference between issued price and face value is discount on interest.

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