The yields on Treasury Bills (T-Bills) in India have decreased by up to seven basis points (bps) due to improved liquidity in the banking system. T-Bills are short-term debt instruments issued by the Government of India, with tenors of 91 days, 182 days, and 364 days. These zero-coupon securities are issued at a discount and redeemed at face value upon maturity. First introduced in 1917, they are auctioned by the Reserve Bank of India (RBI) and can be purchased by individuals, trusts, institutions, and banks. Besides serving as investment instruments, T-Bills play a crucial role in liquidity management and meeting Statutory Liquid Ratio (SLR) requirements for banks.
Facts/Terms for UPSC Prelims
- Repo (Repurchase Agreement): A financial transaction where banks provide Treasury Bills to the RBI in exchange for short-term funds. It serves as a liquidity management tool.
- Statutory Liquidity Ratio (SLR): A mandated reserve requirement that banks must maintain in the form of liquid assets, such as Treasury Bills, as a percentage of their net demand and time liabilities.
- Zero-Coupon Securities: Financial instruments that do not pay periodic interest but are issued at a discount to their face value and redeemed at par upon maturity.
- Liquidity Crisis: A situation where there is a shortage of cash and credit in the financial system, often leading to higher returns on short-term instruments like T-Bills.
