Treasury-Bills

The central government will borrow ₹3.94 lakh crore via T-bills in January-March FY24, up from ₹2.47 lakh crore in October-December, per RBI’s auction calendar.

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Key Highlights on T-Bills Borrowing

• Breakdown of Borrowing:
  • ₹1.68 lakh crore via 91-day T-bills.
  • ₹1.28 lakh crore via 182-day T-bills.
  • ₹98,000 crore via 364-day T-bills.
• Increased Supply: T-bill borrowings have risen due to tight liquidity conditions in the market.
  • Quarterly borrowing increased sharply compared to the previous quarter.
• Flexibility in Auction: RBI, in consultation with the government, retains the flexibility to adjust auction amounts and timing based on market conditions and requirements.

About Treasury Bills (T-Bills)

• Characteristics: They are Zero-coupon securities issued at a discount and redeemed at face value upon maturity. It was introduced in India for the first time in 1917.
• Purpose and Usage:
  • Used to raise short-term funds by the government.
  • Can be used by banks to meet Statutory Liquidity Ratio (SLR) requirements or as collateral for repo transactions with the RBI.
• Eligibility: Individuals, trusts, institutions, and banks can invest in T-bills.

• Market Role: Key instruments for managing liquidity and funding within the financial system.
• Open Market Operations (OMOs): RBI buys or sells G-secs to manage liquidity and stabilize inflation.
  • T-bills are often sold to absorb excess liquidity or purchased to inject liquidity.
• Auction Mechanisms: RBI conducts regular auctions for T-bills and G-secs to ensure smooth borrowing processes.

Advantages and Disadvantages of Treasury Bills

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Way Forward

• Diversified Participation: Encourage greater involvement of retail investors in T-bill auctions through awareness campaigns.
• Efficient Liquidity Management: Streamline OMO operations to ensure balanced money supply.
• Policy Adaptability: Maintain flexibility in borrowing strategies to respond to evolving economic conditions.
• Market Stability: Monitor the impact of increased T-bill supply on short-term interest rates and market dynamics.

By addressing these challenges and leveraging effective monetary tools, the government and RBI can ensure stable borrowing conditions and robust financial market operations.