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What are treasury bills? How do you invest in them?

Written by - Marisha Bhatt

November 2, 2022 6 minutes

An ideal investment portfolio has a healthy mix of assets that are of high-risk nature as well as assets that have low to virtually no risk. This healthy mix allows the investors to have the best of both worlds in terms of gaining more than average returns and spreading the risk on the portfolio. While investing in equity classifies under high risk, there are many investment options that allow the investors to earn risk-free returns. The primary options under the latter category are government securities like Treasury Bills, Sovereign Bonds, Sovereign Gold Bonds, etc. 

Let us discuss hereunder the meaning of treasury bills and other related details of the same. 

What is the meaning of treasury bills?

In simple terms, treasury bills are in the nature of money market instruments and promissory notes issued by the Government of India where they promise to pay the stipulated amount at a later or a future date upon maturity. These are short-term investment instruments with a maturity of a maximum period of 1 year and are issued by the Government to raise capital or funds from the general public. These instruments are in the nature of zero coupon bonds i.e., instruments that do not provide interest like other debt instruments. However, these bills are issued at a discount and redeemed at par value or face value, the difference being the profit for the investors. 

As per RBI, treasury bills, or T-Bills, as they are more commonly known, are issued for a fixed tenure of varying maturity periods. The most common T-Bills available in India are of the maturity period of 91 days, 182 days, and 364 days. These maturity dates for the T-bills remain constant although the amount of face value of the bills and the discounted rates may vary from time to time depending on the funds that need to be raised through this instrument. 

Read more: What are the different types of Govt securities and how to invest in them?

What are the features of treasury bills?

After the basic meaning of treasury bills, let us now focus on the features of these instruments. 

  1. Zero coupon bonds 

Treasury bills, unlike other debt instruments, do not carry a coupon rate or an interest rate that is provided to the investors during the tenure of investment. These bonds instead are issued at a discounted rate and redeemed at par value. For example, T-Bills for 91 days may have a face value of Rs. 100 but may be issued at a discounted value of Rs. 94. The maturity amount payable to the investors is at the rate of Rs. 100, therefore, the differential amount of rs.6 per T-Bill is the net gain for the investors depending on the total T-Bills subscribed. 

  1. Standard investment option 

T-Bills are available at a standard investment option of a minimum of Rs.25,000. Any further investment in these instruments has to be in multiples of Rs. 25,000. 

  1. Flexible maturity 

Investors have the option to invest for varying tenures offered under T-Bills. This increases the access to this investment for every category of investors who have different investment horizons.

  1. Available through auction and mutual funds 

Investors can access these bills and invest in them through various options like 

  1. Weekly auctions by the RBI and placing bids for the same on the electronic platform E-Kuber or through NSE goBID app
  2. Through Depository Participants like commercial banks, and registered primary dealers, 
  3. By simply subscribing to the units of mutual funds that invest in treasury bills. 

What are the pros and cons of investing in treasury bills?

Some of the key advantages of investing in treasury bills are highlighted below.

  1. Pros
    1. Risk-free investment option 

Treasury bills are government-backed securities and therefore the risk of investment in these instruments is nil. These bills are repaid by the government to the eligible investors upon their maturity irrespective of the economic conditions. 

  1. Liquidity 

Treasury bills are highly liquid as they have a maximum maturity of 364 days and can also be sold on secondary markets. Hence, investors can quickly liquidate their holdings at any point depending on their requirements. 

  1. Easy access for small investors 

As the T-Bills are auctioned by RBI every week and are available on various platforms, it makes it an easy access point for small and retail investors. The inclusion of multiple retail investors ensures that there are high cash flows in the capital market.

  1. Cons 

A few limitations of treasury bills are highlighted below.

  1. Lower returns

The returns on treasury bills are quite low as compared to other investment options. These instruments have no interest facility for the investors, unlike other short-term debt instruments. Also, there is no increase in the returns from treasury bills and they are constant, unlike other dynamic investment options like equity or debt-related money market instruments.  

  1. Taxation

The tax on the marginal returns from treasury bills is treated as short-term capital gains and is taxable as per the applicable slab rates.


Treasury bills are a very secure form of investment for investors who have zero risk tolerance and a short-term investment horizon. The liquidity of these instruments makes them a good addition to the portfolio as the investors can get access to immediate funds whenever needed and can have a diversified portfolio by spreading the overall risk.


How can investors calculate the yield on treasury bills?

The formula to calculate the yield on treasury bills is 
Yield = (100 – P)/P * [(365/D)*100],
Where P = Discounted price of the T-bill purchased and,
D = Tenure of bill

What is the maximum tenure of treasury bills?

The maximum tenure of treasury bills is 364 days.

What is the duration taken to settle the process of transferring the treasury bills?

It takes T+1 days to settle the process of transferring the treasury bills.

What are the types of treasury bills?

There are 4 types of treasury bills available for investment. The details of the same are,
-14 days treasury bills – These bills mature after 14 days of issue and have a minimum investment of Rs. 1,00,000 and further investment in multiples of Rs. 1,00,000 thereof
-91 days treasury bills – These bills mature after 91 days of issue and have a minimum investment of Rs.25,000 with additional investment in the same multiples thereof.

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