A Simple Guide to Treasury Bills and How They Operate

29^th Oct 2025...

Published By : Team 811

Key Takeaways

A treasury bill is a short-term government security issued by the Reserve Bank of India on behalf of the Government of India.
Treasury bills are sold at a discount and redeemed at face value, with the difference forming the investor’s return.
T-Bills have maturities of 91, 182, and 364 days and are considered virtually risk-free investments.
T-Bills are auctioned weekly by the RBI and can be purchased directly or traded in the secondary market.
Investors include banks, mutual funds, corporates, and individuals through platforms like RBI Retail Direct.
T-Bills offer safety, liquidity, and predictable returns, making them ideal for short-term fund parking.
Earnings are taxed as interest income or short-term capital gains based on how long the T-Bills are held.

Investing safely while earning steady returns has always been an investor’s goal. In a market full of changing trends, some instruments stand out for their simplicity and reliability. One such option is the treasury bill which is a short-term government security that carries almost no risk of default. Yet, for many new investors, treasury bill meaning remains unclear.

This article explains everything you need to know about treasury bills india, how they work, who issues them, and why they are an important part of the country’s financial system.

What is a Treasury Bill?

A treasury bill (commonly called a T-Bill) is a short-term borrowing instrument issued by the Government of India through the Reserve Bank of India (RBI). It is used when the government needs funds for temporary or short-term expenses.

The treasury bill meaning is simple, it represents a promise by the government to repay a specific amount on a fixed date. These are zero-coupon securities, which means they do not pay interest periodically. Instead, they are sold at a discount and redeemed at face value. The difference between the purchase price and the face value becomes the investor’s return.

For example, a 91-day T-Bill with a face value of ₹100 may be issued at ₹98. When it matures after 91 days, the investor receives ₹100, earning ₹2 as the return.

Features of a Treasury Bill

Before investing, it helps to understand the key characteristics of treasury bills India:

Issuer: Government of India through the Reserve Bank of India.
Tenure: Short-term securities with maturities of 91 days, 182 days, and 364 days.
Risk: Considered risk-free since they are backed by the government.
Return: The return or yield is the difference between the discounted purchase price and the face value at maturity.
Form: Issued in electronic form through RBI’s e-Kuber system.
Tradability: They can be traded in the secondary market, making them fairly liquid investments.

Because they are backed by the sovereign, T-Bills are often viewed as a benchmark for short-term interest rates in the economy.

How do Treasury Bills Work?

They follow a simple process that balances the government's funding needs with investor’s search for safety.

Issuance: The Reserve Bank of India auctions treasury bills on behalf of the government, generally every week. Participants include banks, mutual funds, insurance companies, and even individual investors through certain platforms.
Auction Process: Investors bid either competitively (specifying yield) or non-competitively (accepting whatever yield is determined). The price is quoted as a discount to face value.
Allotment: Successful bidders receive the T-Bills in their demat accounts.
Maturity: On the maturity date, the government pays back the face value. The investor’s gain is the difference between the discounted issue price and the full redemption value.

This simple structure ensures transparency and trust, which is why treasury bills india are one of the most preferred short-term investment avenues for institutions and individuals seeking safety.

Why Investors Choose Treasury Bills

There are many reasons why investors include treasury bills in their portfolios.

Safety: As they are issued by the Government of India, there is virtually no default risk.
Liquidity: They can be sold in the secondary market if you need funds before maturity.
Predictable Returns: The returns are known at the time of purchase since they are based on the discount offered.
Diversification: T-Bills add a stable, low-risk component to an investment portfolio, balancing higher-risk assets like equities.
Institutional Preference: Banks and mutual funds often invest in treasury bills to park surplus funds temporarily, as they can be easily liquidated when needed.

For retail investors, this makes them a smart choice for short-term savings without worrying about market volatility.

Types of Treasury Bills in India

The Reserve Bank of India currently issues three types of treasury bills based on maturity period:

91-day Treasury Bills – Issued weekly, suitable for very short-term parking of funds.
182-day Treasury Bills – Also issued weekly, ideal for investors seeking medium-term liquidity.
364-day Treasury Bills – Issued every alternate week, preferred by those comfortable with a one-year holding period.

Each of these serves a slightly different purpose, but the underlying structure remains the same that they all are discounted instruments redeemed at face value.

Who Can Invest in Treasury Bills

Almost anyone can invest in treasury bills, directly or indirectly. Participants include:

Banks and financial institutions
Mutual funds
Insurance companies
Corporates
Individuals (through demat accounts and certain online investment platforms)

Retail investors can buy T-Bills in smaller quantities through platforms that provide access to government securities. The RBI has also introduced the RBI Retail Direct scheme, which allows individuals to invest in government bonds and T-Bills directly without intermediaries.

How to Invest in Treasury Bills

You can invest in treasury bills through two main routes:

Primary Market: Participate directly in RBI’s auctions via the RBI Retail Direct portal or through a bank registered with the RBI.
Secondary Market: Purchase already-issued T-Bills from the market through your demat and trading account.

Once you complete the process, the securities are credited to your demat account. On maturity, the amount is automatically transferred to your linked bank account.

Many investors use T-Bills to manage short-term funds or as a parking option while waiting for better market opportunities.

Benefits and Limitations of Treasury Bills

Like any investment, treasury bills come with both advantages and certain trade-offs.

Benefits:

Backed by the Government of India, offering complete safety.
Easy to buy and sell through the RBI or authorised dealers.
Ideal for short-term goals or surplus fund management.
Provides better post-tax returns than traditional savings for those in lower tax brackets.

Limitations:

Returns are generally lower compared to long-term bonds or equity investments.
Fixed maturity means you may have to reinvest if funds are needed for longer periods.
Not all retail investors are familiar with the auction process.

Still, for investors looking for stability and transparency, treasury bills remain one of the best short-term choices available.

Taxation of Treasury Bills

Earnings from treasury bills are treated as short-term capital gains if sold before maturity, or as interest income if held till maturity. The income is added to your total taxable income and taxed according to your slab rate. While the returns are modest, the reliability and safety often outweigh the tax implications for conservative investors.

Also Read: E-Tax Filing: A Guide To Pay Income Tax Challan Online

Wrapping Up

Treasury bills may sound technical at first, but it stands for one of the simplest and safest forms of investment. Backed by the Government of India, they combine low risk with assured returns, making them ideal for those who prefer security over speculation.

Whether you are an individual looking to park surplus funds for a few months or an institution managing short-term liquidity, treasury bills offer a transparent and credible way to grow your money. They also serve a broader economic purpose by helping the government manage cash flow efficiently and by setting a benchmark for short-term interest rates across the financial system.

FAQs Treasury Bills

1. What is the minimum amount required to invest in treasury bills in India?

You can invest in treasury bills with a minimum amount of ₹10,000, and further investments must be made in multiples of ₹10,000. This makes them accessible even for small retail investors through the RBI Retail Direct platform.

2. Are treasury bills a good investment for beginners?

Yes. Treasury bills are considered risk-free, as they are backed by the Government of India. They are ideal for beginners who want to start investing safely while earning moderate, predictable returns over a short period.

3. Do treasury bills pay interest?

No. Treasury bills are zero-coupon instruments, meaning they do not pay periodic interest. Instead, they are issued at a discount and redeemed at face value—the difference is your profit or yield.

4. How can individuals buy treasury bills in India?

You can buy treasury bills directly through the RBI Retail Direct portal or indirectly via banks, mutual funds, or trading accounts that offer access to government securities. The process is entirely digital and secure.