What Are Treasury Bills? Understanding India’s Short-Term Investment Option

When the government requires financial support to meet various obligations, it seeks funding from the general public. Recently, the Indian Government issued $50 million treasury bills to extend support to Maldives in May 2025. Such actions give investors a chance to invest in government-backed, relatively low-risk instruments.

Treasury bills are one of the dependable debt instruments. It is a promissory note that assures repayment in the future. To learn more about what is a treasury bill and other crucial details, go through this blog.

Key Highlights

• Treasury Bills are short-term debt instruments backed by the government.
• T-Bills are managed by the RBI.
• You can buy T-Bills through competitive or non-competitive bidding.

What Is a Treasury Bill?

A Treasury bill (T-Bill) is a short-term financial instrument introduced by the Indian government and managed by the Reserve Bank of India (RBI). RBI auction treasury bills which you can buy through non-competitive or competitive bidding.

Treasury bills are zero-coupon securities which do not offer periodic interest payments. Instead, T-Bills are sold at a discounted price and the profit lies in the difference between the discounted purchase price and the face value received at maturity. 

Why Do the Government Issue Treasury Bills?

The government issues Treasury Bills to raise short-term capital to fund expenses, including budget deficit and government projects. These projects include social welfare, health care, educational and infrastructural projects.

These bills help the government manage their cash flow by raising funds from the masses. The issuance of T-Bills thus affects the money supply in the economy, followed by the interest rates. 

How Treasury Bills Work?

Let us understand the workings of treasury bills with an example. Suppose you decided to buy an 182-day treasury bill with a face value of ₹145 and bought it at a discounted price of ₹120. After 182 days, the government will buy back the bill at its face value of ₹145.

Here, Discounted Price: ₹120

Face Value: ₹145

Profit: ₹145 - ₹120 = ₹25

Notably, as T-Bills are zero-coupon instruments, as an investor, you do not earn interest on the investment. 

Who Should Invest in Treasury Bills?

Treasury bills in India are ideal for individuals looking for a secure investment option that offers reasonable returns. The RBI facilitates the process by allowing investors to participate through non-competitive bidding, making it accessible even for those with limited experience.

Information about the discount price and face value is shared in advance, ensuring complete transparency throughout the investment process. This allows you to make informed decisions while creating opportunities for wealth accumulation.

T-bills are suitable for all types of investors, regardless of their financial knowledge or risk appetite. Additionally, they can be a reliable choice for diversifying your portfolio.

Here are the individuals or entities who can invest in T-Bills:

• Individuals 
• Banks
• Companies
• Trusts
• Insurance Firms
• Provident Funds
• State Governments 
• Financial Organisations

Types of Treasury Bills

In India, 4 types of treasury bills are issued through auctions, categorised based on their maturity periods. Here is a breakdown of each:

1. 14-Day Treasury Bills

These bills mature within 14 days from the issuance date. The auction is conducted every Wednesday, with payment due on the following Friday. Investors can purchase these bills in multiples of ₹1 lakh, with ₹1 lakh being the minimum investment requirement.

1. 91-Day Treasury Bills

These treasury bills have a maturity period of 91 days from the date of issue. The auctions are held weekly on Wednesdays, and payments are made by the following Friday. The bills are available in denominations of ₹25,000, which is also the minimum investment amount.

1. 182-Day Treasury Bills

Maturing in 182 days from the issue date, these bills are auctioned every alternate Wednesday, with payments scheduled for the following Friday. Investors must purchase them in multiples of ₹25,000, with a minimum investment of ₹25,000.

1. 364-Day Treasury Bills

With a maturity period of 364 days, these bills are also auctioned every alternate Wednesday. Payments are made on the Friday following the auction. Like the 182-day bills, they are sold in multiples of ₹25,000, with ₹25,000 as the minimum investment.

Different Ways to Buy Treasury Bills in India

You can buy treasury bills in India through the following ways:

• Via RBI: You can purchase treasury bills directly through the Reserve Bank of India (RBI). To do this, you will need to open an RDG (Retail Direct Gilt) account with the RBI. This account can be linked to your savings account for seamless transactions. Purchases are made during auctions conducted by the central bank at regular intervals.
• Via Stock Exchange: Treasury bills can be purchased from the stock exchange, either in the primary or secondary market. To do so, you will need a demat account, which can be opened through a broker or bank. Once your demat account is active, you can initiate transactions and start investing in T-bills.

Pros of Investing in T-Bills

The following are some benefits of treasury bills:

• Risk-Free Investment: Treasury bills, issued by the RBI and backed by the Indian government, are among the safest short-term investment options in India. These securities are considered liabilities of the government, ensuring repayment by a fixed date. This backing by the country's highest authority guarantees the safety of your investment, even during times of economic uncertainty.
• High Liquidity: If you are seeking a secure way to earn short-term returns, treasury bills can be a great choice. Additionally, you can resell these securities in the secondary market, making it easy to convert your investment into cash during urgent financial needs.
• Easy Access Through Non-Competitive Bidding: The RBI conducts weekly auctions for treasury bills, allowing retail investors like you to participate without quoting a specific yield or price. This non-competitive bidding system simplifies the process for small-scale and first-time investors, giving you an easy entry point into the government securities market while promoting greater liquidity in the capital market.

Cons of Investing in T-Bills

Here are some drawbacks of treasury bills that you may encounter:

• Low Returns: These debt instruments provide lower returns in comparison to other investment options. 
• Taxation: Returns from treasury bills are treated as short-term capital gain and subject to taxation according to your income slab rate.
• Inflation Impact: Market fluctuations affect the price of a T-Bill. Its predetermined return might not adequately offset the decrease in purchasing power over time caused by inflation.

What Are the Different Factors that Influence the Price of Treasury Bill?

Several factors impact the pricing and returns of Treasury bills, including:

• Market Risk: Market risk arises from fluctuations in the prices of government securities due to changes in interest rates, potentially leading to valuation losses. While Treasury bills do not pay regular interest, they provide assured returns because they are issued at a discount and redeemed at face value, minimising the impact of market risk.
• Government’s Funding Needs: The government’s short-term borrowing requirements influence the pricing of treasury bills. The government issues these securities to meet its funding needs. Factors such as the scale of these requirements and the RBI's monetary policy decisions can impact their prices.
• Inflation: Inflation can erode the real returns from treasury bills. For instance, if the discount rate offers a return of 3% and the inflation rate is 5%, your investment may fail to deliver meaningful gains in terms of purchasing power.

Now that you know what is treasury bill, it can be a reliable choice for you if you are looking for a secure and short-term investment option. T-Bills provide safety, liquidity and simplicity, making them suitable for conservative investors. 

Keeping a track of T-Bill issuance can help you know the cost of borrowing. For instance, the cost of borrowing 91-day T-Bill has decreased from 6.2806% in April to 5.3699% in July 2025.