Introduction of t-bill

market:

Introduction of t-bill market

A particular kind of finance note put out by
the government of the country. Treasury
bills are highly liquid because there cannot
be a better guarantee of repayment than
the one given by the government. They
are claims against the government. That
means when you buy a Treasury, we are
actually loaning money to the government
and the government in turn is paying you
interest on the borrowed money

Importance qualities of t-bills:

Importance qualities of t-bills High
liquidity. Absence of risk of default.
Readily available Assured yield Low
transaction cost

Types of t-bills:
Types of t-bills Ordinary T -bills: Ordinary T-bills are issued to the public
and the RBI for enabling the
government to meet the needs of
supplementary short term finance.
Adhoc T-bills:- The practice of issuing
adhoc TBs has been discounted
through the singing of two agreement
between the government and the RBI.

T-bills rate:
Treasury bills rate is the rate of
interest at which treasury bills are
sold by RBI. The effective return on
treasury bills is the discount at which
they are sold and their redemption
value.

 Present status: At present the government of

India issues four types of treasury bills
trough auctions namely 14 day ,91 day , 182
day and 364 day . There are no treasury bills
issued by state Government. T-bills are
available for a minimum amount Rs . 25000
and in multiple Rs . 25000. T -bills are issued
at a discount and are redeemed at par.

Auction
T-bills are auctioned every
alternative week of Wednesday. The
RBI issues quarterly calendar of Tbills auction which is available at the
banks website. All T -bills are now
sold through an auction process
according to a fixed auction calendar,
announced by RBI.

91 day T-bills Auction :

91 day T-bills Auction Published on Saturday Nov. 11,2010 at 13:50 1
updated at Saturday Nov.11 2010 at 14:27 The RBI has announced
the auction of 91 days Government of India T reasury Bills for notified
amount of Rs 2000cr. The auction will be conducted on Nov 15 2010.
The sale will be subject to the terms and conditions specified in t he
General Notification No. F.Z.(12)-W and M/97 dated 31 st March 1998
issued by Government of India and as amended from time Tender
should be submitted in the prescribed form on Wednesday November
15,2010 by 12:30 P..M. Results will be announced on the same
evening. Payments by success full bidders will be on Friday,
November 17,2010. Any person in India including individuals, firms,
companies, corporate bodies. Trusts and Institutes can purchase Tbills.

FORM
The T-bills are issued in the form of
Promising note in Physical Form or by
credit Subsidiary General Ledger
(SGL) account or Gill account in
dematerialised form.

MINIMUM AMOUNT OF BIDS:

Bids for treasury bills are to be

made for a minimum amount of
Rs25000/- only and in multiples there
of.

 REPAYMENTS:
The T-Bills are repaid as par on the expiry of their tenor at
the office of RBI, Mumbai.
YIELD CALCULATION:
The yield of a T-Bill is calculated as per the following
formulla :- Y=(100-P)*365*100/P*D Y
DY:- Discounted Yield P:-Price D:-Days of maturity
SALIENT FEATURES OF THE AUCTION TECHNIQUE:
The auction of T-Bills is done only at RBI Mumbai. Bids are
submitted in terms of price per Rs100. e.g a bid for 91day . T-Bill auction could be for Rs97.50. Auction
Committee of RBI decides the cut-off price and results are
announced on the same day.