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What is T-Bills or Treasury Bills in India and How to Buy Them?

What is T-Bills or Treasury Bills in India and How to Buy Them?

Today I’m going to explain you what is T-Bills or Treasury Bills in India and how they are one of the best short term investment options for you.

If you want to shoot 2 birds with 1 arrow then T-Bills are a great investment option. T-Bills or Treasury Bills give you double the benefit of LESS RISK and MORE INTEREST rate than Bank FD.

How, I will show you in this article. SO, please keep reading till the end.

Well, first let us know how popular are T-Bills in India?

On 15 July 2020, 19 states collectively raised Rs 24,956 crore by selling bonds.

That means, every Tuesday Government of India collects over 20,000 crores by selling bonds including T-Bills.

Yes, T-Bills are such a safe investment option in India.

Okay, let’s learn more about T-Bills…

What is T-Bills or Treasury Bills?

T-Bill or Treasury Bill is the part of G-SEC bonds through which the government borrows money from investors and spends this money on government projects and economy.

It’s a direct way to become a partner in government projects and earn handsome interest on capital invested.

T-Bills are short term bonds that we can buy through any Demat account just like shares and mutual funds.

As per the government regulations, you must have a Demat account to participate in buying and selling of shares, mutual funds, and bonds.

As T-Bills are one type of bond you need a Demat account to buy them.

Why Does the Government Issue Treasury Bills?

T-bills are the way to raise money from people by the government. This money helps mitigate economic obligations and support the economy at any given time.

T-bills also help regulate the total currency in circulation for any specific time period.

Government uses T-bills and bonds to make the market liquid. This is a great way to regulate the inflation level and spending/borrowing habits of individuals.

It’s a good investment option for individuals hence helps government sin hard time of economy.

T-Bills Interest Rates in India

When it comes to interest rates, T-Bills always beat bank FDs. When we calculate the mean of annual interest rates of T-Bills from 1992 to 2018 it comes 7.803 % pa.

It’s way better than bank FD ie; 6.75% pa. Max, if you invest in private banks.

Nationalized banks provide even lower than this.

The interest rates of T-Bills are calculated at the time of issue just like bank FD. So, at the time of investment, you already know how much money you will get on maturity.

However, T-Bills cannot compete with shares, debt mutual funds, and corporate bonds in terms of capital gains, even it’s a good investment option for us.

You know how risky is to invest in shares and mutual funds.

That’s all due to Corona Pandemic.

The market is always volatile and we can’t predict what’s going on the next business day.

SO, investing in a safe asset is a wise decision, especially for those who can’t take risk of losing money in the market.


How safe to invest in T-Bills in India?

T-Bills are issued by the government and the money borrowed is used in government projects so it will be safe till then the government becomes bankrupt.

SO, what do you think? Can the government ever go bankrupt?

The chances are rarest of the rare.

And if it happens then no other investments will be safe.

Do you know nationalized banks guarantee only 1,00,000 Rupees against any investment schemes including FD and saving accounts? If a nationalized bank goes bankrupt then you will receive only 1,00,000 rupees from the bank. It doesn’t matter how much money you’ve invested in the scheme. In the case of private banks there is no refund policy in the situation of bankruptcy.

SO, G-SEC bonds including T-Bills have the least risks compared to other investment schemes.

Treasury Bonds Vs T-Bills

There are two types of instruments in G-Sec Securities.

  • Treasury Bonds
  • T-Bills or Treasury Bills

The only difference between these two is the Time of Investment.

Treasury Bonds are long-term investment instruments, i.e. for more than a year.

If you want to be invested for one to several years with a safe investment instrument then Treasury Bonds are the best choice for you.

Treasury Bonds are available in different tenures such as 3 years 5 years, 10.5 years, and so on up to 30 years.

On the other hand, T-Bills or Treasury Bills offer short term tenures such as 91 Days, 6 Months and 9 months, etc.

SO, the purpose is clear – If you want to be invested in the long term, go for Treasury Bonds and if you are searching for short term investment solutions then go for T-Bills.

Different Types of Treasury Bills

We can divide T-Bills into 3 types as per the tenure.

  • 91 days
  • 182 days
  • 364 days

Anything above 364 days goes into treasury bonds.

SO, if you want to invest your money for a short time period as well as want the safety, nothing great then T-Bills.

You can use this to set short term investment goals. I have even just invested 40,000 Rupees last week on 91 days T-Bill through Zerodha Demat account.

I need that money after 3 months for some other work. SO, why let it die in the savings account where the interest rate is no more then 3-5%.

Instead, I have decided to convert that money into T-Bill for 91 days where it will be safe, and less liquid then saving account and also provides double interest rate then banks saving account.

T-Bills – Pros and Cons

However, in my personal point of view, I don’t see any cons in T-Bills but there are no hard and fast rules that something which suits me would also suit you.

It’s my duty to show the pros and cons of anything to you and on mine plus others, reviews AND T-Bills are not out of it.

SO, let see the Pros and Cons of T-Bills…


  • T-Bills are government bonds hence more secure than any other investment instrument. Your money is safe until the government goes bankrupt, which is near to impossible.
  • T-Bills gives more interest rates then banks fixed deposit. So it’s a better alternative to FDs.
  • A great option for short term investment plans.


  • Although T-Bills give more interest rate then bank FD it’s far below then mutual funds and direct shareholding. Investing in these instruments will get you more than double interest rate then T-Bills and G-Sec Bonds. Note: investing in mutual funds and shareholdings is riskier than government securities.
  • T-Bills are not liquid investment instruments. Apart from mutual funds and shares, where you can redeem your money anytime, T-Bills cost you A BIG CUT from the capital if you go for premature redemption.
  • You do not get any tax benefits with T-Bills.
  • Where in Bank FD you just need to go to the particular bank’s branch and fill their FD form along with the cheque of the amount to be fixed, T-Bills require an active Demat account. You can purchase T-Bills only when you have a Demat account as T-Bills are deposited to your Demat account in digital form.

What Influences T-Bill Prices and Rate of Interest?

There are a number of reasons that affect T-Bills prices. Such as macroeconomic conditions, monetary policy, and the overall supply and demand for Treasuries affects directly to T-Bill interest rates.

Here are some of the factors that affect T-Bill Interest rates most.

1. Maturity Dates

The interest rate of T-Bills depends on the maturity dates. Longer maturity dates offer more interest yield than shorter ones.

Such as in 2019 the Indian government offered a 5.74% yield for 91-Day Treasury Bill 5.93% yield for 182-Day Treasury Bill and 5.98% yield for 364-Day Treasury Bill.

Here you can see that 182 days T-bill offers more yield than 91 days and so on.

2. Market Risk

However, T-Bills are risk-free investment instruments, market sentiment indirectly affects the yield.

When investors see less risk in the equity market, they tend to invest in equity and show less interest in government securities. So the demand for T-Bills decreases. As a result, the yield decreases.

On the other hand, during the time of recession when the equity market goes down, there is a high demand for government securities and gold reserves, T-Bills yield increases.

SO, the market condition indirectly affects T-Bills rates.

3. The Federal Reserve

Federal reserve is the fund reserved by the Reserve Bank of India which is used to lend money to banks on an overnight basis.

The demand and supply of federal reserve influence T-Bills’ price on a short term basis.

RBI contract or expand the monetary policy and the availability of money in the economy at the end of every business day.

Contraction of fund results higher-yielding investments in government bonds including T-Bills and the opposite with the expansion of funds.

SO, the price of T-Bills fluctuates on a short term basis as per the availability of funds in the government reserve.

Note: The fluctuation of reserve does not influence the T-Bill price which you’ve already purchased, because the price is already decided and distributed to lender at the time of purchase.

4. Inflation Rate

The last thing that influences T-Bill prices is the inflation rate.

However, T-bills are known as the most liquid government bond, the rising prices in the economy influence this investment instrument too.

Let’s suppose you have purchased a T-Bill with a 5% yield and the inflation rate in India is 6% then you are in net 1% loss.

So, lenders tend to buy T-Bills when the inflation rate is low as compared to the last few years.

Conclusion: How to Buy T-Bills in India

G-Sec bonds are a secure alternative to other investment instruments. And the best thing is you get more yield than bank FD.

SO, why not invest in T-Bills and Bonds?

T-Bills gives us the flexibility to invest for short term tenure as well as more interest rate than others.

A big part of my investment portfolio has T-Bills and bonds and I suggest others too invest in this.

The rest is your choice.

Have a good day.

Don’t forget to share this article with others. This will help them a lot regarding the investment decision.

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