Treasury Bills (T – Bills) are an investment mode, wherein an investor can invest money for buying bonds issued by the Government of India (GOI). In return, the GOI will pay a fixed return (Interest) to the investor. This fixed rate of interest on the bond is called the Coupon Rate of the bond. This Interest amount is NOT paid to the investor periodically unlike other bonds. The interest is adjusted in the purchase price. The purchase price will be at a discount from the face value (Amount that will be received at maturity).
For instance, if the face value is ₹100, the interest rate is 7%, and the holding period is 364 days, the purchase price will end up being about ₹93.46. This means, investors only pay ₹93.46 to purchase the bond, and at maturity, they receive ₹100. This is why T- Bills are also called ‘Zero Coupon’ Securities, wherein no periodic interest is paid.
A Treasury Bill (T-Bill) is issued by the Government of India (GOI) to support short term financing of the government. T-Bills have maturities of 14 days, 91 days, 182 days, or 364 days. Investors can choose maturities as per their preferences.
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