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CA Foundation · Business Economics · Money Market

Which statement about Treasury Bills in India is correct?

Treasury Bills are issued by the Government of India through RBI auctions and have virtually no default risk because they are sovereign obligations. They are sold at a discount, redeemed at par, pay no coupon, and mature within a year, unlike corporate or bank-issued instruments.

  1. AThey are issued by the Government of India through auctions and carry practically no default riskCorrect
  2. BThey are issued by corporates with maturities over one year
  3. CThey are always issued at par and pay periodic coupons
  4. DThey are issued by banks only to other banks

Explanation

Treasury Bills are short-term government securities issued by the central government through RBI auctions, at a discount and redeemed at par. Being sovereign obligations, they carry virtually no credit risk. They pay no coupon and mature in 91, 182 or 364 days, so the other options are wrong.

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