Q.A short-term instrument issued by the Government of India at a discount to its face value, redeemed at full face value on maturity, and regarded as carrying virtually no default risk, is a:
(A) Certificate of Deposit
(B) Commercial Paper
(C) Treasury Bill
(D) Debenture

A Treasury Bill is a short-term (up to 1 year) instrument issued by the RBI on behalf of the Government of India to meet its short-term borrowing needs; it is issued at a discount to face value and redeemed at face value, so it carries no separate interest and is virtually risk-free.

Treasury Bill

A Treasury Bill (T-Bill) is a negotiable money-market instrument through which the Government of India borrows money for the short term. It is issued by the Reserve Bank of India on behalf of the government, normally for periods of 91 days, 182 days or 364 days. T-Bills are issued at a discount, i.e. below their face value, and are redeemed at full face value on maturity; the difference between the issue price and the face value is the gain to the investor in place of interest. Because they are backed by the government, they are highly safe, highly liquid and are mainly bought by banks and financial institutions.

A Treasury Bill is a short-term instrument through which the Government of India borrows money for up to one year, issued by the RBI. It is issued at a discount to face value and redeemed at face value, is a zero-coupon (no separate interest) instrument, and is considered the safest money-market investment.

Meaning of Treasury Bill

A Treasury Bill (T-Bill) is a money-market instrument used by the Government of India to raise short-term funds. It is issued by the Reserve Bank of India on behalf of the government.

Key features:

• Short maturity — issued for 91 days, 182 days or 364 days.
• Issued at a discount — sold below face value and repaid at full face value on maturity; the difference is the investor's gain (so it is a zero-coupon instrument that pays no separate interest).
• Risk-free — being a government obligation, it carries no default risk and is highly liquid.
• Purpose — helps the government meet short-term cash needs and helps the RBI manage liquidity in the economy.

It is studied as a key instrument of the money market in the AP Intermediate 2nd-year Commerce Financial Markets chapter.

A Treasury Bill is a short-term (up to one year) money-market instrument issued at a discount by the RBI on behalf of the Government of India to meet short-term funding needs; it is safe, liquid and pays no interest, the gain being the discount.

Treasury Bill

A Treasury Bill (T-Bill) is one of the main instruments of the money market, which deals in short-term funds. It is issued by the Reserve Bank of India on behalf of the Government of India to borrow money for a short period. This is a 2-mark AP Inter 2nd-year Commerce previous-year question; AP's commerce syllabus aligns with the NCERT/CBSE commerce curriculum here.

Key points:

• It is a short-term instrument with a maturity of less than one year (91 days, 182 days or 364 days).

• It is a promissory note / bearer security of the Government.

• It is issued at a discount (below face value) and repaid at full face value on maturity; the difference is the investor's income.

• It does not carry any fixed rate of interest.

• It is highly safe (government-backed), highly liquid and negotiable.

• Mainly bought by banks and financial institutions.