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What Are Treasury Bills (T-Bills) and How Do They Work in India?

T-Bills are excellent investment options for investors who are looking for a safe, liquid, and short-term investment with guaranteed returns. Read this blog to know more about them.

  • 4,035 Views | Updated on: Dec 26, 2023

Treasury bills (T-Bills) are short-term debt instruments issued by the government to raise funds. T-Bills are considered one of the safest investment options in India, as they are backed by the full faith and credit of the government.

Key Takeaways

  • T-Bills are short-term debt tools issued by the Government of India, with maturities of 91, 182, and 364 days.
  • They are safe, liquid, and low-risk investment options with guaranteed returns.
  • These are sold at a discount to their face value, and investors receive the face value at maturity.
  • These can be purchased through primary dealers or directly at auctions held by the RBI.
  • T-Bills can also be bought and sold in the secondary market.

Treasury Bills, or T-Bills, are financial instruments that provide good returns on investments. They might not be as flashy as stocks or as sophisticated as bonds. Still, they are essential tools for governments and investors alike. If you are wondering what T-Bills are and how they work in India, you are in the right place. Let us dive right in!

What Are Treasury Bills (T-Bills)?

Treasury Bills are government-backed short-term debt instruments. Think of them as IOUs (I Owe You) from the government. When you buy a T-Bill, you are essentially lending money to the government. In return, they promise to pay you back the face value of the bill on a specific date, which is usually less than a year from the issue date.

In India, T-Bills are available in the form of 91-day, 182-day, and 364-day bills. These numbers refer to the maturity period, which is how long you must wait to get your money back with interest. The longer the maturity, the higher the interest rate you can typically expect. Treasury bills interest rates are currently running in the range of 7.07% - 7.08%.

How Do T-Bills Work?

Treasury bills are auctioned for public sale by the government. Here is how they work:

Buying T-Bills

Anyone can buy T-Bills in India, individuals, corporations, banks, or financial institutions. You can do this through primary dealers or directly at auctions held by the Reserve Bank of India (RBI).


T-Bills are typically sold at auctions, where the government sets a minimum price (the cut-off price). Bidders compete by offering to buy T-Bills at different prices (higher or lower than the cut-off). The highest price bidders (lowest yield) get their T-Bills.

Interest Payment

T-bills are sold at a discount to their face value, which means you pay less upfront than you will receive at maturity. The difference between the face value and the purchase price is your interest income.


When the T-Bill matures, the government pays you the face value, and you pocket the difference between the face value and what you initially paid. This difference is your profit, your reward for lending your money to the government.

Advantages of T-Bills

T-Bills are like the reliable old friend of your investment portfolio. Here is why:


T-Bills are backed by the government, making them one of the safest investments.


You can easily buy and sell T-Bills in the secondary market, making them highly liquid investments.


T-Bills have short maturities so that you can get your money back quickly.

Low Risk

Their short-term nature also means they are less affected by interest rate fluctuations than long-term bonds.

Ways to Buy Treasury Bills in India

As you know that T-bills are government-backed, they can be purchased in two ways. Let us take a look at them:

Through the Reserve Bank of India (RBI)

Open an online Retail Direct Gift Account (RDG) with the RBI and link it to your savings account. You can then bid in auctions held by the RBI occasionally. Let us look at the step-by-step guide for buying treasury bills directly through the RBI:

  • Open an online Retail Direct Gift Account (RDG) with the RBI.
  • Link your RDG account to your savings account.
  • Bid in auctions held by the RBI from time to time.
  • If your bid is successful, the RBI will allot you treasury bills.
  • The treasury bills will be credited to your RDG account.
  • You will receive the interest payments and maturity proceeds directly into your bank account.

Through the Primary and Secondary Markets

You have to go through following steps for buying treasury bills through the primary and secondary markets:

  • Open a Demat account with a bank or broker.
  • Deposit funds into your Demat account.
  • Place an order to buy treasury bills on the stock exchange.
  • If your order is successful, the treasury bills will be credited to your Demat account.
  • You will receive the interest payments and maturity proceeds directly into your bank account.

Summing It Up

Treasury Bills are an intelligent investment option as they offer a simple and safe way to park your money temporarily or as a part of a diversified investment strategy. Remember, while T-Bills are low-risk, the returns are typically lower than other investments. So, they might not make you a millionaire overnight, but they will help you sleep better knowing your money is in safe hands.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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