Slide 1

Introduction of t-bill market:

Introduction of t-bill marketA particular kind of finance note put out by the government of the country. Treasury bills are highly liquid because there cannot be a better guarantee of repayment than the one given by the government. They are claims against the government. That means when you buy a Treasury, we are actually loaning money to the government and the government in turn is paying you interest on the borrowed moneyImportance qualities of t-bills:

Importance qualities of t-bills High liquidity. Absence of risk of default. Readily available Assured yield Low transaction cost

Types of t-bills:

Types of t-bills Ordinary T -bills:- Ordinary T-bills are issued to the public and the RBI for enabling the government to meet the needs of supplementary short term finance. Adhoc T-bills:- The practice of issuing adhoc TBs has been discounted through the singing of two agreement between the government and the RBI.

T-bills rate:

Treasury bills rate is the rate of interest at which treasury bills are sold by RBI. The effective return on treasury bills is the discount at which they are sold and their redemption value.

Present status: At present the government of India issues four types of treasury bills trough auctions namely 14 day ,91 day , 182 day and 364 day . There are no treasury bills issued by state Government. T-bills are available for a minimum amount Rs . 25000 and in multiple Rs . 25000. T -bills are issued at a discount and are redeemed at par.

Auction

T-bills are auctioned every alternative week of Wednesday. The RBI issues quarterly calendar of T-bills auction which is available at the banks website. All T -bills are now sold through an auction process according to a fixed auction calendar, announced by RBI.

91 day T-bills Auction :91 day T-bills Auction Published on Saturday Nov. 11,2010 at 13:50 1 updated at Saturday Nov.11 2010 at 14:27 The RBI has announced the auction of 91 days Government of India T reasury Bills for notified amount of Rs 2000cr. The auction will be conducted on Nov 15 2010. The sale will be subject to the terms and conditions specified in t he General Notification No. F.Z.(12)-W and M/97 dated 31 st March 1998 issued by Government of India and as amended from time Tender should be submitted in the prescribed form on Wednesday November 15,2010 by 12:30 P..M. Results will be announced on the same evening. Payments by success full bidders will be on Friday, November 17,2010. Any person in India including individuals, firms, companies, corporate bodies. Trusts and Institutes can purchase T-bills.

FORM

The T-bills are issued in the form of Promising note in Physical Form or by credit Subsidiary General Ledger (SGL) account or Gill account in dematerialised form.

MINIMUM AMOUNT OF BIDS:

Bids for treasury bills are to be made for a minimum amount of Rs25000/- only and in multiples there of.

REPAYMENTS: The T-Bills are repaid as par on the expiry of their tenor at the office of RBI, Mumbai.

YIELD CALCULATION: The yield of a T-Bill is calculated as per the following formulla :- Y=(100-P)*365*100/P*D Y DY:- Discounted Yield P:-Price D:-Days of maturity

SALIENT FEATURES OF THE AUCTION TECHNIQUE: The auction of T-Bills is done only at RBI Mumbai. Bids are submitted in terms of price per Rs100. e.g a bid for 91-day . T-Bill auction could be for Rs97.50. Auction Committee of RBI decides the cut-off price and results are announced on the same day.