Understanding Treasury Bills: Features, Benefits, and When to Invest

When considering short-term, low-risk investment avenues, Treasury Bills (T-Bills) are among the most reliable options available to investors. In India, these government-backed securities are known for their safety, liquidity, and predictable returns. This article outlines what T-Bills are, their key features, benefits, and when they fit best within an investor’s portfolio.

What Are Treasury Bills?

Treasury Bills are short-term debt instruments issued by the Reserve Bank of India (RBI) on behalf of the Government of India to manage short-term funding requirements. These are zero-coupon securities, meaning they are issued at a discount and redeemed at face value upon maturity.

T-Bills are typically available with maturities of 91 days, 182 days, and 364 days. Owing to their short tenure and sovereign backing, they are considered virtually free from credit risk, making them a preferred choice for conservative investors.

Key Features of T-Bills

• Short-term maturity: T-Bills mature in less than a year―often in 91, 182 or 364 days.

• Issued at a discount: Investors purchase T-Bills at a discounted price (for example, ₹98 for a ₹100 face value) and receive the full face value upon maturity. The difference represents the return earned.

• Guaranteed by the government: As these are issued by the Government of India through the RBI, the investment is considered one of the safest available.

• Minimum investment amount: The minimum investment amount is generally ₹25,000 (or in multiples thereof), making T-Bills accessible to both individual and institutional investors.

• Liquidity: T-Bills can be held until maturity or traded in the secondary market, allowing investors flexibility and liquidity management.

Benefits of Investing in T-Bills

• Capital preservation: Being government-backed, T-Bills offer a high level of security. They are suitable for risk-averse investors or those looking to temporarily park funds.

• Predictable returns: Since both the tenure and redemption value are predetermined, investors have clarity on expected returns and investment duration.

• Short-term flexibility: T-Bills are ideal for short-term investment horizons - typically up to one year - offering a better alternative to idle cash or low-yield savings.

• Portfolio diversification and liquidity buffer: They serve as an effective liquidity or contingency component within a diversified investment portfolio.

• Transparency and accessibility: The RBI Retail Direct platform has simplified retail participation, making it easier for investors to participate in T-Bill auctions online.

When to Invest in Treasury Bills?

T-Bills are best suited for investors in the following situations:

• If you have surplus funds to invest for a short duration (three to twelve months).

• You prefer low-risk instruments that preserve capital while earning moderate returns.

• You are building a liquidity reserve or planning for near-term financial obligations.

• You are managing a diversified portfolio and need an interim parking option before reallocating to other asset classes.

However, it is important to note:

• Returns are moderate: As risk is minimal, the returns on T-Bills are lower compared to equities or long-term bonds. High inflation may also reduce real returns.

• Short-term nature: T-Bills are designed for short-term goals, not long-term wealth creation.

• Interest rate sensitivity: If sold before maturity, T-Bills may be subject to price fluctuations due to changing interest rates.

How to Invest in Treasury Bills?

Investors can purchase T-Bills through the following channels:

• Primary auctions conducted by the RBI, accessible via the RBI Retail Direct platform.

• Banks and registered brokers, where investors can place non-competitive bids in T-Bill auctions.

• Secondary markets, allowing investors to trade existing T-Bills through demat accounts.

Taxation: The gains from T-Bills are treated as short-term capital gains and taxed according to the investor’s applicable income tax slab.

Conclusion

Treasury Bills are a dependable and secure investment avenue for those seeking short-term, low-risk opportunities. They combine government-backed assurance with high liquidity and transparency. For investors working with Equirus Wealth, integrating T-Bills into a broader portfolio strategy can help balance liquidity needs, manage risk exposure, and support disciplined financial planning.

While T-Bills may not deliver high returns, their role in ensuring capital preservation and short-term stability makes them an essential component of a well-diversified investment approach.