What is a T-Bill?
A Treasury Bill (T-Bill) is a short-term debt instrument issued by the Government of India through the Reserve Bank of India (RBI). T-bills are used by the government to meet short-term funding needs. They come in three maturities: 91 days, 182 days, and 364 days.
T-bills are issued at a discount to face value. You buy a ₹100 T-bill for, say, ₹97.50 and receive ₹100 at maturity — your return is the difference (₹2.50). There are no periodic interest payments (no coupons). The return is entirely from the price appreciation from purchase to face value.
T-Bills vs G-Secs — What is the Difference?
- T-Bills: Maturity of 91, 182, or 364 days. Short-term. Issued at discount, no coupons.
- G-Secs (Government Securities): Long-term bonds with maturity from 2 to 40 years. Pay semi-annual coupon interest. Also called gilts or dated securities.
- Both are sovereign debt — zero credit risk. The government can always print money to repay (in practice, it never defaults on domestic debt).
- State Development Loans (SDLs): Similar to G-Secs but issued by state governments, slightly higher yield than central government G-Secs.
How to Calculate T-Bill Yield
The yield on a T-bill is calculated as:
- Yield = ((Face Value - Purchase Price) / Purchase Price) × (365 / Days to Maturity) × 100
- Example: 91-day T-bill purchased at ₹98.20, face value ₹100. Yield = ((100-98.20)/98.20) × (365/91) × 100 = 1.83% × 4.01 = 7.35% annualised
T-bill yields are closely linked to the RBI's repo rate. When repo rate is 6.5%, 91-day T-bill yields are typically 6.4–6.8%.
How Retail Investors Can Buy T-Bills
Retail investors have three main routes:
- RBI Retail Direct (retaildirect.rbi.org.in): Free platform by RBI. Open a gilt account, participate in weekly T-bill auctions directly. No intermediary fees. Minimum investment ₹10,000 and in multiples of ₹10,000. This is the cheapest route.
- Zerodha Coin / Groww / Paytm Money: Some brokers offer G-Sec and T-bill purchases through their platform. Convenient but may have fees.
- Through mutual funds: Liquid funds, overnight funds, and ultra-short funds heavily invest in T-bills. Investing in these funds gives indirect exposure without the hassle of direct auctions.
T-Bills vs Fixed Deposits — Which is Better?
- Safety: T-bills = sovereign guarantee (technically zero risk). FDs = DICGC insured up to ₹5 lakh per bank. Beyond ₹5 lakh, FD has credit risk (bank default). T-bills are safer for large amounts.
- Returns: T-bill yield currently ~7.0–7.3% (91-day). SBI FD for 91 days: ~5.5–6%. T-bills typically yield more than equivalent-tenure FDs from major PSU banks.
- Tax: Both are taxed at income slab rate. No advantage either way.
- Liquidity: FDs: premature withdrawal allowed (with penalty). T-bills: can sell in secondary market via RBI Retail Direct or through your broker (liquidity depends on market conditions).
- Convenience: FD wins — easy to open at any branch or online banking app. T-bills require RBI Retail Direct registration which takes 2–3 days.
Who Should Buy T-Bills Directly?
T-bills make sense for: high-net-worth individuals wanting risk-free returns above FD rates for amounts above ₹5 lakh (beyond DICGC cover), corporates and trusts with short-term surplus, and investors who understand the auction mechanism. For amounts below ₹5 lakh or investors who prefer convenience, liquid mutual funds (which invest heavily in T-bills) achieve similar outcomes without direct auction participation.