Treasury bills

26. Consider the following statements:
1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
3. Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Ans: (c) 2 and 3 only
Explanation:-          

• Treasury Bills are issued only by the central government in India. The State governments do not issue any treasury bills. Interest on the treasury bills is determined by market forces.
• Treasury bills, or T-bills, are short-term debt instruments issued by the U.S Treasury. T-bills are issued for a term of one year of less. T-bills are considered the world’s safest debt as they are backed by the full faith and credit of the United States government.
• Treasury bills offer are issued at a discount from the par value.
• Statement 1: RBI manages securities of both Central and State governments. Thus, this statement is incorrect.
• Statement 2: Treasury bills are issues by Central government.  Recently Jharkhand had also issued T bills. Thus, this statement is incorrect.
• Statement 3: Treasury bills are zero coupon securities and pay no interest. Rather, they are issued at a discount (at a reduced amount) and redeemed (given back money) at the face value at maturity. Thus, this statement is correct.
• Thus, option B is the most appropriate answer.