Consider the following statements:
- The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
- Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
- Treasury bills offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
[UPSC Civil Services Exam – 2018 Prelims]
(a) 1 and 2 only
(b) 3 only
(c) 2 and 3 only
(d) 1, 2 and 3
Answer: (c)
Explanation:
- Government securities (G-Secs) are tradable instruments that are issued by the central government or state governments to acknowledge their debt obligations.
- The management of G-Sec issuances is entrusted to the Reserve Bank of India (RBI), which conducts regular G-Sec auctions on behalf of the central government every Friday.
- Regarding state government transactions, the RBI carries out these operations based on agreements established with the respective state governments.
Treasury bills
- Treasury bills, also known as T-bills, are short-term debt instruments issued exclusively by the central government. They are not issued by state governments.
- These T-bills play a crucial role in the cash management of the government. They provide a means for the government to meet short-term funding requirements efficiently.
- Due to their risk-free nature, the yields of treasury bills at different maturities serve as important benchmarks for short-term interest rates. They aid in pricing various floating-rate products in the market.
- Treasury bills are issued at a discount, meaning they are sold at a price lower than their face value, and they are redeemed at their full face value upon maturity.
