With reference to treasury bills consider the following statements:

1. Treasury bills are used by the central government to fulfill its long term liquidity.

2. Banks cannot keep treasury bills as SLR approved security.

Which of the statements given above is/are correct?

Solution

• Statement 1 is incorrect: Treasury bills are Money market debt instrument. They are used by the Central Government to fulfil its shortterm liquidity requirement upto the period of 364 days. • Statement 2 is Incorrect: The RBI specifies the SLR status of securities issued by the Government of India and the State Governments: Dated securities of the Government of India, Treasury Bills of the Government of India, Dated securities of the Government of India, State Development Loans (SDLs) issued from time to time under their market borrowing programme.