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?

Solution

Statements 1 is not correct : Reserve Bank of India has has well defined obligations and provides several banking services to the governments both at the centre and in states. Statements 2 and 3 are correct : Treasury bills are issued when the government need money for a shorter period while bonds are issued when it needs debt for more than say five years. 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. Treasury Bills are issued only by the central government in India. The State governments do not issue any treasury bills.