Treasury Bills in India: How 91, 182 and 364-Day T-Bills Are Priced and Who Buys Them

Treasury bills in India are the plainest IOU the government writes. You hand over a little less than ₹100 today, the government hands back exactly ₹100 a few months later, and the gap is your return. No coupons, no call options, no fine print about step-ups. Yet this tiny instrument quietly sets the floor for short-term interest rates across the market, and anyone who watches bank stocks, liquid funds or the rupee ends up looking at T-bill yields sooner or later.

We will walk through how the bills work, how the discount turns into a yield (with the numbers worked out), how the weekly auctions run and who actually turns up to buy. Everything about the rules comes from the Reserve Bank of India’s own primer on government securities. The worked examples use made-up prices, not actual auction results.

What treasury bills in India actually are

The RBI describes T-bills as money market instruments: short-term debt issued by the Government of India. They are currently issued in three tenors, 91 days, 182 days and 364 days. That is the whole menu. Anything longer than a year is a dated government security, which pays a coupon twice a year and generally runs from 5 to 40 years, according to the same RBI primer.

The defining feature is that a T-bill is a zero coupon security. It pays no interest along the way. It is issued at a discount and redeemed at face value on maturity. RBI’s own illustration is a 91-day bill with a face value of ₹100 issued at ₹98.20, a discount of ₹1.80. The investor’s entire return is that ₹1.80.

Because the issuer is the Government of India, the RBI calls G-Secs, which include T-bills, risk-free gilt-edged instruments that carry practically no risk of default. That does not mean they carry no risk at all. Prices still move with interest rates, as we will see.

There is a cousin worth knowing. Cash Management Bills (CMBs) were introduced in 2010 by the government in consultation with the RBI, to cover temporary mismatches in the government’s cash flow. They behave like T-bills, discount in and face value out, but run for less than 91 days. The first set was issued on May 12, 2010, and the retail non-competitive window has not been extended to them.

Turning the discount into a yield

A discount of ₹1.80 sounds small. What matters is how long your money is locked up to earn it. The RBI primer gives the formula for a T-bill’s yield:

Yield (%) = [(100 − P) ÷ P] × [365 ÷ D] × 100

Here P is the purchase price and D is the number of days left to maturity. Two details in that formula trip people up.

• The gain is divided by the price you pay, not by ₹100. So the yield is always a touch higher than the simple discount rate on face value.
• The year is 365 days. T-bills follow the money market day count, which RBI states as actual/365. Dated bonds in India use 30/360 instead. Mixing the two conventions is a classic spreadsheet mistake.

Run RBI’s own example through it. A 91-day bill at ₹98.20 gives (1.80 ÷ 98.20) × (365 ÷ 91) × 100, which works out to about 7.35%. That 7.35% is an annualised yield on the money invested, not the return you pocket in 91 days. The actual return over the three months is 1.80 ÷ 98.20, roughly 1.83%.

Worked example 1: comparing the three tenors

Say a hypothetical auction clears at these prices (illustrative numbers only):

The 182-day bill: (3.20 ÷ 96.80) × (365 ÷ 182) × 100 ≈ 6.63%. The 364-day bill: (6.50 ÷ 93.50) × (365 ÷ 364) × 100 ≈ 6.97%.

Look at what happens to the raw discount. The 364-day bill’s ₹6.50 looks far juicier than the 91-day bill’s ₹1.80, but once you annualise, the shortest bill pays the most in this made-up set. Comparing rupee discounts across tenors without adjusting for days is how people talk themselves into the wrong bill. The shape of these short-end yields is also a small version of the yield curve story we covered in our piece on the inverted yield curve and G-Sec yields.

A bigger rupee discount on a longer bill is not a better deal by itself. Annualise first, then compare.

Worked example 2: going the other way, from yield to price

Traders usually quote yields, so you often need the price. Rearranging the same formula gives P = 100 ÷ [1 + (Y × D ÷ 365)], with Y as a decimal.

If the market wants 7.00% on a fresh 91-day bill: 100 ÷ (1 + 0.07 × 91 ÷ 365) ≈ ₹98.28. If the demanded yield rises to 7.25%, the price drops to about ₹98.22. A quarter of a percentage point moved the price by only about six paise per ₹100. That is why short bills are seen as low-volatility parking spots: there is very little time left for a rate change to compound.

Worked example 3: selling before maturity

T-bills trade in the secondary market, so you do not have to sit till the end. Suppose an investor buys a 91-day bill at ₹98.40. Thirty days later, with 61 days left, buyers are paying ₹98.95.

• Seller’s annualised return for the 30 days held: (0.55 ÷ 98.40) × (365 ÷ 30) × 100 ≈ 6.80%.
• New buyer’s yield for the remaining 61 days: (1.05 ÷ 98.95) × (365 ÷ 61) × 100 ≈ 6.35%.
• Had the first investor held all 91 days: (1.60 ÷ 98.40) × (365 ÷ 91) × 100 ≈ 6.52%.

Here market yields fell after purchase, the price rose faster than the straight-line pull towards ₹100, and selling early actually beat holding to maturity on an annualised basis. Flip the scenario, with yields rising sharply, and an early exit could earn less than expected. This is the interest rate risk that a “risk-free” label does not remove. RBI’s primer runs a similar calculation: a 91-day bill bought at issue for ₹98.20 and trading at ₹99 after 41 days shows a yield of about 7.37% on the remaining 50 days.

How the weekly T-bill auctions work

The RBI conducts T-bill auctions usually every Wednesday, covering all three tenors. Settlement happens on T+1, the working day after the auction. A few more mechanics from the primer:

• Calendar in advance. RBI releases a quarterly calendar of T-bill issuances in the last week of the preceding quarter. The April to June calendar, for instance, is notified in the last week of March.
• Weekly press release. The issue details for each week’s bills are announced through a press release on the RBI website.
• Minimum ticket. The minimum bid for T-bills is ₹10,000, and above that in multiples of ₹10,000. Multiple bids at different price or yield levels are allowed.

RBI also describes two ways an auction can allot securities. In a uniform price auction, every successful bidder pays the same cut-off rate, whatever they bid. In a multiple price auction, each successful bidder pays the price they actually quoted. The difference matters to an aggressive bidder: under multiple price, bidding high to be sure of allotment means you really do pay that high price.

Competitive and non-competitive bids

Competitive bids name a specific price or yield and get allotted only if that bid falls within the cut-off. RBI says these come from well-informed institutional investors such as banks, financial institutions, primary dealers, mutual funds and insurance companies.

Non-competitive bidding is the retail door. It is open to an investor who does not hold a current account or Subsidiary General Ledger (SGL) account with RBI and who bids indirectly through a permitted aggregator or facilitator. RBI’s definition of a retail investor here is broad, including individuals, firms, companies, corporate bodies, institutions, provident funds and trusts. A non-competitive bidder does not quote a price; they take the auction’s outcome. An investor can make only a single bid in an auction under the scheme, and allocation to retail non-competitive bids is capped at a maximum of 5% of the aggregate nominal amount of the issue within the notified amount, unless RBI sets another percentage.

Who buys T-bills, and why it matters for equity investors

The RBI primer lists the big players in the G-Sec market as commercial banks and primary dealers, along with insurance companies. Primary dealers act as market makers, quoting firm two-way prices. Other participants include co-operative banks, regional rural banks, mutual funds, and provident and pension funds. Foreign portfolio investors can take part within prescribed limits, and corporates buy and sell government securities to manage their portfolios.

Why should someone who mostly trades shares care? A few practical reasons we keep coming back to:

• Banks. Government securities count toward a bank’s Statutory Liquidity Ratio (SLR), and RBI notes that even CMBs are reckoned as eligible SLR investments. When short yields move, the treasury income and mark-to-market of bank portfolios move with them.
• Liquidity signals. G-Secs can be used as collateral to borrow in the repo market. Short-end yields, the call money rate and the RBI’s liquidity operations tend to move together, something we looked at in our note on the call money rate and RBI liquidity.
• The hurdle rate. The 91-day bill is about as close as Indian markets get to a risk-free return. If a near-sovereign bill is paying a healthy yield, every dividend yield and earnings yield on Dalal Street has to beat that number to justify the extra risk.

When a three-month government bill pays well, every stock has a tougher benchmark to beat.

Indian T-bills versus US T-bills

Readers who follow global markets will see “T-bill” in US news too. The idea is the same, a discount instrument with no periodic interest, but the menu differs. Investopedia describes US Treasury bills as running from four to 52 weeks, sold in auctions with competitive and non-competitive bids. India keeps it to three tenors, plus CMBs for the government’s short-term cash gaps. When a US bill yield is quoted alongside an Indian one, remember the day count and compounding conventions may not match, so a straight comparison of headline numbers can mislead.

Mistakes people make with T-bills

• Treating the discount as the yield. ₹1.80 off ₹100 is a 1.8% discount on face value, but the annualised yield on a 91-day bill at that price is about 7.35%.
• Using a 360-day year. T-bills in India use actual/365. Use 360 and your yield comes out wrong.
• Ignoring price risk on an early exit. Hold to maturity and you get ₹100. Sell early and you get the market price, which depends on where yields have gone.
• Forgetting reinvestment. A 91-day bill has to be rolled over four times to cover a year, and each rollover happens at whatever the yield is then. If rates fall, the next bill pays less. Planning for that is a basic part of managing risk in any portfolio, not just a trading account.

The short version

T-bills are simple on the surface: buy below ₹100, collect ₹100. The useful skill is translating that discount into an annualised yield with the right formula and day count, and then reading what those yields say about liquidity, bank earnings and the return every riskier asset has to clear. Check the RBI’s weekly press release after a Wednesday auction and run the cut-off prices through the formula yourself. It takes a minute, and it tells you more about short-term money in India than most headlines.

Disclaimer: This article is for educational purposes only and is not investment advice. The prices and yields in the worked examples are hypothetical. Please consult a SEBI-registered investment adviser before making investment decisions.