Choose incorrect statement from the following: 1. 28 Days T - bills were introduced in 1998 2. 364 Days T - bills were introduced in 1992 3. 182 Days T - bills were introduced in 1986 4. 273 Days T - bills were introduced in 2006
4
Understanding Treasury Bills and Their Introduction in India
Treasury Bills (T-bills) are short-term money market instruments issued by the Government of India. They are used by the government to meet its short-term funding requirements. T-bills are zero-coupon securities, meaning they are issued at a discount to their face value and the difference between the issue price and the face value at maturity is the investor's return. The Reserve Bank of India (RBI) auctions T-bills on behalf of the government. Over time, different tenors (maturities) of T-bills have been introduced in the Indian financial market.
Analysing Statements on T-Bills Introduction Dates
Let's examine each statement provided in the question to determine which one is incorrect regarding the introduction dates of Treasury Bills in India.
- Statement 1: 28 Days T - bills were introduced in 1998.
- Historical records indicate that the 28-day Treasury Bill tenor was indeed introduced in India in 1998. This was part of the evolution of the money market and government borrowing instruments. Therefore, this statement appears to be correct.
- Statement 2: 364 Days T - bills were introduced in 1992.
- The 364-day Treasury Bill was introduced in 1992 in India. This longer tenor T-bill provided investors with a different short-term investment option compared to the existing shorter maturities. This statement is correct.
- Statement 3: 182 Days T - bills were introduced in 1986.
- The 182-day Treasury Bill was one of the earlier tenors introduced in the Indian money market. Its introduction in 1986 is well-documented in the history of financial reforms in India. This statement is also correct.
- Statement 4: 273 Days T - bills were introduced in 2006.
- While Treasury Bills of various tenors exist, a standard, regularly auctioned 273-day T-bill introduced specifically in 2006 is not commonly listed as a key development in the Indian T-bill market. The primary auctioned tenors are typically 91 days, 182 days, and 364 days, with 28 days having been introduced previously. The introduction of a 273-day T-bill in 2006 is not historically accurate. Therefore, this statement is likely incorrect.
Identifying the Incorrect Statement
Based on the analysis of each statement and historical data regarding the introduction of various T-bill tenors in India, Statement 4 stands out as factually incorrect.
| Statement | Introduction Year Claimed | Historical Accuracy | Correctness |
|---|---|---|---|
| 28 Days T-bills introduced | 1998 | Yes | Correct |
| 364 Days T-bills introduced | 1992 | Yes | Correct |
| 182 Days T-bills introduced | 1986 | Yes | Correct |
| 273 Days T-bills introduced | 2006 | No | Incorrect |
The question asks to choose the incorrect statement. Our analysis shows that Statement 4 is the incorrect one.
Revision Table: Indian Treasury Bills Introduction Dates
| T-Bill Tenor | Approximate Introduction Year in India |
|---|---|
| 182 Days | 1986 |
| 91 Days | Around 1988 |
| 364 Days | 1992 |
| 28 Days | 1998 |
| 14 Days (Discontinued) | 1997 (Discontinued 2001) |
Additional Information: Treasury Bills in India
Treasury Bills are a vital part of the Indian money market. Here are some key facts about them:
- Nature: They are short-term debt obligations of the Government of India.
- Maturity: They are currently issued in three standard tenors: 91 days, 182 days, and 364 days.
- Issuance: Issued through auctions conducted by the Reserve Bank of India (RBI). Auctions for 91-day T-bills are held weekly, while auctions for 182-day and 364-day T-bills are held fortnightly.
- Investment: Available for investment by individuals, institutions, banks, etc. They are considered very safe due to being sovereign obligations.
- Return: Since they are zero-coupon instruments, the return is the difference between the face value and the discounted issue price.
Important Questions from Money Market
The interest rate at which the Reserve Bank absorbs liquidity from banks under the Liquidity Adjustment Facility (LAF), on an overnight basis, against the collateral of eligible government securities, is called _____.
When the general interest rate reaches a very low level, which of the following statements will be correct?
Which of the following statements are true in context of efficient market?
A. Equilibrium rates of return will prevail
B. Investor cannot earn a positive return
C. Volatility will be very high
D. Securities of listed firms sell at their fair values
E. Investors are generally risk-averse
Choose the most appropriate answer from the options given below:
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