The Government of India issues Treasury Bills, which are money market instruments in the form of promissory notes that are guaranteed to be repaid at a later time. The money raised through such measures is often utilized to fund the government’s immediate needs, hence lowering the overall fiscal deficit of the nation.
With a maximum tenure of 364 days and zero coupons (interest), they are typically short-term borrowing instruments. They are issued at a lower price than the government security’s nominal value, which is publicized (G-sec).
The government can raise money with the use of a short-term treasury bill in order to pay its present obligations, which exceed its annual revenue output. Its goal is to control the total amount of money in circulation at any given time while simultaneously minimizing the overall fiscal deficit in an economy.
As part of its open market operations (OMO) strategy, the Reserve Bank of India (RBI) also releases these treasury notes in an effort to control inflation and people’s borrowing and spending patterns. High-value Treasury bills are provided to the public during economic booms that cause high and persistent inflation rates in the nation, reducing the total amount of money in circulation. It successfully reduces the soaring demand rates, which in turn reduces the high prices that afflict the poor.