Which of the following explains the meaning of Treasury Bills?

The correct answer is Option (2) → They are also known as Zero Coupon Bonds

• Option (1) It is issued by the State Bank of India — Incorrect. Treasury bills are issued by the Reserve Bank of India on behalf of the Central Government.

• Option (2) They are also known as Zero Coupon Bonds — Correct. A treasury bill is a short-term borrowing instrument of the Government of India, maturing in less than one year. It pays no interest (coupon) during its life. Instead it is issued at a discount, below its face value, and repaid at face value. The difference is the investor’s return. A bond that pays no coupon is called a zero coupon bond.

• Option (3) The minimum amount for a treasury bill is Rs. 100. — Incorrect. Treasury bills are available for a minimum amount of Rs. 25,000 and in multiples of it.

• Option (4) It is a financial instrument for long term borrowing — Incorrect. It is a money market instrument for short-term borrowing, of less than one year.