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Answer Posted / dipika
treasury bills are the short term money market instruments with maturity period one year or less than one year. these bills are issued by central/state govt. through the agency RBI.RBI make auctioning of these bills fortnightly or midnightly and invite bids from various agencies, banks except from state government. these are issued at discount value on face price and are redeemed at face price.interest is fixed according to the demand and supply of funds in the market. the purpose is to meet short term liquidity needs of the government.investing in treasury bills is preferred by banks because these are govt. securities highly liquid and highly secured and on the other hand ensures liquidity to the commercial banks in taking short term loans through repos. thanks.
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