RBI Cancels Treasury Bill Auction to Manage Liquidity

Context:

Reserve Bank of India cancels Treasury Bill (T-bill) auction

• All bids rejected due to high yields
• Aim: Support liquidity before financial year-end
• Avoid signalling higher interest rates

What are Treasury Bills (T-Bills)?

• Short-term government securities
• Issued by Government of India
• Maturity:
  • 91-day
  • 182-day
  • 364-day
• Zero-coupon instruments

What is Yield?

• Return on bond
• Inverse relation:
  • Price ↑ → Yield ↓
  • Price ↓ → Yield ↑

Important for Which Exam?

RBI Grade B

• Phase 1:
  • General Awareness (Monetary Policy, Bonds)
• Phase 2:
  • ESI:
    • Liquidity
  • FM:
    • Bond yields
    • G-Secs

NABARD Grade A/B

• Phase 1:
  • ESI:
    • Monetary basics
• Phase 2:
  • ESI:
    • Liquidity
    • Financial stability

UPSC

• Prelims:
• Mains:
  • GS 3:
    • Monetary policy

MCQs

Q.1) What are Treasury Bills?

[1] Long-term bonds
[2] Short-term government securities
[3] Corporate shares
[4] Tax instruments

Q.2) Where are T-Bills issued?

[1] Private companies
[2] Government of India
[3] RBI itself
[4] State governments

Q.3) What was the reason for cancellation of T-Bills?

[1] Low demand
[2] High yield bids
[3] Technical issue
[4] Fiscal deficit

Q.4) What is the maturity period of T-Bills?

[1] 1–2 years
[2] 5–10 years
[3] 91, 182, 364 days
[4] 30 years

Q.5) What happens when bond prices fall?

[1] Yield decreases
[2] Yield increases
[3] No change
[4] Zero yield

ANSWERS

1 → [2]
2 → [2]
3 → [2]
4 → [3]
5 → [2]