UPSC Prelims 2018 Question:

Consider the following statements:

1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the state Governments.
3. Treasury bills offer are issued at a discount from the par value.
   
   

Which of the statements given above is/are correct?

Explanation:

• A Government Security (G-Sec) is a tradable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments. The Reserve Bank of India (RBI) manages and services both the Government of India Securities and State Government Securities. So, statement 1 is not correct.
  
  
• In India, the Central Government issues both, treasury bills and dated securities while the State Governments issue only dated securities, which are called the State Development Loans (SDLs). So, statement 2 is correct.
  
  
• Treasury bills or T-bills, which are money market instruments, are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. The return to the investors is the difference between the maturity value or the face value and the issue price. So, statement 3 is correct.
  
  

Therefore, option (3) is the correct answer.

Subject: Economics | Public Finance