Treasury Bills in India: 91, 182 & 364-Day T-Bills

Treasury Bills (T-Bills) are the shortest-dated government securities in India. They carry zero credit risk, require no lock-in beyond the chosen tenor, and are now accessible to retail investors directly through RBI Retail Direct with minimum investments of ₹10,000. This article explains exactly how T-Bills work: the mechanics of discount pricing, the weekly auction process, how to calculate the yield, what the auto-bidding feature introduced in August 2025 does, and the situations where T-Bills are a better option than fixed deposits.

What is a Treasury Bill?

A Treasury Bill is a short-term debt instrument issued by the Government of India and managed by the Reserve Bank of India. Unlike most bonds, T-Bills do not pay periodic interest (coupons). Instead, they are issued at a discount to their face value of ₹100 and redeemed at ₹100 at maturity. The investor’s return is the difference between the purchase price and ₹100.

Because T-Bills are issued by the central government, they carry sovereign credit quality — the same credit risk as any other Government of India obligation, which is effectively zero in rupee terms. The government can always service its rupee-denominated debt by taxing or, in extremis, by directing the RBI to create the necessary currency. This makes T-Bills among the lowest credit-risk instruments available to Indian investors in the domestic market.

The three tenors

India issues T-Bills in three standard maturities:

All three T-Bill auctions are held on Wednesday. The settlement is typically T+1, meaning the investor pays (and the government delivers) on the business day following the auction.

Discount pricing: how it works

T-Bills are quoted and issued at a price below ₹100. The difference between ₹100 and the issue price is your total return over the life of the T-Bill.

Example: Suppose a 91-day T-Bill is issued at ₹98.40. You invest in 10 units (face value ₹1,000). You pay ₹984. In 91 days, you receive ₹1,000. Your gross return is ₹16 on a ₹984 investment over 91 days.

To annualise this return to a comparable YTM:

YTM formula for T-Bills:

YTM = ((Face Value − Issue Price) / Issue Price) × (365 / Days to Maturity)

Using the example: YTM = (1.60 / 98.40) × (365 / 91) = 0.01626 × 4.011 = 6.52%

This annualised yield is how T-Bills are compared to other fixed income instruments. Note that T-Bill yields are quoted on a simple interest (non-compounded) basis because of the short tenor. For longer-dated bonds with periodic coupons, YTM accounts for compounding; for T-Bills, the difference is immaterial at single-digit yields.

How T-Bill auctions work

The RBI conducts T-Bill auctions through a uniform-price (for retail non-competitive bids) and discriminatory-price (for competitive institutional bids) mechanism.

Competitive bids: Institutions (banks, primary dealers, insurance companies, mutual funds) submit bids specifying the price (yield) they are willing to accept. The RBI accepts bids from the lowest yield (highest price) upward until the notified amount is absorbed. This is the discriminatory price auction: each bidder gets their bid price, not a uniform price.

Non-competitive bids (retail): Retail investors via RBI Retail Direct submit non-competitive bids — they specify only the quantity, not the price. They are allotted T-Bills at the weighted average yield of all accepted competitive bids. This means retail investors get a fair average rate without needing to predict auction outcomes.

The minimum non-competitive bid size is ₹10,000 (face value). Bids can be placed in multiples of ₹10,000. The maximum non-competitive bid per investor per auction is ₹2 crore.

RBI Retail Direct: the access route for individual investors

RBI Retail Direct (retaildirect.rbi.org.in) is the platform through which individual investors can participate directly in G-Sec and T-Bill auctions without going through a broker. Account opening is free. The platform accepts UPI and net banking payments for settlement.

To participate in a T-Bill auction via RBI Retail Direct:

• Log into your Retail Direct account before the auction closes (typically 2 PM on Wednesday for same-day auctions; check the auction calendar for specific deadlines).
• Select the T-Bill tenor and enter the face value amount you wish to subscribe (minimum ₹10,000).
• Submit the non-competitive bid. Payment is blocked from your linked bank account.
• Results are published by RBI after the auction. Your account is credited with the allotted T-Bills in demat form.
• On maturity, the face value (₹100 per unit) is credited to your linked bank account.

TDS is not deducted at source on T-Bill discount income earned through the RBI Retail Direct platform. You are responsible for declaring the income in your ITR.

Auto-bidding SIP feature (launched August 2025)

In August 2025, RBI Retail Direct introduced an auto-bidding facility for T-Bills. This allows investors to set up a standing instruction to automatically bid in every weekly auction for a chosen T-Bill tenor (91-day, 182-day, or 364-day) for a specified amount and duration.

The effect is similar to a Systematic Investment Plan (SIP) for T-Bills: rather than logging in each Wednesday and manually placing a bid, the platform places non-competitive bids on the investor’s behalf at each scheduled auction. This is particularly useful for investors who want to maintain a rolling T-Bill allocation — as each T-Bill matures, the proceeds can be reinvested in the next auction automatically.

Auto-bidding requires the investor to maintain sufficient balance in their linked bank account on each auction date. The standing instruction can be paused or cancelled at any time through the Retail Direct portal.

Taxation of T-Bills

The return on a T-Bill (the discount) is treated as income from other sources for tax purposes, not as capital gains. It is taxed at your applicable income tax slab rate.

Since T-Bills have tenors of 91, 182, or 364 days — all less than 12 months — there is no long-term capital gains question for investors who hold to maturity. If you were to sell a T-Bill in the secondary market before maturity (which is possible but uncommon for retail investors), the gain or loss would be treated as short-term capital gains taxable at slab rate, since the holding period is below 12 months.

The interest income is fully taxable with no deduction. There is no Section 80C benefit for T-Bill investments.

T-Bills vs fixed deposits: when does each make sense?

T-Bills typically yield less than comparable-tenor bank FDs from top private or small finance banks, which offer higher rates to attract deposits. However, T-Bills have an absolute credit quality advantage, and for investors with deposits exceeding ₹5 lakh at a single bank (the DICGC insurance limit), T-Bills eliminate even that residual bank credit risk.

For investors in the highest income tax brackets, the comparison on an after-tax basis may differ only marginally from FDs, since both are taxed at slab rates. The decision typically comes down to: how much credit risk are you willing to accept for an extra 50–100 basis points in yield?

Secondary market for T-Bills

T-Bills held in demat form can, in principle, be sold in the secondary market before maturity through the NDS-OM (Negotiated Dealing System – Order Matching) platform. In practice, retail investors rarely access NDS-OM directly — it is primarily an institutional platform. Retail investors who need early liquidity may find the secondary market thin and the bid-ask spread unfavourable.

If you need a liquid, capital-protected short-term instrument where you can exit at any time without price risk, liquid or overnight mutual funds (which invest primarily in T-Bills and call money) are often the more practical choice for retail investors, despite carrying fund structure costs.