Can you guess how much Indians have saved in fixed deposits with banks like SBI, HDFC Bank, ICICI Bank and others? It’s not Rs 100 million or even Rs 100 billion for that matter. 

It’s 103 Trillion Rupees! 

Fascinating? Right! Anyone would be astonished to see this number.

Now, there’s nothing wrong with investing in an FD. If you are someone who has excess funds and doesn’t want to take any risks, FDs are not a bad choice.

However, RBI ensures only up to Rs 5 Lakh in an FD in case your bank goes insolvent.

But, what if you had a lot more excess funds and wanted to keep it in a place where you could get decent returns?

Well, there is another safer option for you apart from FDs: It’s Treasury Bills (T-Bills).

So let’s see, which is better T-Bills Vs Fixed Deposit.

What are T-Bills?

Whenever the Government needs money for a short period of time, they issue an investment instrument known as Treasury bills or T-bills which gives a fixed rate of return. These are issued by the Central Government only. 

As of now, treasury bills are issued in three maturities — 91-day, 182-day, and 364-day. Individuals, trusts, institutions, and banks can purchase T-Bills.

But how do they work?

Let’s consider this with the help of an example:

Assume that you apply for a T-Bill for 364 days and pay Rs 100 to the Government of India.

Now, GoI will give you this T-Bill in the demat format just like your shares of the Stock Market. 

You are also given a discount/refund of let’s say Rs 7. So, effectively you paid Rs 93.

Upon maturity, you will get the entire proceeds of 100 rupees.

So, your yield will be:  Yield = [Discount Value]/[Bond Price] * [365/number of days to maturity]

Placing the values, the final yield will be 7.5%.

The return on treasury bills depends on liquidity position i.e. available cash in the economy. When there is a liquidity crisis, the returns are higher, and vice versa.

How to Purchase a T-Bill?

There are 2 ways to purchase a T-Bill:

Through RBI’s Retail Direct Scheme Account:

1. Go to rbiretaildirect.in and register.
2. Fill in all the user details. 
3. Once registered, you can log in to the account and under the T-Bills tab you can choose which T-Bill you want to invest in. Check returns here.
4. Place your bidding amount and pay the final amount to purchase the T-Bill.

Through Investment Platforms:

1. Go to your preferred investment platform. Example: coin.zerodha.com
2. Choose your preferred T-Bill under the Invest tab.
3. Place your bid of the total units you want to buy and pay the final amount to purchase the T-Bill.
4. Once your bidding amount is accepted. T-Bill will be credited to your demat account.

Note: Applying for a T-bill is not a guarantee that you will get it. RBI can reject your bid if the T-bill is oversubscribed.

Also Read: Fixed Deposit Guarantee: What happens when the bank collapses

T-Bills Vs Fixed Deposits

Let’s see how both T-Bills and FDs fare against each other:

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Disclaimer: The above content is for informational purposes only. Please consult a SEBI-registered investment advisor before investing.