Consider the following statements: 1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities

1. A. 1 and 2 only
2. B. 3 only
3. C. 2 and 3 only
4. D. 1, 2 and 3

Answer: C

Explanation

The Reserve Bank of India manages public debt and issues Indian currency denominated loans on behalf of the central and the state governments under the powers derived from the Reserve Bank of India Act. The RBI is the debt manager for both the Central Government and the State Governments. RBI manages the debt of state governments on the basis of separate agreements. Hence, statement 1 is not correct. Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. They are issued at a discount and redeemed at the face value at maturity. For example, a 91 day Treasury bill of ₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would be redeemed at the face value of ₹100/-. The return to the investors is the difference between the maturity value or the face value (that is ₹100). Hence, statement 2 and 3 are also correct.