Any investor would like to park their savings in instruments that combine high returns with low risks. On this count, both Fixed Deposits and treasury bills serve as ideal investment options.While you might be familiar with fixed deposits, treasury bills might be a whole other ball game. Here is a little insight into the investment avenue and how it compares to an FD.

About treasury bills

The bill market is a subcomponent of the money market in India and is issued solely by the Central Government to meet its short-term requirements. Popularly called the T-bills, these elements have a short-term maturity periods.

Currently, T-bills are issued for 91 days, 182 days, and 364 days.The main advantage of treasury bills is that they are assigned zero risk, transparency is assured, and they have a higher degree of tradeability, which is made possible by the presence of an active secondary market.

Fixed Deposit vs. treasury bills

  • Both Fixed Deposits as well as treasury bills earn you interest. While the interest on your Fixed Deposit is determined at the time of opening the using, with the help of an FD Calculator,the interest that you earn on your treasury bill is subject to market forces. You earn higher returns on T-bills when the liquidity position in the economy is tight
  • Treasury bills issued by the Central Government have a specified tenure viz. 91 or 182 or 364 days. Whereas you can choose the tenure of your FD, which can be as short as a month or can range to a few years
  • Fixed Deposits can be held with any bank, financial institution, or NBFC. In the case of a T-bill, the parties to the instrument are yourself and the Central Government
  • A Fixed Deposit gives you the freedom to invest any amount. However, treasury bills require you to invest a minimum of Rs. 25,000 and in multiples of the same thereafter
  • Treasury bills score over Fixed Deposits in terms of liquidity. T-bills are highly liquid instruments and also have an active secondary market. FD’s are relatively less liquid, especially if you have invested in a long-term FD; you might have to forego interest if you opt for pre-closure
  • TDS is the influencing factor that determines how you split your Fixed Deposits. Treasury bills, on maturity, do not attract TDS

Fixed Deposits have always been the savings options in the country.

However, with the bill market being concentrated in metros, the reach of the same has been limited to a few. For those of you looking for decent returns within a short term, T-bills emerge as the next best available option.