Question 43 from UPSC CSE 2018 - Economy

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 are issued at a discount from the par value.
Which of the statements given above is/are correct?

IASCODEX · Accepted Answer

Correct Option: C. 2 and 3 only

Strategy: To identify the correct statements regarding Indian government securities:

*   **Statement 1 (Incorrect):** The Reserve Bank of India (RBI) manages State Government securities through specific agreements.
*   **Statement 2 (Correct):** Only the Central Government issues treasury bills; State Governments issue State Development Loans (SDLs).
*   **Statement 3 (Correct):** Treasury bills are always issued at a discount to their face value.

Based on this assessment, the correct combination of statements is 2 and 3 only.

Key Info: The Reserve Bank of India (RBI) acts as the debt manager for both the Central and State Governments under the Reserve Bank of India Act, 1934. Its responsibilities include managing and servicing government securities, covering both Government of India securities (G-Secs) and State Development Loans (SDLs). The RBI's management of State Government securities depends on specific agreements with individual states.

Treasury Bills (T-bills) are short-term money market instruments issued exclusively by the Government of India. They serve as a tool for short-term borrowing by the central government, with maturities of 91, 182, and 364 days. T-bills are zero-coupon instruments, meaning they are issued at a discount to their face value, and the holder receives the full face value upon maturity. The difference between the issue price and face value represents the investor's return.

State Governments do not issue treasury bills; instead, they issue SDLs for their market borrowings. The RBI is responsible for issuing, servicing, and managing both G-Secs and SDLs, ensuring the smooth functioning of the government securities market.

IASCODEX · Answer

Option A: 1 and 2 only

IASCODEX · Answer

Option B: 3 only

IASCODEX · Answer

Option D: 1, 2, and 3