STOCK GYAN. (Part – 7, Bills & CP)

STOCK GYAN. (Part – 7, Bills & CP)

Hello Readers,

Till the previous parts, we were discussing Long Term Debt Asset Class Instruments under which we had discussed:

Now we are proceeding towards Short term debt asset class instruments under which we will start with its 1st type i.e. Securities.

Also, refer the 1st part of the stock gyan series for having better understanding of the sequence and types, sub types etc.

Securities include two broad instruments which you are going to read in detail now:

  • Bills (short term debt class covers only T-Bills)
  • Commercial Paper

What are Bills?          

Bills are basically used as an form of investments and the it can be understand in detail by reading its Kinds.

Kinds of Bills:

The bills are of two kinds-

  1. Adhoc Bills : The adhoc bills are issued for investment by the state governments, semi government departments and foreign central banks for temporary investment. They are not sold to banks and general public

Ad-hoc bills were abolished in April 1997.


  1. Regular Bills: The treasury bills sold to the public and banks are called regular treasury bills. They are freely marketable and commercial banks buy entire quantities of such bills, issued on tender. They are bought and sold on discount basis.

Treasury Bills (T-Bills):

Treasury bills are instrument of short-term borrowing by the Government of India, issued as promissory notes under discount. The interest received on them is the discount, which is the difference between the price at which they are issued and their redemption value.

They have assured yield and negligible (zero) risk of default.

There are no treasury bills issued by State Governments.

Classification of T-Bills:

  • 91-days TBs,
  • 182-days TBs,
  • 364-days TBs

Amount of Treasury Bills:

Treasury bills are available for a minimum amount of Rs.25,000 and in multiples of Rs. 25,000 i.e Rs. 50,000, Rs. 75,000 etc. Treasury bills are issued at a discount and are redeemed at par. Treasury bills are also issued under the Market Stabilization Scheme (MSS).

Auctions of Treasury Bills:

While 91-day T-bills are auctioned every week on Wednesdays, 182-day and 364-day T-bills are auctioned every alternate week on Wednesdays. The Reserve Bank of India issues a quarterly calendar of T-bill auctions which is available at the Banks’ website. (URL: It also announces the exact dates of auction, the amount to be auctioned and payment dates by issuing press releases prior to every auction.

Type of  T-bills                          Day of Auction                                            Day of  Payment

91-day                                             Wednesday                                                   Following Friday

182-day                               Wednesday of non-reporting week                     Following Friday

364-day                               Wednesday of reporting week                             Following Friday

* If the day of payment falls on a holiday, the payment is made on the day after the holiday.

Advantages of T-Bills:

Zero risk: It is considered to have little or practically no risk attached

High marketability: As they are issued by government and possess good liquidity in the market, treasury bills have the high marketability.

High Liquidity: They are very liquid (i.e. you can easily convert them to cash). Even before the full time period elapses, you can always decide to go for your money at any time.

Commercial Paper:

Commercial Paper (CP) is an unsecured money market instrument issued in the form of a promissory note.

It was introduced in India in 1990 with a view to enabling highly rated corporate borrowers to diversify their sources of short-term borrowings and to provide an additional instrument to investors.

Who can issue CP?

Corporates, primary dealers (PDs) and the All-India Financial Institutions (FIs) are eligible to issue CP.

Eligibility Criteria for corporates for issuing CP:

A corporate would be eligible to issue CP provided –

  • The tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore
  • Company has been sanctioned working capital limit by bank/s or all-India financial institution/s; and
  • The borrowal account of the company is classified as a Standard Asset by the financing bank/s/ institution/s.

Rating Requirement for issuance of CP:

All eligible participants shall obtain the credit rating for issuance of Commercial Paper either from:

  • Credit Rating Information Services of India Ltd. (CRISIL) or
  • The Investment Information and Credit Rating Agency of India Ltd. (ICRA) or
  • The Credit Analysis and Research Ltd. (CARE) or
  • The FITCH Ratings India Pvt. Ltd. or
  • Such other credit rating agency (CRA) as may be specified by the Reserve Bank of India from time to time, for the purpose.

The minimum credit rating shall be A-2 [As per rating symbol and definition prescribed by Securities and Exchange Board of India (SEBI)].

Minimum and Maximum period of maturity prescribed for CP:

CP can be issued for maturities between a minimum of 7 days and a maximum of up to one year from the date of issue.

However, the maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid.

Minimum & Maximum Amount of CP:

CP can be issued in denominations of minimumRs.5 lakh or multiples thereof.

Who can invest in CP?

Individuals, banking companies, other corporate bodies (registered or incorporated in India) and unincorporated bodies, Non-Resident Indians (NRIs) and Foreign Institutional Investors (FIIs) etc. can invest in CPs. However, investment by FIIs would be within the limits set for them by Securities and Exchange Board of India (SEBI) from time-to-time.

Mode of redemption:

Initially the investor in CP is required to pay only the discounted value of the CP by means of a crossed account payee cheque to the account of the issuer through IPA (Issuing & Payment Agent).

On maturity of CP,

(a) when the CP is held in physical form, the holder of the CP shall present the instrument for payment to the issuer through the IPA.

(b) when the CP is held in demat form, the holder of the CP will have to get it redeemed through the depository and receive payment from the IPA.

So, here have discussed about 1st category of Short term debt asset class investments i.e. Securities in which we had discussed completely about T-Bills & commercial papers.

The source of this article is RBI’s official publications.

In the next part we will discuss about Other Cash Category of Short term debt asset class investments under which we will discuss Deposits & Certificates of deposit in detail.

So, don’t miss it.

Share this useful info with your friends and stay tuned to this website for more parts.

In case of any query related to above article, the questions can be asked by commenting in the comment box or the author can be contacted personally at

P.S. – We at don’t deal in services related to share or stocks investment advises. So, kindly don’t ask any query related to same.

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