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    Question

    With reference to treasury bills consider the following statements:

    1. Treasury bills are used by the central government to fulfil its long-term liquidity.

    2. Banks cannot keep treasury bills as SLR-approved security.

    Which of the statements given above is/are incorrect?

    A 1 only Correct Answer Incorrect Answer
    B 2 only Correct Answer Incorrect Answer
    C Both 1 and 2 Correct Answer Incorrect Answer
    D Neither 1 nor 2 Correct Answer Incorrect Answer

    Solution

    Treasury bills are Money market debt instruments. They are used by the Central Government to fulfil its short-term liquidity requirement for up to a period of 364 days. The RBI specifies the SLR status of securities issued by the Government of India and the State Governments: Dated securities of the Government of India, Treasury Bills of the Government of India, Dated securities of the Government of India, State Development Loans (SDLs) issued from time to time under their market borrowing programme.

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