Question 56
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 offer are issued at a discount from the par value.
Which of the statements given above is/are correct?
AOptions
BSolution
Let's analyze each statement:
1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities. This statement is incorrect. The Reserve Bank of India (RBI) acts as the debt manager for both the Central Government and State Governments in India. It manages the public debt and issues securities on their behalf.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments. This statement is correct. Treasury bills (T-bills) are short-term money market instruments issued only by the Central Government to meet its short-term funding requirements. State governments issue their own market borrowings, known as State Development Loans (SDLs), which are typically longer-term securities.
3. Treasury bills offer are issued at a discount from the par value. This statement is correct. Treasury bills are zero-coupon instruments, meaning they do not pay interest. Instead, they are issued at a discount to their face (par) value and are redeemed at par value on maturity. The difference between the issue price and the face value constitutes the return to the investor.
Therefore, statements 2 and 3 are correct.
CStrategy
For questions on economic and financial instruments, it's crucial to understand the roles of different government bodies (RBI, Central Government, State Governments) and the specific characteristics of various financial instruments (T-bills, SDLs, etc.). Pay attention to what is exclusively done by one entity versus another.
DSyllabus Analysis
This question pertains to the Indian Economy, focusing on Public Finance, Monetary Policy, and the characteristics of Government Securities.
EQuestion Analysis
Medium to Difficult. Requires detailed knowledge of Indian public finance and money market instruments.