UPSC Prelims Practice Questions — RBI scraps treasury bill sale to support banking liquidity

Q1. In the context of the RBI's March 2026 decision to reject all bids at its weekly auction, what is a Treasury Bill?

  • A. A zero-coupon short-term sovereign instrument issued at a discount to face value and redeemed at par, with maturity of one year or less
  • B. A long-term marketable Government of India security carrying a fixed half-yearly coupon
  • C. An inflation-indexed bond whose principal is adjusted to the wholesale price index
  • D. A money-market instrument issued by commercial banks to raise short-term funds from the public

Q2. With reference to the difference between Treasury Bills and dated Government of India securities (G-secs), consider the following statements: 1. Treasury Bills are zero-coupon instruments whereas dated G-secs typically carry a periodic coupon. 2. Treasury Bills have a maturity of one year or less whereas dated G-secs have maturities exceeding one year. 3. Unlike dated G-secs, Treasury Bills are issued directly by the RBI on its own account rather than on behalf of the Government. Which of the statements given above is/are correct?

  1. Treasury Bills are zero-coupon instruments whereas dated G-secs typically carry a periodic coupon.
  2. Treasury Bills have a maturity of one year or less whereas dated G-secs have maturities exceeding one year.
  3. Unlike dated G-secs, Treasury Bills are issued directly by the RBI on its own account rather than on behalf of the Government.
  • A. 1 and 2 only
  • B. 2 and 3 only
  • C. 1 and 3 only
  • D. 1, 2 and 3

Q3. Treasury Bills, which the RBI declined to allot in its March 2026 auction, are issued by the RBI in its capacity as manager of the Government's public debt under which one of the following statutes?

  • A. The Reserve Bank of India Act, 1934
  • B. The Banking Regulation Act, 1949
  • C. The Government Securities Act, 2006
  • D. The Fiscal Responsibility and Budget Management Act, 2003

Q4. By rejecting T-bill bids, the RBI left more cash in the system, lifting the surplus that banks park under the LAF. Which one of the following currently forms the floor (lower bound) of the RBI's Liquidity Adjustment Facility corridor?

  • A. Standing Deposit Facility (SDF) rate
  • B. Marginal Standing Facility (MSF) rate
  • C. Policy repo rate
  • D. Fixed reverse repo rate
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