T-bills are safer and better than fixed deposits
₹60 trillion every year. Of this, around 50% of household savings is invested in real estate and about 15% each in bank fixed deposits (FDs) and gold. Many investors prefer the safety and comfort of physical gold even though there are alternatives to this asset class in the form of gold funds and sovereign gold bonds.
As for FDs, a far superior alternative, with better safety and security features, is government securities, particularly treasury bills (T- bills). T- Bills are promissory notes issued by the Reserve Bank of India (RBI) almost every week on behalf of the government of India. These bills come with a maturity profile of 91 days, 182 days and 364 days.
They offer market rates that are superior to FDs with similar maturity. For instance, the 3-month and 12-month T- Bills offer 6.7% interest against FD rates of 4.5- 6%. T- Bills are risk free securities since they come with a government guarantee and are issued at a discount to the face value.
On the day of maturity, these bills are debited automatically from your demat accounts. The amount corresponding to their face value is instantly credited into the bank account linked to your demat account. Past data shows that T- Bills and most open market-issued debt securities offer higher returns than bank FDs with a similar maturity 70% of the time.
Government bonds, another good investment option, are issued for longer durations of up to 30 years. The frequency of interest payments is semi-annually. Investors should identify the time period for which they want to invest in fixed income products.
The investment horizon can be anything between, say, 91 days and 30 years. The first step in this direction should be to check out the interest offered by banks on FDs. They
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