India has once again extended a helping hand to Maldives, which is facing a financial crisis. State Bank of India (SBI) has subscribed to treasury bills (T-bills) worth US$50 million issued by the Finance Ministry of Maldives. This subscription has been made on the special request of the Maldives government, which is for a period of one year. This period starts from September 19, 2024. SBI has provided similar help earlier as well.
Let us tell you that treasury bills are short-term debt instruments issued by the government, which the government uses to meet its short-term financial needs. The Maldives government had made this request under emergency financial assistance. SBI had earlier subscribed to similar US$50 million treasury bills in May 2024, which was done on the special request of the Maldives government. Both these subscriptions are part of the important steps taken to stabilize the economic situation of Maldives.
This financial support by SBI will help Maldives to deal with the economic crisis. This process of subscribing to Treasury Bills further strengthens the long-standing financial cooperation between SBI and the Government of Maldives. Such support by State Bank of India to meet the financial requirements of Maldives further strengthens bilateral relations between India and Maldives while promoting regional economic stability.
What does it mean to subscribe to Treasury Bills (T-bills)?
Subscribing to treasury bills (T-bills) means that an investor (such as a bank, financial institution, or individual) buys treasury bills issued by the government. Treasury bills are short-term debt instruments issued by the government, which the government uses to meet its short-term financial needs.
When an institution, such as the State Bank of India (SBI), subscribes to treasury bills, it means that it is lending money to the Maldives government for a fixed period. At the end of this period, the Maldives government has to return the amount along with interest to SBI.
In simple words:
Subscribe to = Buying treasury bills and lending money to the government.
Treasury Bills = Short-term debt instruments issued by the government, which are repaid with interest after a specified period of time.
Subscribing to the Treasury Bills of Maldives Government by SBI means that SBI is lending money to the Maldives Government as a financial aid for a period of time, which will be repaid by the Maldives Government later.
Some key features of Treasury Bills (T-bills)
Short-term investment instruments: Treasury bills are issued for a short-term period, usually with a maturity period of 91 days, 182 days, or 364 days.
No coupon interest: Treasury bills do not pay any regular interest (coupon). They are issued at a discount, and are paid at face value on maturity.
Safe InvestmentTreasury bills are issued by the government, so they are considered one of the safest investment options. Their risk of default (i.e. non-payment) is very low.
Liquidity: Treasury bills can be converted into cash quickly and easily. They can also be traded in the secondary market.
Zero-risk returns: Being issued by the government, the returns on treasury bills are considered risk-free. That is, the investor is fully guaranteed payment on maturity.
depend on market rates: The discount rate of treasury bills depends on market interest rates and demand. When interest rates are high, the discount rate on T-bills is also high.
