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Features of Fixed Deposits and Treasury Bills

8 Mins 04 May 2023 0 COMMENT

Are you looking for a secure investment that will provide you with stable returns on your savings? If so, you should take fixed deposits and treasury bills into consideration. These two financial products are among the most popular choices for risk-averse investors who place a high value on capital preservation and consistent returns. Let’s look at an example to learn about the benefits these products offer.

Consider that you want to invest Rs 10,000 for a year. You desire a safe investment option with predictable returns because you don’t want to take any risk. Treasury bills and fixed deposits are your options. A fixed deposit is a savings account with a set interest rate for a particular period, whereas a treasury bill is a short-term debt instrument issued by the government.

Consider investing Rs 10,000 in a treasury bill with a six-month maturity and a 6% yearly interest rate. If the market conditions remain the same you might get a return of Rs 300 at maturity. On the other hand, a fixed deposit with a bank that offers a 7% annual interest rate will net you Rs 350 at the end of six months.

This instance demonstrates how risk and return must be balanced. Treasury bills are one of the safest investment alternatives since they are backed by the government even though they have lower returns. On the other hand, fixed deposits provide higher rates but carry a certain amount of risk, depending on the bank’s financial soundness. You can choose the one that best suits your investment objectives and risk tolerance by knowing the distinctions between treasury bills and fixed deposits.

Treasury Bills and Fixed Deposits: An Overview

Treasury bills and fixed deposits have specific benefits and traits of their own. To assist you in selecting the investment strategy that best meets your needs, let’s compare the features of treasury bills and fixed deposits pointwise.


Treasury bills are the government’s short-term financial instruments to raise money for various needs. From 91 to 364 days, they are available in multiple maturities.

However, fixed deposits are investment choices offered by banks or other financial institutions where you deposit a lump sum amount for a fixed term, often ranging from 7 days to 10 years or more.


The returns on Treasury bills are often lower than those on fixed deposits. The government guarantees their returns; thus, they are considered a safe investment option.

Compared to treasury bills, fixed deposits have greater rate of interest from 3% up to 7% depending on the tenure, but these rates are not guaranteed. They might change depending on the bank or organisation issuing the deposit.


Since the government backs Treasury Bills, they are considered less dangerous than fixed deposits.

Fixed deposits, on the other hand, come with a higher risk because they are not backed by the government and rely on the bank or institution providing them for financial stability.


Owing to their high liquidity, Treasury Bills can be quickly converted into cash. Prior to the maturity date, you can sell them on the secondary market.

On the other hand, fixed deposits have a fine if the money is withdrawn before the maturity date, although you can liquidate them immediately.


Comparing fixed deposits and Treasury bills, the former has a shorter duration. Treasury Bill maturities range from 91 days to 182 days to 364 days.

Fixed deposits are available for terms of seven days to 10 years.

Minimum Investment

Fixed deposits often have a lower minimum investment requirement than treasury bills. While fixed deposits can be opened with just Rs 1,000, Treasury bills are typically issued in quantities of Rs 1 lakh or more.


Interest from fixed deposits and interest from Treasury Bills is subject to taxation. However, Treasury bills have a lower tax obligation than fixed deposits because they are not subject to TDS. The tax rate that an investor pays on interest from fixed deposits depends on their income tax slab.

Interest Rate Fluctuation

Treasury bills have a set interest rate that remains constant during their tenure. However, the interest rate on fixed deposits may change depending on the market’s state and the bank’s policy or institution issuing the deposit.

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