Treasury Bills vs fd: Which is Better

T-Bills and Fixed Deposits are two secure investment options that could help you accumulate wealth in the long term. FDs, issued by banks and NBFCs, offer attractive returns. These returns surpass those of savings accounts. On the other hand, T-bills cater to short-term needs. They are issued by the government and offer competitive returns. Explore these options to avail higher returns while maintaining your risk tolerance.

Here are some of the interest rates offered on FDs and T-bills:  

Fixed Deposits 

• RBI’s repo rate influences the FD interest rates. A higher repo rate translates to higher FD interest rates.

• Issuers offer higher FD interest rates to attract more deposits. This helps them meet their financial requirements.

• Fixed deposits with longer maturity periods typically have higher interest rates. Short-term deposits usually offer lower rates.

• Issuers may hike interest rates during economic growth periods to attract more investors. 

Treasury bills

• The interest rates offered on-bills are determined by the investor bids at auctions.

• The government may offer higher interest rates on T-bills to attract more capital.

• Increase in inflation could lead to a hiked interest rate for T-bills.

• Demand for T-bills may rise when low-risk investments are scarce. This could offer higher returns.

• Changes in the repo rate made by RBI may indirectly affect the T-bills interest rates. 

Before investing in a savings tool, understand its benefits. This helps you make an informed decision. Here are some benefits of investing in FDs:  

• Compounding Interest

Cumulative FDs allow your interest to earn interest over time to help maximise your returns. 

• Effortless Application

Booking an FD is simple and convenient. Many banks and NBFCs offer online application processes.

• Higher Returns

FDs typically offer higher interest rates compared to regular savings accounts.

• Overdraft Facility

Most issuers provide overdraft facilities to help depositors access their invested funds during financial emergencies.  

• Liquidity 

Liquidate your fixed deposit anytime with the premature withdrawal facility; subject to certain penalty charges. 

Here are some advantages of investing in T-bills: 

• Secure Investments

T-bills are issued by the Government of India and offer a high degree of safety for your investment.

• Predictable Returns

Returns earned from T-bills are based on the purchase price and maturity value, allowing you to plan your investments with clarity. 

• Flexibility

T-bills offer liquidity. You can sell them before maturity in the secondary market.

• Diversified Investments 

Adding T-bills to your investments can reduce overall portfolio risk. They are a low-risk, secure asset class. This helps create a more balanced investment strategy.