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Question

Difficulty: MediumMoney Market: Institutions and Instruments

Treasury Bills are short-term money market instruments issued by the Central Bank on behalf of the government primarily to raise long-term capital for infrastructure development projects.

Answer: Answer

Answer

The statement is False. Treasury Bills are short-term debt instruments maturing within 364 days used for short-term liquidity management, not long-term capital formation.
The statement is false because Treasury Bills belong strictly to the money market and are used for short-term liquidity regulation and deficit financing (maturing within one year). Long-term funding for capital projects is provided by capital market instruments such as government development stocks and bonds.

Step-by-Step Solution

1
Identify the maturity duration of Treasury Bills.
Treasury Bills mature in the short term, specifically within 91, 182, or 364 days.
Money market instruments are by definition restricted to short-term financial claims of less than one year.
2
Analyze the financial market required for long-term capital infrastructure projects.
Long-term borrowing for major infrastructure expenditure is conducted in the capital market using instruments such as government bonds or stocks.
Capital markets specialize in mobilizing medium-to-long-term funds exceeding one year.
3
Determine the truth value of the stem statement.
The statement incorrectly conflates short-term money market instruments (Treasury Bills) with long-term capital market borrowing goals.
Because Treasury Bills cannot be used for long-term capital formation, the statement is false.

Key Concept

Distinction between Money Market Instruments (Treasury Bills) and Capital Market Instruments (Government Bonds)
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Topics

Money Market: Institutions and Instruments

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