Why in news
- Ministry of External Affairs reported that India has borne approximately $45 million in interest payments to roll over Maldivian Treasury Bills.
- The State Bank of India subscribed to these T-bills in 2019 and has extended the facility six times for annual terms to prevent default.
Key terms
Treasury Bill
Zero-coupon short-term debt security issued by a sovereign government at a discount to fund short-term fiscal deficits.
Rollover Risk
The risk associated with refinancing debt when a maturing obligation must be replaced by new debt.
What is the T-Bill Subscription Mechanism?
- Treasury Bills are short-term money market instruments issued by sovereign governments to meet immediate cash flow gaps.
- Under bilateral financial support, the State Bank of India (SBI) subscribed to sovereign Maldivian T-bills to inject foreign currency liquidity.
- To relieve fiscal strain on Male, the Government of India absorbed the accrued interest costs upon successive annual rollovers.
Strategic and Economic Implications
- Prevents sovereign debt distress in a key Indian Ocean neighbor within India's 'Neighbourhood First' policy framework.
- Provides liquidity support without directly expanding external budgetary grants, utilizing public sector bank balance sheets backed by interest subsidies.
Prelims facts
- Treasury Bills are issued in India by the RBI in three tenors: 91-day, 182-day, and 364-day.
Mains discussion
- Evaluate India's economic diplomacy tools in maintaining neighborhood stability amid competing regional influences in the Indian Ocean Region.
Source: Hindu Business Line Economy
Same topic · past papers
UPSC has asked this before
These previous-year questions sit on the same topic. Open one to practise the earlier ask.
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2023 · Q25 · General Studies · 2 marks
Consider the following markets: 1. Government Bond Market 2. Call Money Market 3. Treasury Bill Market 4. Stock Market How many of the above are included in capital markets? -
2021 · Q13 · General Studies · 2 marks
With reference to India, consider the following statements: 1. Retail investors through demat account can invest in 'Treasury Bills' and 'Government of India Debt Bonds' in primary market. 2. The 'Negotiated Dealing System-Order Matching' is a government securities trading platform of the Reserve Bank of India. 3. The 'Central Depository Services Ltd' is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange. Which of the statements given above is/are correct? -
2018 · Q56 · General Studies · 2 marks
Consider the following statements: 1. The Reserve Bank of India manages and services Government of India Securities but not any State Government Securities. 2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the state Governments. 3. Treasury bills are issued at a discount from the par value. Which of the statements given above is/are correct? -
2026 · Q71 · General Studies · 2 marks
Match List I with List II and select the answer using the code given below the Lists: List I (Project Supported by India) - List II (Country) A. Mangdechhu Hydroelectric Project - 1. Maldives B. Restoration of Stor Palace - 2. Afghanistan C. District Hospital at Dickoya - 3. Bhutan D. Institute of Security and Law Enforcement Studies - 4. Sri Lanka Code: A B C D -
2024 · Q20 · GS II · 15 marks
Discuss the geopolitical and geostrategic importance of Maldives for India, with a focus on global trade and energy flows. Further, also discuss how this relationship affects India's maritime security and regional stability amidst international competition?