Context: Russian funds worth about $10-12 billion are estimated to have been invested in Indian government treasury bills in the year ended 31 March as a surge in trade deficit led to higher surpluses in the vostro accounts under the rupee trade settlement mechanism.

• Given India’s $43 billion trade deficit with Russia, exporters from the country are left with huge surpluses in their vostro accounts in India. 
• According to Reserve Bank of India (RBI) norms, excess balances can be invested in payments for projects and investments, government treasury bills and government securities.

Treasury Bill 

• About: Short term (up to one year) borrowing instruments of the Government of India or by a central authority of any country which enable investors to park their short term surplus funds while reducing their market risk.

• Issued by:The Central Government.
• The State governments do not issue any treasury bills.
• Auctioned by: Reserve Bank of India (RBI)
• Types of Treasury Bills: presently issued in three tenors, namely, 91 days, 182 days and 364 days.
• The 91-day T-Bills are issued on a weekly auction basis while 182-day T-Bill auction is held on Wednesday preceding Non-reporting Friday and 364-day T-Bill auction on Wednesday preceding the Reporting Friday.
• In 1997, the Government had also introduced the 14-day intermediate treasury bills.
• Eligible buyers: Individuals, Firms, Trusts, Institutions and banks
• Interest on the treasury bills is determined by market forces.
• To get money under repo, banks give the RBI treasury bills. 
• They can also hold it if they need to meet their Statutory Liquid Ratio (SLR) standards.
• Taxation: Short-term capital gains (STCG) on these bills are subject to STCG tax at rates determined by the investor's income tax bracket.
• However, retail investors do not have to pay any tax deducted at source (TDS) upon redemption of these bonds, minimizing the difficulties of claiming the same through income tax returns if they do not fall into the taxable income level.