Day Count Conventions in Treasury Calculations
Same rate, same dates, four different interest amounts. Which basis each Indian market uses, and how to count the days by hand.
A day count convention is the rule for counting the days in an interest period and the days in a year. The rate, the principal and the dates can be identical, and the interest still comes out different, because one desk divides by 365, another by 360, and a third pretends every month has 30 days.
For the Certified Treasury Professional (CTP) exam this sits in Module VII, which names "day count conventions, money market and bond market basis" directly. It also drives every accrued interest, clean price and dirty price question in Module III. Get the basis wrong and every option in the question looks plausible.
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The Four Conventions
- Actual/365
- Actual days in the period divided by 365. The year is always 365 days, even in a leap year (sometimes written Actual/365 Fixed).
- Actual/360
- Actual days divided by 360. Called money market basis internationally. It pays slightly more interest than a 365-day year at the same quoted rate.
- 30/360
- Every month counts as 30 days and the year as 360. Called bond basis. A full half-year is always exactly 180 days.
- Actual/Actual
- Actual days divided by the actual days in the year, so 365 or 366. Used where leap years must be counted precisely.
Which Indian Market Uses Which
As RBI's G-Sec primer and SEBI's 2016 circular state them.
Government securities (dated G-secs)
Convention
30/360
Source
RBI G-Sec primer, Q25 and glossary
Money market, including T-bills
Convention
Actual/365
Source
RBI G-Sec primer, Q25
Corporate debt under SEBI debt regulations, issued from 1 January 2017
Convention
Actual/Actual (366 when 29 February falls in the year)
Source
SEBI circular CIR/IMD/DF-1/122/2016
US dollar and euro money markets, repos abroad
Convention
Actual/360
Source
Market practice abroad, not an RBI rule
| Market | Convention | Source |
|---|---|---|
| Government securities (dated G-secs) | 30/360 | RBI G-Sec primer, Q25 and glossary |
| Money market, including T-bills | Actual/365 | RBI G-Sec primer, Q25 |
| Corporate debt under SEBI debt regulations, issued from 1 January 2017 | Actual/Actual (366 when 29 February falls in the year) | SEBI circular CIR/IMD/DF-1/122/2016 |
| US dollar and euro money markets, repos abroad | Actual/360 | Market practice abroad, not an RBI rule |
The 30/360 Date Rule
Under 30/360 the day count between two dates is 360 x (Y2 - Y1) + 30 x (M2 - M1) + (D2 - D1). Before applying it, adjust the days: if D1 is 31, change it to 30. If D2 is 31 and D1 is now 30, change D2 to 30 as well.
Take 31 January to 30 April. D1 becomes 30, so the count is 30 x 3 + (30 - 30) = 90 days. The actual count is 89 days. That one-day gap is exactly the kind of difference an exam option is built around.
Worked Example: Same Deal, Four Answers
Illustrative. ₹1 crore placed at 7% from 31 January 2026 to 30 April 2026 (not a leap year). Actual days 89, 30/360 days 90.
Actual/365
Working
1,00,00,000 x 7% x 89/365
Interest
₹1,70,685
Actual/360
Working
1,00,00,000 x 7% x 89/360
Interest
₹1,73,056
30/360
Working
1,00,00,000 x 7% x 90/360
Interest
₹1,75,000
Actual/Actual
Working
1,00,00,000 x 7% x 89/365 (2026 has 365 days)
Interest
₹1,70,685
| Basis | Working | Interest |
|---|---|---|
| Actual/365 | 1,00,00,000 x 7% x 89/365 | ₹1,70,685 |
| Actual/360 | 1,00,00,000 x 7% x 89/360 | ₹1,73,056 |
| 30/360 | 1,00,00,000 x 7% x 90/360 | ₹1,75,000 |
| Actual/Actual | 1,00,00,000 x 7% x 89/365 (2026 has 365 days) | ₹1,70,685 |
Day count and accrued interest questions in the real format. No signup.
Accrued Interest on a G-Sec: RBI's Own Example
From RBI's G-Sec primer. Trade: ₹5 crore face value of 8.83% GS 2023, clean price ₹100.50, settlement 30 January 2014.
- 1
Find the last coupon date
25 November 2013. Interest accrues from here to the day before settlement.
- 2
Count days on 30/360
25 to 30 November is 5 days, December is 30, January up to the 30th is 30. Total 65 days.
- 3
Accrued interest per ₹100
8.83 x 65/360 = ₹1.5943.
- 4
Dirty price
Clean price plus accrued interest: 100.50 + 1.5943 = ₹102.0943.
- 5
Consideration
5,00,00,000 x 102.0943/100 = ₹5,10,47,150. This is what the buyer pays the seller.
Try One Yourself
Illustrative: a 7.10% G-sec with its last coupon on 15 April, settling on 3 August. On 30/360 the count is 30 x 4 + (3 - 15) = 108 days, not the 110 actual days. Accrued interest per ₹100 is 7.10 x 108/360 = ₹2.13, so ₹21,300 on ₹10 lakh face value. A clean price of ₹100.25 gives a dirty price of ₹102.38.
Converting Between 360 and 365 Bases
A rate quoted on a 360-day year earns more than the same rate on a 365-day year, because each day carries 1/360 of the rate instead of 1/365. To put a 360-day rate on a 365-day basis, multiply by 365/360. To go the other way, multiply by 360/365.
Illustrative: 10% on Actual/360 for a full year of 365 days is 10 x 365/360 = 10.1389% on a 365-day basis. That is the gap of about 1.389% the money market basis carries over the bond basis.
Comparing offers works the same way. Investment A pays 2% on a 365-day basis; B pays 1.99% on Actual/360. Convert A: 2 x 360/365 = 1.97% on a 360-day basis. B's 1.99% is higher, so B pays more even though its headline rate is lower.
SEBI's Leap Year Rule for Corporate Bonds
SEBI's November 2016 circular settled a market dispute over leap years. For debt securities issued under its debt listing regulations on or after 1 January 2017, if 29 February falls in the period, the denominator is 366 for that whole one-year period, however often coupons are paid. A half-yearly bond uses 366 twice that year.
Illustrative: ₹1 crore at 8% for 1 January to 1 July 2028 (182 days, 2028 is a leap year) earns 1,00,00,000 x 8% x 182/366 = ₹3,97,814. Dividing by 365 would give ₹3,98,904. The same circular says a coupon falling on a holiday is paid the next working day, but interest is still calculated only up to the original date, and later coupon dates do not shift.
How the CTP Exam Tests This
- check_circleMarket to convention: G-secs 30/360, T-bills and money market Actual/365. A question that gives a G-sec trade and an option worked on actual days is a trap.
- check_circleAccrued interest and dirty price: count days to the day before settlement, multiply coupon x days/360, add to the clean price. RBI's own example is the model.
- check_circleBasis conversion: 365/360 to move a 360-day rate up to a 365-day basis, 360/365 to move down.
- check_circleLeap year: Actual/Actual for SEBI-regulated corporate debt uses 366 for the whole year containing 29 February.
- check_circleOnly a basic 8-function calculator is allowed, so practise the day counts and the x days/360 step by hand.
FAQs
What day count convention is used for G-secs in India?expand_more
30/360, per RBI's G-Sec primer: every month is taken as 30 days and the year as 360. It is used to compute accrued interest on dated government securities.
What day count convention do T-bills use?expand_more
Actual/365. RBI's primer says the money market follows actual/365, and T-bills, being money market instruments, follow the money market convention.
What is the difference between money market basis and bond basis?expand_more
Internationally, money market basis is Actual/360 and bond basis is 30/360 or an actual-day method. In India, RBI describes the money market convention as actual/365 and the bond market convention as 30/360.
Why does Actual/360 pay more than Actual/365?expand_more
Each day earns 1/360 of the annual rate instead of 1/365. Over a full year that is about 1.389% more interest at the same quoted rate.
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