Government Securities (G-Secs) are debt instruments issued by the central or state governments to borrow money from the public. They are considered one of the safest investment options because they carry the sovereign guarantee of the government.
Types of G-Secs:
- Treasury Bills (T-Bills):
- Short-term securities with maturities of less than one year (commonly 91 days, 182 days, and 364 days).
- Issued at a discount and redeemed at face value (zero-coupon instrument).
- Government Bonds / Dated Securities:
- Long-term securities with maturities ranging from 5 to 40 years.
- Pay periodic interest (coupon) at fixed or floating rates.
Key Features:
- Safety: Virtually risk-free as they are backed by the government.
- Liquidity: Can be traded in the secondary market, offering liquidity to investors.
- Returns: Yield depends on market interest rates and tenure; longer-term bonds may offer higher returns.
- Minimum Investment: Varies by instrument; T-bills are often accessible to retail investors via RBI or banks.
Issuing Authority:
- Central Government: Through the Reserve Bank of India (RBI).
- State Governments: Known as State Development Loans (SDLs), also issued via RBI auctions.
Purpose:
- To raise funds for government expenditure and budgetary needs.
- To regulate money supply and implement monetary policy (RBI uses G-Secs in open market operations).
Investors:
- Banks, financial institutions, insurance companies, mutual funds, and retail investors.
