G-secs
About:
- Government Securities (G-Secs) are tradable debt instruments issued by the Central or State governments in order to borrow money from the public to finance their fiscal deficit.
- These securities represent a contractual obligation to pay the holder a fixed amount of money, called principal or face value, on a specified date.
- They can be short-term, with original maturities of less than one year, or long-term with original maturities of one year or more.
- In India, the Central Government issues both treasury bills and bonds while State Governments issue only bonds, known as State Development Loans.
- G-Secs are considered to be risk-free gilt-edged instruments and are high-grade investment bonds offered by governments and large corporations as a means of borrowing funds.
Types of Government Securities (G-Secs):
- There are four types of Government Securities (G-Secs): Treasury Bills (T-bills), Cash Management Bills (CMBs), Dated G-Secs, and State Development Loans (SDLs).
T-bills:
- Treasury bills are money market instruments issued by the Government of India as a promissory note with guaranteed repayment at a later date.
- They are primarily short-term borrowing tools, having a maximum tenure of 364 days, available at zero coupons (interest) rate.
- They are issued at a discount to the published nominal value of government security (G-sec).
- Government treasury billscan be procured by individuals at a discount to the face value of the security and are redeemed at their nominal value.
Syllabus: Prelims; Economy
