Government Securities

Updated on 24 Oct, 2023

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What are government securities in India?

Government securities are either treasury bonds, bills or dated securities issued by the central government or bonds and dated securities issued by the state government. This kind of investment is issued by the government at no risk and it offers fixed interest rate.

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What are examples of government securities?

Government securities are generally an investment product offered by the government. it can be in the form of treasury notes, bills or bonds, TIPS or a saving bond. this kind of securities usually offers fixed interest

Who can buy government securities?

Until 2001 only banks and large financial institutions and mutual funds were allowed to buy government bonds either by bidding for new bonds or buying pre-existing bond but after that it became open for retail investors at 5% of the specified amount for the government securities issued. retail investor can be an individual, corporate or any institution permitted by the RBI

How do you trade in government securities?

Initially government securities are sold in the primary market as an auction opened by the RBI for bidding, the primary market is restricted for commercial banks, state and central government, financial institutions and insurance companies. After that securities are sold in the secondary market which is open for individuals and corporates

Why do banks invest in government securities?

The main purpose is the Statutory Liquid Ratio, this is a rule set by the RBI which obligates commercial banks to deposit a specific amount in the central bank in he form of Gold, Cash or Securities. banks prefer to deposit this amount as securities in order to benefit from the interest paid rather than paying in cash or gold.

What are the features of government securities?

government Securities can be issued only by the indian government either the central government or the state government. Government secirities are no risk investment. it offers fixed interest rate however it is low. Government securities are not taxable for the generated income. Government securities can be resold in the secondary market

What are the advantages of investing in government securities?

The main advantage of government securities is the safety as it is provided at no risk and guaranteed by the government compared to other types of investments like equity or mutual funds. It is also a good long term investment as it has relatively longer duration. It is a good source of liquidity considering the fixed interest rate

Can an individual buy govt securities?

Individuals cannot buy government securities in the primary market when the auction is opened by the RBI however they can buy those securities in the secondary market at the sepcified limit based on the value of securities and at a minimum value of 10,000Rs for the bond

Are government securities a good investment?

Looking into the safety factor, government securities are good investment as it is risk free and guaranteed by the government however it is important to take into consideration that it gives lower interest rate compared to other investments at higher risk levels

What is the difference between government securities and bonds?

Government securities are strictly products issued by the government either the central government or the state government including treasury bills and bonds however bonds are not strictly issued by the government as commercial banks offer a wide range of bond plans to cover different needs of investors

government securities