Professional Documents
Culture Documents
Govt Securitis
Govt Securitis
Government Securities are securities issued by the Government for raising a public loan or as notified in the official
Gazette. They consist of Government Promissory Notes, Bearer Bonds, Stocks or Bonds held in Bond Ledger
Account. They may be in the form of Treasury Bills or Dated Government Securities.
Government Securities are mostly interest bearing dated securities issued by RBI on behalf of the Government of
India. GOI uses these funds to meet its expenditure commitments. These securities are generally fixed maturity and
fixed coupon securities carrying semi-annual coupon. Since the date of maturity is specified in the securities, these
are known as dated Government Securities, e.g. 8.24% GOI 2018 is a Central Government Security maturing in
3. Ample liquidity as the investor can sell the security in the secondary market
7. Rate of interest and tenor of the security is fixed at the time of issuance and is not subject to change
10. Securities qualify as SLR (Statutory Liquidity Ratio) investments (unless otherwise stated).
1. Primary Market: The Primary Market consists of the issuers of the securities, viz., Central and Sate
Government and buyers include Commercial Banks, Primary Dealers, Financial Institutions, Insurance
Companies & Co-operative Banks. RBI also has a scheme of non-competitive bidding for small investors
2. Secondary Market: The Secondary Market includes Commercial banks, Financial Institutions, Insurance
Companies, Provident Funds, Trusts, Mutual Funds, Primary Dealers and Reserve Bank of India. Even
Corporates and Individuals can invest in Government Securities. The eligibility criteria is specified in the
Auctions: Auctions for government securities are either multiple- price auctions or uniform price auction - either
Yield Based: In this type of auction, RBI announces the issue size or notified amount and the tenor of the paper to
be auctioned. The bidders submit bids in term of the yield at which they are ready to buy the security. If the Bid is
more than the cut-off yield then its rejected otherwise it is accepted
Price Based: In this type of auction, RBI announces the issue size or notified amount and the tenor of the paper to
be auctioned, as well as the coupon rate. The bidders submit bids in terms of the price. This method of auction is
normally used in case of reissue of existing Government Securities. Bids at price lower then the cut off price are
rejected and bids higher then the cut off price are accepted. Price Based auction leads to a better price discovery
Underwriting in Auction: One day prior to the auction, bids are received from the Primary Dealers (PD) indicating
the amount they are willing to underwrite and the fee expected. The auction committee of RBI then examines the
bid on the basis of the market condition and takes a decision on the amount to be underwritten and the fee to be
paid. In case of devolvement, the bids put in by the PDs are set off against the amount underwritten while deciding
the amount of devolvement and in case the auction is fully subscribed, the PD need not subscribe to the issue
G-Secs, State Development Loans & T-Bills are regularly sold by RBI through periodic public auctions. SBI DFHI
Ltd. is a leading Primary Dealer in Government Securities. SBI DFHI Ltd gives investors an opportunity to buy G-
Sec / SDLs / T-Bills at primary market auctions of RBI through its SBI DFHI Invest scheme (details available on
website ). Investors may also invest in high yielding Government Securities through SBI DFHI Trade where buy
and sell price and a buy and sell facility for select liquid scrips in the secondary markets is offered.