Introduction to

Government
Securities
• A Government security is a tradable instrument issued by the Central Government or the
State Government. It acknowledges the Government’s debt obligation. Such securities are
issued for short term or long term. Government needs large amount to carry on its welfare
activities and therefore needs funds, which is generated by issuing Government Securities.

• It is issued with a promise of repayment upon the security's maturity date. Government
securities are usually considered low-risk investments because they are backed by the taxing
power of a government.

• These Securities are also called Gilt Edged Securities.

Types of Government Securities

1. Treasury Bill
• Short term debt instruments issued by RBI on Government’s behalf for
fulfilling periodic discrepancies between its receipts and expenditure.
• Zero Coupon Securities
• Issued at a discount and redeemed at the face value at maturity
• Maturities up to 52 weeks and lesser than it
• Issued in three tenors, namely, 91-day, 182 day and 364 day
• For example, a 91-day Treasury bill of Rs.100/- (face value) may be issued at
say Rs. 98.20, that is, at a discount of say, Rs.1.80 and would be redeemed at
the face value of Rs.100/-
2. Cash Management Bills
• Launched in 2010
• Short term bills issued by central government to meet its immediate cash
needs.
• Introduced to meet the temporary mismatches in the cash flow of the
Government of India
• Have the generic character of T-bills
• Issued with a maturity of less than 91 days.
• For example, if the face value of a CMB is Rs 100, we can get the bill at Rs
97 and at the end of the maturity date, say 60 after days, we can get Rs 100
3. Cash Management Bills
• Longer term securities and carry a fixed or floating coupon (interest rate)
• Paid on the face value, payable at fixed time periods on half-yearly basis..
• The tenor of dated securities can be up to 30 years
• RBI acts as the registry / depository of Government securities and deals
with the issue, interest payment and repayment of principal at maturity
• A typical dated fixed coupon G-Sec contains the following features -
coupon, name of the issuer, maturity year. For example, 7.49% GS 2017
would mean:
Coupon : 7.49% paid on face value
Name of Issuer : Government of India
Date of Issue : April 16, 2007
Maturity : April 16, 2017
Coupon Payment Dates : Half-yearly (October 16 and April 16) every year
Minimum Amount of issue/ sale : ₹10,000
Advantages
• Risk free
• Liquidity.
• Diversifies your portfolio
• Controls Inflation