Government Securities Market

Government Securities Market

GSM, which stands for “Government Securities Market,” is the primary marketplace for the sale of debt. Not only does it provide the government with access to the funds it needs to satisfy its short- and long-term obligations. But it also serves as a benchmark against which other corporate papers with varying maturities can be evaluated.

Types of Government Securities Market in India

G-secs are not tax-exempt like bank CDs and other income-producing assets. Government-back securities are commonly consider as the safest method to invest. As a direct result of this, the danger of default is drastically reduced. Several governments and central banks throughout the world issue various types of government bonds.

Types of Government Securities in India

• Treasury Bills
• Cash Management Bills
• Dated Government Securities
• Fixed-Rate Bonds
• Floating Rate Bonds (FRB)
• Capital Indexed Bonds

• Inflation-Indexed Bonds (IIBs)
• Bonds with Call/Put Options
• Special Securities
• STRIPS
• Sovereign Gold Bond (SGB)
• 7.75% Savings (Taxable) Bonds
• State Development Loans

Zero Coupon Bonds

Zero-coupon bonds are typically sold for less than face value and repayable at face value. On January 19, 1994, anyone was able to purchase these bonds. Since the maturity date of the security has already been determine, neither coupon nor interest will be provided for it. When a security reaches its maturity date, it is redeem for the original purchase price.

Treasury Bills

• The Indian central government issues Treasury bills, which are short-term government bonds. They are due within one year. T-bills is an alternative term for these types of instruments. Currently, three distinct types of Treasury notes are in circulation. 91 days , 182 days, 364 days Treasury bills are not consider as interest-bearing assets.
• They are also refer as “zero-coupon securities”, which signifies that purchasing them will yield no return. Due to the discount rate utilize to issue these securities, they can be redeem at face value on their maturity date rather than accruing interest. A 91-day Treasury bill having a face value of 200 rupees. For instance, might be sold for 196 rupees (after a discount of 4 rupees) and subsequently redeemed for 200 rupees. The RBI conducts weekly auctions to sell Treasury Bills, which are always accessible.