Government Securities Market

 Ordinary and Ad-hoc Treasury Bills

On the one hand, ordinary treasury bills are those issued in the open market through auction to meet short term financial requirements of the central Government.

On the other hand, Ad-hoc treasury bills are issued in order to provide investment outlets to state governments, semi-government departments and foreign central banks for their temporary surpluses. 

Advantages of T-bills

• High liquidity
• Non-competitive bidding
• Negligible risk

Disadvantages of T-bill

• Lower returns
• Tax liability

Capital Indexed Bonds

By purchasing these securities, which pay interest at a predetermined percentage above the wholesale price index, investors can protect their purchasing power and mitigate inflation risk.

Cash Management Bills (CMBs)

• Cash management bills are a brand-new financial instrument that was just introduce to the Indian financial market. The Indian government and the Reserve Bank of India issued this security in 2010. Cash management bills are comparable to Treasury bills in that they are short-term, as-needed instruments.
• However, the amount of time it takes one to mature relative to the other is a significant way to distinguish between them. CMBs are consider a short-term investment choice because to their extremely short maturities (less than 91 days). Typically, the Indian government purchases these securities to obtain cash immediately.

State Development Loans

• In the past, states occasionally issue state development loans, which were fix maturity government securities market. These loans assisted states in paying their debts. Every two weeks, the issue is auction off utilizing a method called the Negotiated Dealing System. SDL allows you to repay your loan in the same manner as other lenders, and you can modify the conditions to suit your needs.
• The interest rate on SDL is slightly higher than the rate on fixed-maturity government securities. Some Indian states issue State Development Loans (SDLs), whereas the federal government issues government securities with maturities in the past (G-Securities). These two types of loans are collectively refer to as “dated government securities.”