Home/Blogs/Government Securities What are They Are They Worth Investing in

Government Securities What are They Are They Worth Investing in

What is Government Security?

  • A government security, or G-Sec, refers to an investment issued by any governmental body, i.e., central or state.
  • Recently, the National Stock Exchange (NSE), working with the Reserve Bank of India (RBI), allowed the people of India to invest in government securities. Earlier, these securities were only available to large finance companies and banks.
  • A government security carries absolutely no risk and is known to be a risk-free, gilt-edged financial instrument.

 

Open Your free Demat Account in just 5 minutes!

What Investments Does Government Security Offer?

Government Securities mainly include the following:

  • Long-dated bonds: They are also known as 'dated securities' or 'government bonds' and have a maturity period of more than one year. Both the Central and State governments can issue these long-term bonds. When a state government issues a dated security, it is called an SDL (State Development Loan).
  • T-bills: Also known as 'treasury bills', these are short-term bonds with a maturity period of less than a year. Only the central government can issue these bills.

What are the Different Types of Government Securities in India?

Some of the key types are mentioned below:

  • Fixed-rate bonds: As the name suggests, the interest rate issued on these bonds is fixed throughout the tenure of the investment.
  • Floating-rate bonds: These bonds are subject to changes in their rate of interest. The changes are made periodically and are announced before the bond is issued.
  • Sovereign gold bonds: The central government issues these bonds so that companies and investors can invest in gold for long periods without actually having to buy gold.
  • Inflation-indexed bonds: These bonds work according to inflation; both the principal amount and interest are subject to inflation. They are indexed either by the wholesale price index or the consumer price index.

Why Should You Invest in Government Security?

Investing in Government Security has several advantages, such as:

  • The government body ensures that you receive your interest (in the form of coupons) along with the repayment of your principal amount.
  • The maturity period of these investments can be anywhere from 91 days to 40 years, depending on the investor.
  • These funds can be easily sold in the secondary market and can also be offered up as collateral to borrow cash in the repo market.
  • Unlike gold investments, there is no need for the safekeeping of government securities. These can be kept scripless and held in physical form as and when needed.
  • Whether it is SDL or special securities like oil bonds, UDAY bonds, etc., they offer amazing yields.

To Sum Up

  • Since the government allows individual investors and cooperative banks to buy these securities, they are considered a golden chance. 
  • These securities come with a guaranteed return of principal and interest.
  • There are no major risks involved.

 

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

You may also like…

Be the first to read our new blogs

Intelligent investment insights delivered to your inbox, for Free, daily!

Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C