Government Securities (G-Secs)

G-Secs are tradable instruments issued by the Central Government or State Governments. It acknowledges the Government's debt obligation.

Why are they special?

They carry Sovereign Guarantee. This means the risk of default is practically ZERO. The Government can always print money or tax people to pay you back.

Types of G-Secs

1. Treasury Bills (T-Bills)

• Short Term: < 1 Year.
• Tenures: 91 days, 182 days, 364 days.
• Zero Coupon: Issued at discount, redeemed at face value.
• Example: Buy ₹100 T-Bill at ₹98. Get ₹100 after 91 days. Profit = ₹2.

2. Dated G-Secs

• Long Term: 5 years to 40 years.
• Coupon: Pays fixed interest every 6 months.
• Example: "7.18% GS 2033" means:
  • Coupon: 7.18%
  • Maturity: Year 2033

3. State Development Loans (SDLs)

• Issued by State Governments (e.g., Tamil Nadu, Maharashtra).
• Usually offer slightly higher interest than Central Govt bonds.
• Also very safe.

How to Buy G-Secs?

Earlier, only big banks could buy them. Now, YOU can.

1. RBI Retail Direct

• A special portal by RBI for retail investors.
• Open a "Gilt Account" for free.
• Buy T-Bills and G-Secs directly in primary auction.

2. Stock Brokers

• Zerodha, Groww, Upstox allow buying T-Bills and G-Secs.
• Held in your Demat account.

3. Debt Mutual Funds

• Gilt Funds invest 80% in G-Secs.
• Easiest way (Professional management).

Taxation

• Interest: Taxed as per your income slab.
• Capital Gains: If sold before maturity at a profit, taxed as Capital Gains.
• No TDS: TDS is not deducted on G-Sec interest (but you must pay tax yourself).

7-Day Action Plan

Day 1: Visit rbiretaildirect.org.in. Just explore the site.
Day 2: Check the latest T-Bill auction yields. (Usually 6.5% - 7%).
Day 3: Compare T-Bill yield with your Savings Account interest. T-Bills win hands down!
Day 4: Check "Gilt Funds" on Value Research. See their returns.
Day 5: Understand "Duration Risk". Long-term G-Secs are volatile if interest rates change.
Day 6: If you have idle cash for 3 months, consider a 91-day T-Bill instead of FD.
Day 7: Open a Gilt Account or try buying a T-Bill via your broker for ₹10,000 to learn.

Quiz

💡 Final Wisdom: If you want to sleep like a baby, lend to the Government. It's the bedrock of a safe portfolio.