What are government bonds? How to invest in Government Securities, key features, advantages explained

'Where to invest' is one of the most sought after questions. While this may have many answers based on the opinions and mindset of different people, an investor always wants to have assured returns. There are only a few investment instruments in the market which offers an assured return. Some of them are fixed deposits, Public Provident Fund and Government Bonds. So, if you have idle funds lying with you that yield no return, you can consider Government Bond. Investing in Government Bonds comes with the benefits of safety, security as well as assured returns.

"Government Securities (G-Sec) are issued in the primary market through auctions conducted by Reserve Bank of India (RBI). An investor, depending upon eligibility, may bid in an auction under Competitive Bidding or Non-Competitive Bidding. Institutional investors such as banks, financial institutions, primary dealers, mutual funds, and insurance companies are generally eligible to make competitive bids," says NSE website.
 
It further says that to encourage retail investment in Government Securities (G-Secs), the facility of non-competitive bidding (NCB) has been introduced. Under the scheme, eligible retail investors apply for a certain amount of securities in an auction without mentioning price/yield. Such bidders are allotted securities at the weighted average price/yield of the auction. 

Investing in Government Securities  

Eligible retail investors necessarily have to participate in non-competitive bidding (NCB) at RBI through an aggregator or facilitator. NSE acts as facilitator in NCB to aggregate the bids received from the retail investors and submits a single bid at RBI.  Retail investors have multiple channels through which they can place their bids. Retail investors can place their bids through trading members of NSE or using the NSE goBID mobile app/web platform.

Do you have idle funds lying around that yield no return? Investing in Government Bonds comes with the benefits of safety, security as well as assured returns.
To know more: https://t.co/DB2wGzEedU #NSE #GovernmentSecurities #GovernmentBonds #InvestorAwareness pic.twitter.com/kjIQzYHnvw

— NSEIndia (@NSEIndia) March 16, 2019

How to invest in government securities?

Retail investors have multiple channels to invest in treasury bills (T-Bills) and Government of India (GoI) dated bonds in the primary market. Retail investors can place their orders through any one of the following options available under the non-competitive bidding facility offered by NSE. 

Key Features of Government Securities

* Securities issued by the Government of India
* Issued through Reserve Bank of India on behalf of the Central Government of India
* Treasury bills have maturity of 91 days, 182 days and 365 days
* Treasury bills are zero coupon bonds. They are issued by discount and redeemed at face value
* Government bonds or dated securities have maturities of upto 40 years
* Government bonds pay interest every six months 

Advantages of investing in Government Securities

* Safety: Being Sovereign security, no default risk
* Ease of Exit: Investor can sell the government bonds in the secondary market
* Fixed income investment available across the maturities
* No TDS applicable on interest
* Can be held in existing demat account

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Government Securities (G-Sec) are issued by the Central Government. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).