G-Secs can help you reduce the credit risk of your portfolio. G-Secs come in a variety of maturities and types, including floating rate bonds that allow you to hedge against interest rate risk.
Low risk: G-secs carry zero credit risk as they are backed by the government (which means if you hold the security to maturity, your capital and the interest are safe).
Higher returns than FDs: Average returns from G-secs tend to be higher than bank FDs.
Wide-ranging tenures: You can choose between T-bills (with tenures as short as 91 days) or government bonds (with tenures ranging from 5 to 40 years).
We offer a wide selection of government securities ranging from short-term instruments to long-dated bonds.
FACTBOX
A G-sec, also known as a government security, is a debt instrument issued by the government. G-secs are available as short and long-term debt instruments. The short-term G-sec treasury bills or T-bills possess a maturity of less than one year, while long-term bonds or dated securities carry tenures of five to 40 years.
G-Secs are debt instruments that are backed by the government. The sovereign guarantee makes it a strong and relatively risk-free investment option. Since they carry no risk of default, they are known as gilt-edged securities.
Like shares, you can sell G-secs in the secondary market through your broker.
Unlike corporate bonds or other debt instruments, G-secs carry no risk of default since they are backed by the government. But they are not completely without risk.
- The risk of inflation: The rate of interest on a G-sec may not be enough to cover rising inflation.
- Price risk or interest rate risk: Since interest rates and bond prices have an inverse relationship, there is a risk of the bond yields falling when interest rates rise. Longer-term bonds are worst hit when interest rates rise.
Government securities are issued by the Reserve Bank of India on behalf of the Government of India. These are issued through auctions conducted on e-Kuber, RBI’s electronic platform. Institutions like banks and insurance companies typically participate in these auctions. Retail investors can invest in G-secs through brokers or RBI’s retail direct scheme. The minimum investment is Rs 10,000.
