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Government Securities

 

Government Securities (G-Secs) are securities issued by the Central Government or the State Government. These securities represent the market borrowings of the Centre and/ respective States. They are issued for financing the fiscal deficit and managing the temporary cash mismatches of the Government. Broadly, Government Securities can be classified as follows:

  1. Dated Government Securities
  2. State Development loans (SDLs)
  3. Treasury Bills

Dated G-Secs are those securities which are issued by the Central Government and are the most actively traded out of the three instruments. Similarly, SDLs, as the name suggests, refer to borrowings of the State Governments. Treasury Bills are shorter tenor securities, ranging from 91 Days to 364 Days, issued for the purpose of meeting short term liquidity mismatches of the Central Government.

G-Secs market is largely institutional in nature, though retail investments are permitted. Institutional players include Commercial banks, Primary Dealers, Insurance Companies, Co-operative banks, Regional Rural banks, Mutual Funds, Corporates, Provident and Pension funds. Foreign Institutional Investors (FIIs) too, are allowed to participate in the G-Secs market within the quantitative limits prescribed from time to time. These securities are generally held in Subsidiary General Ledger (SGL) accounts held with the RBI. In case entities do not have a direct account with RBI, they may open a Constituent SGL account with banks and Primary Dealers or convert them into dematerialized form in demat accounts maintained with the Depository Participants of NSDL.

Government securities are issued at par value (Rs 100) and have a coupon rate which is decided through the auction process at the time of issuance. The coupon interest payments are made on half-yearly basis and are redeemed at par value on maturity date. Interest payments are calculated based on 30/360 day count convention.

Government securities are highly liquid instruments available both in the primary and secondary market. In the primary market, Government securities are issued through auctions (yield based or price based auctions) conducted by RBI. There is a scheme of non-competitive bidding in these auctions wherein retail investors can participate for small amounts ranging from Rs 10,000 to Rs 2 cr (face value) in auctions of dated G-Secs and upto 1% of notified amount in auctions of SDLs.

The secondary market trading of G-Secs is undertaken on an electronic platform (known as Negotiated Dealing System Order Matching (NDS-OM), over the telephone (Over-the-Counter), NDS-OM Web and Stock exchanges. The settlement of all such trades takes place on T+1 basis (T+2 in case of FPIs) through the Clearing Corporation of India (CCIL) which guarantees the settlements. The market trades from 9 a.m to 5 p.m. from Monday to Friday.

 
 

Latest News

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RBI slashed the Statutory Liquidity Ratio by 50 bps from 20.0% to 19.5% of banks NDTL. The ceiling on SLR security’s under HTM will also be reduced from 20.25% to 19.50% in a phased manner by March 31, 2018
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In its Fourth Bi-monthly policy, the MPC panel kept the policy rates unchanged at 6.00% while maintaining a neutral policy stance
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Consequently, the policy rates are as follows: Repo rate: 6%, Reverse Repo rate: 5.75%, MSF rate: 6.25%
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The panel revised its inflation projection upwards for the second half of FY18 to 4.2-4.6% from 4.0%-4.5% in the previous policy
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India’s eight-core sector growth came in at 4.9% compared to 2.6% observed in the previous month mainly aided by a sequential increase in output of coal, fertilizers, steel and electricity
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Real GVA growth has been revised downwards to 6.7% for FY18 from 7.3% previously
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Surprising on the downside, headline CPI for Sep-17 came in at 3.28% as food prices saw a sharp decline. Additionally, the print for Aug-17 was also revised downwards to 3.28% compared to 3.36% estimated previously.
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Core inflation, however, stood 11 bps higher at 4.61% compared to 4.50% as implementation of HRA under the 7th CPC continued to impact housing prices.
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IIP registered a 4.3% growth in Aug as compared to 1.2% observed in July led by broad based growth across all sectors, viz. Manufacturing at 3.5%, Electricity at 2.3% and Mining at 0.3%.
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