Why in news? Trading volumes in government securities (g-secs) hit a two-year high on Q2 of 2022-2, rising interest rate , with the Finance Ministry terming this a sign of growing market interest in such bonds.

Highlights

What is a Government Security (G-Sec)?

• It is a tradeable instrument issued by the Central Government or the State Governments and acknowledges the Government’s debt obligation.
• 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).
• Central Government: Issues both treasury bills and bonds or dated securities
• State Governments : Issue only bonds or dated securities, called the State Development Loans (SDLs).
• G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

Issuing Authority : Through auctions conducted by RBI.

Types of G-sec

Treasury bills or T-bills

• They are money market instruments, are short term debt instruments issued by the Government of India
• Maturity : 91 day, 182 day and 364 day.
• These are zero coupon securities and pay no interest.
• Issued at a discount and redeemed at the face value at maturity.

Cash Management Bills (CMBs)

• Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs),
• Introduced mainly to meet the temporary mismatches in the cash flow of the Government of India.
• The CMBs have the generic character of T-bills but are issued for maturities less than 91 days.

Dated G-Secs

• Dated G-Secs are securities which carry a fixed or floating coupon (interest rate) which is paid on the face value, on half-yearly basis.
• Tenor : 5 years to 40 years