G -SECS

G -SECS

Subject : Economics

Context : The Reserve Bank of India (RBI) said it would allow retail investors to open gilt accounts with the central bank to invest in government securities directly and without the help of intermediaries.

Concept :

• This is a major structural reform placing India among select few countries which have similar facilities.
• This measure together with HTM [hold to maturity] relaxation, will facilitate smooth completion of the government borrowing programme in 2021-22.

G-Secs

• A Government Security (G-Sec) is a tradable instrument issued by the Central Government or the State Governments.
• It acknowledges the Government’s debt obligation.
• Such securities are short term (usually called treasury bills, with original maturities of less than one year- presently issued in three tenors, namely, 91 day, 182 day and 364 day) or long term (usually called Government bonds or dated securities with original maturity of one year or more).
• In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).
• G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
• Gilt-edged securities are high-grade investment bonds offered by governments and large corporations as a means of borrowing funds.