Government securities (G-Secs) are debt instruments that the government issues to raise money for its fiscal expenditure. You can invest in these securities and receive a fixed return on your investment.
How government securities work
The Reserve Bank of India (RBI) issues Treasury bills (T-bills) and bonds on behalf of the government. When you invest in these securities, you essentially lend money to the government, which uses these funds to run the country's operations.
This process works similarly to how banks operate with fixed deposits. Banks accept your money as deposits, pay you interest, and then lend that money to other customers. The government follows a similar model but uses the funds for public expenditure.
Types of government securities
Government securities include two main types of instruments:
- Treasury bills (T-bills): Securities with maturities of less than one year
- Government bonds: Securities with maturities of more than one year
Both types offer you a fixed return on your investment, making them relatively safe investment options backed by the government's credit.
You can learn more about government securities by visiting Government securities module on Varsity.