What Are Government Securities? Features & Advantages Of Government Securities

Government securities, often known as bonds, treasury bills, or notes, are financial instruments that are issued by the national and state governments of India. Government securities are debt products that the government issues in order to borrow money. The government offers a fixed interest rate on this type of investment, which carries no risk.

Treasury bills and bonds are examples of government securities, but bonds aren’t strictly government securities because commercial banks offer a variety of bond plans to meet different investor needs. Government securities are only issued by the government, whether it’s the federal government or a state government.

Features of Government Securities

The type of Government securities investor chosen determines the return generation in the Government securities segment. The investor might choose G-sec with coupon rates if they prefer a set semi-annual income. They are typically issued to refund securities that have reached maturity, advance repay securities that haven’t yet reached maturity, and generate new cash resources.

• A premium is not added to the price when issuing the bulk of government securities; they are always issued at face value.
• Government securities are a secure investment, that ensures investors a fixed income.
• When opposed to the primary market, the secondary market has higher liquidity. Retail investors benefit from significant secondary market liquidity as a result, and you can sell immediately there.
• In the case of government securities, there is no tax deducted at the source.
• Once the security is issued, the premium, face value, and interest rate cannot be changed because they are fixed at the time of issuance.
• Government bonds and Treasury bills are issued by the Government of India
• Dematerialized government securities are available for investors to store.
• The securities are redeemed at face value in the event of redemption.
• The maturity tenure of the government securities is between two and thirty years.

Advantages of Government Securities

Government projects are made possible by the use of government bonds by the federal, state, and municipal governments. Treasury bonds with a 2 to 30-year maturity are sold by the national government. Government bonds have typically been low-risk investments, although they do carry interest rate risk and do not have the same earning potential as assets with higher risk.

Risk-Free-Investors who purchase government bonds are guaranteed returns and financial security. They have consistently set the bar for risk-free security. Government bonds are thus appropriate for investors looking for a risk-free investment.

Return – Government bond returns are typically on par with bank deposits. Along with fixed interest, the principal is also guaranteed. These bonds are available for a longer period of time than bank deposits.

Regular Income – According to RBI regulations, holders of government bonds must receive interest payments every six months. As a result, it gives bondholders the chance to invest their unused money and receive a regular income.

Liquidity – Like stock assets, government bonds can be bought and sold. These bonds have the same level of liquidity as banks and other financial institutions.

Portfolio Diversification -A portfolio that includes investments in government bonds is well-diversified for the investor. The risk of the entire portfolio is reduced because government bonds are risk-free investments.