GOVERNMENT SECURITIES IN INDIA

1. ALTERNATIVE FORMS
OF INVESTMENT
BY
K.VIDHYA

3. INTRODUCTION
It is a larger market than the Industrial
Securities.
Government securities market is otherwise
called as Gilt-edged securities market.
It’s Long term securities are traded in Capital
market & short term securities in Money market.
Securities issued by Central, State, Semi-
government authorities.

4. TYPES OF GOVERNMENT SECURITIES
• PROMISSORY NOTES
• STOCK CERTIFICATES

5. PROMISSORY NOTES
Registered promises of the government.
Usually entered in a register specially made for it.
Purchased by the banks and highly liquid in
nature.
Freely transferable.
Half yearly interest provided when the
promissory note is presented before the office of
purchase
Most popular government security among the
investors .

7. STOCK CERTIFICATES
• Cannot be transferred
• Investors keep till its maturity.
• LIFE INSURANCE CORPORATION and
PROVIDENT FUNDS are the major purchasers.
• Helps the national economic policies, for
development of the country and the invested
money can be utilized for pre planned works.

9. CHARACTERISTICS OF GOVERNMENT
SECURITIES
ISSUING AUTHORITY
GOVT.SECURITIES AND STOCK MARKET
GOVT.SECURITIES AND COMMERCIAL BANKS
ISSUE PRICE
GOVT.SECURITIES AND RATE OF INTEREST
TAX EXEMPTION
GOVT.SECURITIES AND FINANCIAL INSTITUTIONS
GOVT.SECURITIES AND UNDERWRITING

10. (A) ISSUING AUTHORITY
Government securities can be issued only by
the Central, state and semi- government
authorities.
Gold Bonds, National Defence Bonds and
Rural Development Bonds.
Issues treasury bills, special rupee securities,
payment of India’s Subscriptions to
International Monetary Fund, I.B.R.D. And
International Development Agency.

11. (B)GOVT.SECURITIES AND STOCK
MARKET
• Controlled by RBI, which maintain SLR.
• Interest rate do not affect private sector &
industrial securities.
• Operates for creating funds for development
& to meet deficit budgets of
the government.

12. (C)GOVT.SECURITIES AND
COMMERCIAL BANKS
• Commercial banks have to maintain their
secondary resources through govt.securities.
• It helps to get accommodation from RBI,
whenever the need arises.
• Easy to obtain loans
• Kept as collateral security.

13. (D) ISSUE PRICE
• Issued in denominations of ₹ 100.
• Usually issued at a discount but not at a
premium.
(E) TAX EXEMPTION
• Offer tax exemptions to Employees, high
income holders

14. (F) GOVT.SECURITIES AND RATE OF
INTEREST
• Rate of interest is LOW.
• Lower than any other form of investment.
• Govt. Securities are the safest in terms of
maturity, risk is low.
• Paid on maturity date without any default.

15. (G) GOVT.SECURITIES AND FINANCIAL
INSTITUTIONS
• Legal constraint to invest certain proportion of
their surplus every year.
• Hold the security till its maturity.
(H) GOVT.SECURITIES AND
UNDERWRITING
• Issued by the DEBT OFFICE OF THE RBI.
• Brokers do not deal with these securities.
• Sold through OVER THE COUNTER MARKET and
each sale is separately negotiated.

16. OPERATIONS OF GOVT. SECURITIES
MARKET
• Government securities in India is narrow and
inactive.
• General investors do not buy these type of securities.
• RBI and FINANCIAL INSTITUTIONS are the main
investors.
• Govt. Securities market supports capital market
• It is employed by RBI and RBI has used open market
operations to provide finance for government.
• RBI tries to maintain funds for achieving stability in
future.

17. PRICES AND YIELDS ON
GOVERNMENT SECURITIES
• Prices remains stable, although bank rate has
been increasing.
• The RBI has tried to stabilize the prices of
government securities.
• The RBI make changes in purchasing and
selling rates of different loans which are
placed on its list.
• The RBI has also tried to manipulate the
selling rate of treasury bills of government.

18. CONT.....
• RBI has many times mopped up the surplus
funds by lowering the rate of sale of treasury
bills.
• The yield on securities can be analysed only
when an investor hold it continuously.
• Government securities have continuously
increasing their interest rate.
• These rate are as far below than Industrial
securities.

19. CONCLUSION
• In India govt. Securities are useful only for
monetary management and fiscal policy. Though
RBI has played an important role in purchasing,
selling, borrowing and lending of government
securities by executing the interest rates, an
individual investor is not willing to invest in it.
although these securities comprises larger
segment than the industrial market, only little
knowledge is presently available to the common
man. Therefore, it is not an attractive form of
investment .

20. THANK YOU ...