What are Government Bonds?

Hi there Celina,

Have you ever thought about how the government sources funds for infrastructural development? I’m sure you have and that is why you are searching for answers on what are government bonds in India. I was curious about knowing this too and that is when I started my research and came across the concept of government bonds. 

A government bond can be defined as a debt instrument issued by the country's central and state governments to fund their needs while also regulating the money supply. Bonds are frequently used by governments to raise revenue for infrastructure development and to finance government spending. As a result, the government will issue bonds to the general public, attracting investment. At the bond's maturity date, the government will repay the principal and interest according to the bond's terms. The Reserve Bank of India supervises the issuance of government bonds (RBI).

Government bonds in India are typically long-term investment vehicles. These bonds have a long term, ranging from five to forty years. Government bonds are also included in the category of government securities (G-secs). Government bonds can be issued by both the federal and state governments. State Development Loans, on the other hand, are bonds issued by state governments (SDLs).

The Government of India (GOI) offers many bond types. Furthermore, these bonds appeal to a wide range of investor requirements. The coupon rate is the interest rate offered on a government bond. The coupon might be fixed or floating, and it is paid out twice a year. The Government of India usually issues bonds with fixed coupon rates in the market.

The following are the different types of Government Bonds.

• Treasury Bills

• Cash Management Bills

• Dated Government Securities

• Fixed-Rate Bonds

• Floating Rate Bond

• Zero Coupon Bonds

• Capital Index Bonds

• Inflation Indexed Bonds

• Special Securities

• Sovereign Gold Bonds (SGBs)

• State Development Loans (SDLs)

So this is what are government bonds in India. I hope I was able to help you understand the concept.