I have seen G-Secs and T-Bills issued by the government of India. What are the main features of G-Secs and T-Bills in India?

All G-Secs in India currently have a face value of Rs.100/- and are issued by the RBI on behalf of the Government of India. All G-Secs are normally coupon (Interest rate) bearing and have semi-annual coupon or interest payments with a tenor of between 5 to 30 years. This may change according to the structure of the Instrument.

Take the case of 11.50% GOI 2005 security. This bond will carry a coupon rate (Interest Rate) of 11.50% p.a. on a face value per unit of Rs.100/- payable semi-annually and maturing in the year 2005. That is the interpretation of bond details as put out by the RBI.

On the other hand, treasury Bills are for short-term instruments issued by the RBI for the Govt. for financing the temporary funding requirements and are issued for maturities of 91 Days and 364 Days. T-Bills have a face value of Rs.100 but have no coupon (no interest payment). T-Bills are instead issued at a discount to the face value (say @ Rs.95) and redeemed at par (Rs.100). The difference of Rs. 5 (100 - 95) represents the return to the investor obtained at the end of the maturity period.

State Government securities are also issued by RBI on behalf of each of the state governments and are coupon-bearing bonds with a face value of Rs.100 and a fixed tenor. They account for 3-4 % of the daily trading volumes. While the central government securities are fully free of any default risk, state bonds do carry risk of default.