The Reserve Bank of India (RBI) has announced that it will conduct an open market purchase of government securities of ₹25,000 crore under the G-sec Acquisition Programme (G-SAP 2.0).

Answer this PYQ in the comment box:

Q.Consider the following statements:

1. The Reserve Bank of India manages and services the Government of India Securities but not any State Government Securities.
2. Treasury bills are issued by the Government of India and there are no treasury bills issued by the State Governments.
3. Treasury bills offer are issued at a discount from the par value.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 3 Only

(c) 2 and 3 only

(d) 1, 2 and 3

 

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2

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What are Government Securities?

• These are debt instruments issued by the government to borrow money.
• The two key categories are:

1. Treasury bills (T-Bills) – short-term instruments which mature in 91 days, 182 days, or 364 days, and
2. Dated securities – long-term instruments, which mature anywhere between 5 years and 40 years

Note: T-Bills are issued only by the central government, and the interest on them is determined by market forces.

Why G-Secs?

• Like bank fixed deposits, g-secs are not tax-free.
• They are generally considered the safest form of investment because they are backed by the government. So, the risk of default is almost nil.
• However, they are not completely risk-free, since they are subject to fluctuations in interest rates.
• Bank fixed deposits, on the other hand, are guaranteed only to the extent of Rs 5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC).

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