What Are Government Securities in India: Recent Updates, Types and Other Key Details

Do you know that the Reserve Bank of India has rolled out a new trading facility for state government securities in June 2025? This will expand the framework that was earlier limited to central government securities. This means retail investors can now explore both.

However, if you are new to this and wondering what are government securities, let’s break it down for you. Keep reading this blog to find out why these securities deserve a spot in your portfolio.

Key Highlights

• G-Secs are safe debt instruments issued by the RBI to fund developmental projects and manage national debt.
• Popular types include T-bills, Cash Management Bills (CMBs), savings bonds and more. 
• Retail investors can buy G-Secs via stock brokers, mutual funds or directly through RBI Retail Direct.

What Are Government Securities in 2025?

Alternatively referred to as ‘G-Secs’, government securities form a vital part of the secondary market and contribute significantly to the Indian economy. The Government issues these debt instruments through the RBI to collect investments for different developmental projects. 

Thus, by investing in G-Secs, you can help the government in building various infrastructure projects, managing national debt and bridging several other budgetary gaps.

G-Secs are highly secure investments where the government guarantees the total repayment of your principal amount upon maturity, along with timely interest payouts. These are much similar to corporate bonds where the investment returns are paid out in a similar fashion. The RBI’s Sovereign Gold Bond Scheme is a conventional example of govt securities. 

Recent Updates on Government Securities in India

Govt securities market in India has seen some interesting changes lately. From new facilities to fresh guidelines, here’s a quick look at what’s happening now: 

• The newly introduced trading facility allows Separate Trading of Registered Interest and Principal of Securities (STRIPS) in state-issued fixed-coupon bonds. To qualify, these bonds must have at least ₹10 billion ($116.93 million) outstanding and a residual maturity of up to 14 years.
• Securities and Exchange Board of India (SEBI) approved compliance relaxations in June 2025 for Foreign Portfolio Investors (FPI) to boost investments in government securities.
• The Central Government of India auctioned government securities, amounting to ₹27,000 crore in July 2025, which has been subscribed to fully. 
• Bonds maturing in 2030 will yield 6.01% annualised return (₹15,000 crore).
• Bonds maturing in 2054 will have a 7.09% yield (₹12,000 crore).

Types of Government Securities in India

Some of the most popular types of government securities in India are outlined below:

Treasury Bills

These are often termed as 'T-bills'. The government issues these short-term debt securities for tenures ranging from a few days to one year. While purchasing them, you can acquire units at a discounted rate but you won't receive any periodic interest payouts. Contrarily, you receive the full value of your investment on maturity.

Recently, in May 2025, India rolled over a $50 million Treasury Bill to support the Government of Maldives, with the State Bank of India subscribing to it.

Treasury Notes

T-notes are more suitable for investors looking for mid-term investment solutions. Their maturity periods typically range between 2-10 years. Being an investor in T-notes, you can expect a fixed semi-annual interest rate. Moreover, debt instrument experts consider these instruments to be generally safe. 

Treasury Bonds

T-bonds or treasury bonds are offered by the relevant government bodies with maturity periods typically exceeding 10 years. You can expect a fixed coupon rate throughout your investment term and the interest amount is credited to your bank account twice a year. 

Cash Management Bills (CMBs)

Again, it is another form of reliable short-term government securities that you can access occasionally through authorised online platforms. These government securities are issued to meet the government’s urgent cash needs on an as-needed basis. Typically, their tenures are less than 91 days long.

For instance, the RBI announced plans to raise ₹80,000 crore by issuing 84-day CMBs during the pandemic to help the government meet immediate debt needs.

Savings Bond

Simply put, these are government bonds that primarily target retail investors. You can secure fixed-interest income from these securities, which makes it a great choice for risk-averse individuals who prioritise stability while investing. Adding to that, on July 1, 2025, the RBI announced the interest rate for its savings bond (FRSB) at 8.05% for the July–December 2025 period.

Capital Indexed Bonds

These are specialised bond agreements where your principal amount is adjusted periodically to balance out the effects of inflation. It is a unique characteristic that helps retain the real value of your invested amount over time. 

State-Development Loans

The different state governments issue these debt investment instruments for short durations to complete certain local developmental projects. These loans have a wide range of maturity periods and coupon rates, largely determined by the creditworthiness of the bond issuer.

Zero-Coupon Bonds

When investing in zero-coupon bonds, you do not get periodic interest, unlike traditional bonds. However, you can acquire them at a concessional price and expect the bond issuer to repay the entire face value when the bond matures.

In March 2025, the Indian Finance Ministry approved the issuance of zero-coupon bonds for Power Finance Corporation, allowing the company to raise up to ₹10,000 crore. Each bond will be issued at a discount of ₹49,546 on a face value of ₹1 lakh, meaning an investor pays ₹50,454 upfront and gets ₹1 lakh at maturity, which is in 121 months. 

How to Buy Government Securities in India?

As you already know what are government securities, let us now find out some easy ways of investment. Here are the main options: 

1. You can buy government securities through stock brokers that provide non-competitive bidding and auction-based purchase options.
2. As an investor, you can buy government securities through mutual funds to diversify your portfolio. This eliminates the need to monitor securities at the individual level. 
3. You can register on RBI Retail Direct to buy government securities directly.

Pros of Investing in Government Securities

If you are seeking stability in your financial journey, government securities will appear to be a compelling prospect. As sound investors, it is essential to verify the different advantages & disadvantages of investing in government securities like any other instruments. 

That being said, these are some key benefits of investing in G-Secs:

Guaranteed Returns

Most government securities offer fixed coupon rates. It results in a predictable source of income for the investors. 

Portfolio Diversification

Incorporating government securities, such as capital-indexed bonds or savings bonds, can diversify your equity-heavy portfolio.

Tax Benefits

Specific government securities like tax-free government bonds ensure attractive tax exemptions. You do not need to pay income tax on profit earned from these instruments. 

Liquidity and Marketability

Due to high demand Central Government securities offer excellent liquidity. Therefore, you can easily buy or sell them using a brokerage platform. 

Cons of Investing in Government Securities

Investing in government securities can have several drawbacks too, like:

Limited Returns

As government securities are much safer investments when compared to corporate bonds or stocks, they offer investors lower returns.

Slight Interest Rate Risk

Although government securities carry low risk, still the interest payments can occasionally vary when the values of existing assets fluctuate. This can result in temporary periods of low returns for an investor. 

Inflation Risk

Despite being associated with safety, these investments are not completely insulated from market volatility. Certain political events, economic factors and additional elements can influence the value of government securities. 

Final Word:

Government securities offer a reliable investment avenue with benefits like guaranteed returns and portfolio diversification. Despite its inherent safety, understanding what are government securities and selecting the right type requires assessing individual risk tolerance. It is crucial to weigh the cons of investing in a particular asset class against the set monetary objectives.