Features of government securities, Financial Management

Features of government securities:

Issuers

The government securities are issued by the central government, state governments, and semi-government authorities like municipal corporations and municipalities, autonomous institutions like the port trusts, improvement trusts, state electricity boards, metropolitan authorities, public sector corporations, and government agencies such as the Industrial Development Bank of India (IDBI), State Financial Corporations (SFCs), State Industrial Development Corporations (SIDCs), National Bank for Agriculture & Rural Development (NABARD), housing boards, etc.

Eligible Investors

Individuals, firms, companies, corporate bodies, institutions, state governments, provident funds and trusts are allowed to invest in government securities. The Non-resident Indians, overseas corporate bodies and Foreign Institutional Investors (FIIs) registered with SEBI and approved by RBI are also eligible to invest in government securities. Though different segments are permitted to invest, commercial banks, insurance companies and Non-Banking Financial Companies (NBFCs) are the major buyers of gilts in the market.
Purpose

Government securities play a vital role in the open market operations conducted by the Central Bank of the country. These instruments facilitate implementation of the fiscal policy of the government. The major investors such as commercial banks, NBFCs, insurance companies hold GOI securities to meet their statutory requirements. In spite of low yields, they are bound to invest in these bonds.

Minimum Subscription

The minimum amount of investment in government securities for a single investor is Rs.10,000 (face value) and in multiples thereof.

Maturity

The government securities are issued with various maturity periods. These were issued with maturities ranging from 2 to 31 years since independence. In the early 90s the average maturity period was shortened to 10 years by the RBI. At present, government securities run with a tenure upto 20 years in the market. They can be classified into three categories depending upon their maturities viz., long-dated, medium-dated and short-dated. Long-dated securities have maturities exceeding 10 years from the issue date, medium-dated securities have maturities ranging from 5 to 10 years and short-dated securities mature within 5 years.

 

Posted Date: 9/10/2012 7:34:48 AM | Location : United States







Related Discussions:- Features of government securities, Assignment Help, Ask Question on Features of government securities, Get Answer, Expert's Help, Features of government securities Discussions

Write discussion on Features of government securities
Your posts are moderated
Related Questions
Determine the term- Investment decision Investment decision is broadly concerned with asset-mix or composition of the assets of a firm. Concern of the financing decision is wit

Describe how society's interests can influence financial managers. Sometimes the interests of a business firm's owners aren't the same as the interests of society.  For illustr

Modern approach at financial problems With the advent of technology and need to tighten shipsdue to competition, financial management became as much a science as art. Efficient

Norfolk Ltd is specialized in producing & selling air conditions.  In 2010, the manufacturing cost per unit included:

MARGINAL ANALYSIS It is difficult to develop the conditional profit table when there are a large number of scenarios and possible actions. The marginal analysis approach sides

Do you provide plaigerism free solutions to questions or do you only tutor?

Discount Rate Determinants The discount rate is the firm weighted average cost of capital. It represents the opportunity cost of investing creditors and shareholders funds in o

Bonds with Warrants: Warrants are usually attached with the bonds or preference shares to attract the investor. The objective is to induce the potential investors to subscribe

Does your company have a cutting-edge product idea that will blaze new trails in its industry? Is it properly retiring out-of-date products and keeping current with new consumer de

We have seen earlier that there are callable bonds. This is a valuable feature for the issuers who consider that their stock is undervalued enough so that selling