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
Conversion value is the amount which investors will receive by immediately exchanging the bonds for equity stock and selling the stock at prevailing market

#questThe managing directors of three profitable listed companies discussed their companies'' dividend policies at a business lunch. Company A; has deliberately paid no dividends

How does the theory of comparative advantage relate to the currency swap market? Answer:  Name recognition is very important in the international bond market. With no it, even a

Jack needs to borrow $1,000 for the next year. Bank South will give him the loan at 9 percent. Suncoast bank will give him the loan at 7 percent with a $50 loan origination fee. Fi

What are the Limitations oftrade payable day's ratio? Year-end trade payables may not be representative of the year. Credit purchases are VAT exclusive in the income sta


State about the investigate of Competition Directorate Competition Directorate will generally investigate the below areas: (i)  Mergers and takeovers This is when larg

Market participants' measure the default risk of an issue on the basis of the credit ratings that the credit rating agencies assign to the issues. Once rating is

1. Describe the types of financial ratios and other financial performance measures that are used during a venture's successful life cycle. Who are the users of financial performan

Suppose the government regulates the price of a good to be no lower than some minimum level. Can such a minimum price make producers as a whole worse off?  Explain. As a higher