Government Securities (G-Secs)
G-Secs or government securities are long-term debt instruments issued by the central government. You invest money, and the government pays you fixed interest every 6 months. At maturity, you get your principal investment back.
Announcement
RBI announces a G-Sec with details like tenure, interest rate, and auction date.
Place Your Bid
You place your order at the cut-off price during the bidding window.
Auction & Allotment
After the auction, units are allotted based on final price; any extra amount is refunded and the allotted bonds are automatically credited to your demat account.
You place your order at the cut-off price during the bidding window.
After the auction, units are allotted based on final price; any extra amount is refunded and the allotted bonds are automatically credited to your demat account.
You receive fixed interest payouts every 6 months directly in your bank account.
At the end of the tenure, your principal is returned at face value.
Let's Learn How Do G-Secs Work with an Example.
Step 1. A G-Sec is Announced:
The RBI announces a government G-sec, 2028 (Tenure of 3 years) with interest rate of 7% and cut-off price of ₹102
Step 2. You Place an Order:
You choose to invest — e.g., 100 units at cut-off price
- ₹10,200 (₹102 x 100) is blocked.
- This is the maximum you’ll pay; the actual price could be lower.
Step 3. Auction & Allotment:
What Happens After You Bid?
- Once bidding ends, a final price is decided (e.g., ₹101).
- You’re allotted 100 units at this final price.
- Since you had paid ₹10,200 in advance and only ₹10,100 is needed, ₹100 is refunded to your bank account.
- The allotted units are credited to your demat account automatically.
Step 4. What happens after allotment:
You Start Receiving Interest.
G-Secs pay fixed interest twice a year. You earn on the face value (usually ₹100), not on your purchase price.
- Coupon Rate: 7% annually → 3.5% semi-annually
- Face Value : ₹100
- Tenure: 3 years (6 interest payouts)
| Period | Interest Rate (Semi-Annually) | Interest Earned |
|---|---|---|
0 – 6 Months | 3.50% | ₹350 |
6 – 12 Months | 3.50% | ₹350 |
1 – 1.5 Years | 3.50% | ₹350 |
1.5 – 2 Years | 3.50% | ₹350 |
2 – 2.5 Years | 3.50% | ₹350 |
2.5 – 3 Years | 3.50% | ₹350 |
Total Interest earning ₹2,100
The interest is credited to your bank account automatically every 6 months.
Step 5: What Happens at Maturity? (End of Year 3):
a. Principal Repaid:
You receive ₹10,000 (₹100 × 100 units), as bonds are redeemed at face value, not at your purchase price of ₹101.
b. Final Interest Credit:
The last ₹350 interest (if not already paid) is deposited into your bank account.
c. Your Total Returns:
- Total Invested: ₹10,100
- Interest Earned: ₹2,100
- Principal Returned: ₹10,000
- Net Earnings: ₹2,000
You don’t need to hold G-Secs until maturity.
- Sell anytime on the exchange via your demat account
- Sale value will depend on market demand and prevailing interest rates
- You may receive more (premium) or less (discount) than what you paid
Tip: While early exit is allowed, G-Sec prices can fluctuate, and liquidity may vary—so plan your holding period accordingly
While browsing G-Sec offers, you’ll come across certain terms—like coupon rate, face value, or cut-off price. Don’t worry if they sound technical. Here’s a quick breakdown of the key terms to help you understand what you’re investing in, without the jargon.
| Term | Definition |
|---|---|
Issued by | G-Secs are issued by RBI on behalf of the Government of India. |
Maturity Date | The date your investment is repaid at face value, along with final interest. |
Face Value | The base value of the bond – typically ₹100 per unit. |
Cut-off Price | The final price per unit decided in auction. You might pay less than your max. |
Min. Investment | Minimum of 100 units, total depends on cut-off price (e.g., ₹102 × 100). |
Interest Paid | Interest is paid every 6 months (bi-annually) directly to your bank. |
Return p.a. | Fixed annual interest on face value (e.g., 7% per ₹100). |
Indicative Yield | Expected return based on previous auctions; actual may differ. |
Frequently Asked Questions
What is the minimum investment in G-Secs?
You need to invest in at least 100 units. The final amount depends on the cut-off price (e.g., ₹102 × 100 = ₹10,200).
Can I pledge G-Secs as collateral?
Yes, G-Secs held in your demat account can be pledged to get trading margins. Click here for more details Link
Can I sell G-Secs before maturity?
Yes, G-Secs are tradable on exchanges. You can exit anytime, but the sale price depends on market demand and prevailing interest rates.
Is TDS applicable on G-Sec interest earnings?
No TDS is deducted. However, the interest earned is taxable as per your income slab and must be declared in your tax return.
Where can I view available G-Sec offers?
You can view and invest in live G-Sec auctions directly through the Kotak Neo app under the “Invest/ Government Bonds” section. Click here to view gsec listings