Personal Finance & Money Asked on April 24, 2021
I am having a slight trouble in understanding this. I seriously do not know what it means by "G-secs". I have heard this word in the article posted below. What does it mean when someone says government securities?
I am seeing the term used in this article:
Reserve Bank of India (RBI) has announced that it will purchase four
government securities (G-Secs) that amount to ₹20,000 crores. The
central bank will purchase it on February 10, 2021, under the open
market operations (OMOs). This move was announced in aftermath of the
yields that were moving up to touch the intra-day high of 6.1634 per
cent recently. The RBI was concerned about the higher government
borrowing.
The answer is right there in the article (bold added):
What are government securities or G-Sec?
- Government securities are the debt instruments which are issued by the government to borrow money. It is divided into two categories namely,
- Treasury bills are short-term instruments. They get mature in 91 days, 182 days, or 364 days.
- Dated securities which are the long-term instruments. They get mature in between 5 years to 40 years.
They are bonds issued by the Government.
Correct answer by D Stanley on April 24, 2021
It says so in the article:
Reserve Bank of India (RBI) has announced that it will purchase four government securities (G-Secs) that amount to ₹20,000 crores.
So G-Secs is just an abbreviation for Government Securities.
What is this? This question is also answered by the article:
What are government securities or G-Sec? Government securities are the debt instruments which are issued by the government to borrow money. It is divided into two categories namely,
- Treasury bills are short-term instruments. They get mature in 91 days, 182 days, or 364 days.
- Dated securities which are the long-term instruments. They get mature in between 5 years to 40 years.
In short, the government doesn't just go to the next local branch of a bank and asks for a loan. Instead, it asks "the public" for a loan, resp. for many "mini-loans" which can be bought by individual investors. I don't know their exact minimum in India, but in Europe, they can be as low as 1000 €. These loans (also called "government bonds") can be due in a short time (as noted above), others can be due after many tens of years. But that's no problem - they can be bought and sold at the secondary market (at exchanges).
Central Banks (e. g. the Reserve Bank of India) often buy Government Bonds in order to provide liquidity to the economy.
Answered by glglgl on April 24, 2021
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