1. Better than FD on returns.
2. Lock-in is for several years.
3. I will tell you a secret: This is like a pension fund. Especially the long-term ones (2055 and later maturities)
4. Your interest income gets credited every 6 months from ICICI Bank which is the administrator for those securities.
5. You cannot resell. The market does not exist. Government has plans for making it tradable in future. That is why it is more like a pension plan.(No surrender value until redemption date and no market for secondary sale)
6. You can put in the bid every week between Tuesday and Thursday for long term ones (> 1 year)
7. You can put in the bid every week between Monday and Wednesday for T-Bills (< 1 year)
8. The initial quote is slightly adjusted upward or downwards by Friday when the bid process takes place. (I always got a small refund)
9. Your allocation is done on the following Monday and you can see it in demat by Wednesday.
10. T-Bills (< 1year) do not have interest coupon credited. Instead the interest is built into the difference between buy and surrender value at the end of the tenure.
11. Interest rates have come down by almost 1% in the last 2 years.
12. So far I never saw a situation where allocation was not made to me because there were too many bids.
13. No TDS deduction on interest. You have to self declare this income in your IT returns.
14. Another interesting cousin for these G-Secs is Gold Bonds usually floated by RBI during festivals.
15. Gold bond interest rate is 2.5% (came down from 2.75% in two years).
16. Gold bond allocation as well as call back value is based on gold prices on the respective dates.
17. In the USA, government securities are the primary investment vehicles for pension funds.
18. You would become money lender to the government. (Sovereign guarantee)
19. The potential down side is if the government is heavily indebted during redemption in later years, they would still pay you by reducing the rupee value. That inflation rate risk is there even with every other debt instrument.
20. For long tenors, one must make sure that the demat account and attached bank account have proper nominee details etc. (Currently no resale market for G-Secs and no exit options)
31. For long term G Secs, minimum investment is around Rs 10,000 (Remember it is based on price discovery and is generally never a round number), or, in multiples there of.
32. There is no better instrument to lock in the current interest rates for very long term ones. I expect interest rates to go down gradually in India in the next 30 years.
33. Pension funds and annuities are a close match, but they have no sovereign guarantee and are dependent on the financial health of your pension-plan/insurance provider. Their interest rates are marginally lower.
Please let us know what else you wanted to know about G-Secs.
PS: Zerodha charges a small commission on every purchase.
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