Government Securities form the backbone of India's sovereign debt market, enabling the Centre and States to finance fiscal deficits while providing risk-free instruments that anchor the broader financial system.
T-Bills are zero-coupon instruments issued by the Central Government for maturities of 91, 182, and 364 days. They are issued at a discount and redeemed at face value, making them benchmarks for short-term risk-free rates. The Reserve Bank of India conducts weekly auctions on behalf of the Government.
CMBs were introduced to address temporary mismatches in government cash flows and carry maturities of less than 91 days. Unlike regular T-Bills, they are non-standard and issued on an ad hoc basis as and when the government requires short-term liquidity support. Their flexible tenor distinguishes them from the standardised T-Bill calendar.
SDLs are dated securities issued by State Governments to fund their fiscal deficits, typically with tenors of around ten years. While the RBI manages their issuance and the Centre facilitates the process, SDLs carry no explicit Central Government guarantee. They trade at a spread over Central Government securities, reflecting perceived sub-sovereign credit risk.
G-Secs collectively serve as the primary channel for government market borrowing, set benchmark yields, and provide high-quality collateral for banking and monetary operations. Retail Direct Scheme has broadened access to these instruments beyond institutional investors, deepening the market.
A well-functioning G-Sec market is indispensable for efficient public debt management and monetary transmission. Expanding liquidity, broadening the investor base, and maintaining SDL credibility remain priorities for sustainable fiscal financing.
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