Government Securities (G-Secs) are tradeable debt instruments issued by the Central Government or State Governments to acknowledge a debt obligation, serving as a mechanism for the government to borrow money to fund its deficit and development projects. Because they are backed by the government, G-Secs are considered virtually risk-free and are often called "gilt-edged" instruments. The Central Government issues both short-term Treasury Bills (T-bills), which have maturities of less than one year (currently in 91-day, 182-day, and 364-day tenors), and long-term dated securities or bonds, which have maturities of one year or more, up to 40 years. State Governments issue only bonds, known as State Development Loans (SDLs).
The legal framework for G-Secs was historically governed by the Public Debt Act, 1944, which was replaced by the Government Securities Act, 2006, an Act to consolidate and amend the law. The Government Securities Act, 2006 came into force on December 1, 2007, and applies to securities issued by both the Central and State Governments. The market underwent comprehensive reforms starting in the early 1990s to move away from inefficient practices and develop a robust secondary market.
The Reserve Bank of India (RBI) issues G-Secs on behalf of the government, and its Public Debt Office (PDO) acts as the registry and depository. T-bills are zero coupon securities, meaning they are issued at a discount to their face value and redeemed at par, while dated securities typically pay a fixed or floating coupon (interest) on a half-yearly basis. The concept is intrinsically connected to the RBI's role in monetary policy and the government's fiscal management.
Recently, in June 2026, the government introduced significant changes to deepen the market and attract foreign capital. The Income Tax Amendment Ordinance, 2026, effective April 1, 2026, exempted eligible Foreign Portfolio Investors (FPIs) from paying taxes on interest income and capital gains from G-Sec investments, replacing the previous regime that included a 12.5% long-term capital gains tax and a 20% withholding tax on interest. Concurrently, the RBI expanded the Fully Accessible Route (FAR) to include all new issuances of 15-year, 30-year, and 40-year government bonds, allowing unrestricted foreign investment in these securities.