In India, a government bond is issued by state, or the central government, to finance new public works or public works improvement projects. These debt instruments are an attractive and suitable option for many kinds of investors, particularly those who have a low-risk appetite and are looking to earn a fixed income from investments. These are essentially risk free investments. 

If you are a retail investor, HNI, family office, or wealth advisor wondering how to buy government bonds in India, you’re in the right place! Keep reading to get the answers to all your questions about G-Secs.

What Is a Government Bond?

In India, they are usually long-term debt investment tools since they are majorly issued for maturity periods from 5 – 40 years. The respective government will repay the bond’s face value at the end of this period and on the maturity date.

One of the differences between a corporate bond and a government bond is that the former is issued by a company to finance its operations, new projects, etc., while the later is always issued to execute a public project that will ultimately benefit the Indian public, such as a highway, railway station, foot overbridge, public library, river, etc. 

 Government bond or a g-sec is most secure in terms of default risk for investors. This is considered a risk free investment in common investing parlance since the government is never going to default. 

In return for borrowing the public’s funds, the government will usually pay a regular or fixed interest rate known as a coupon, such bonds are known as fixed-rate bonds. Some G-Secs, the interest rate may be floating, which are known as floating-rate bonds.

Few types of government bonds in India include:

  • Sovereign gold bonds (SGBs): Issued by the Central Government, they allow investors to invest in gold without the burden of investing in physical gold and running the risk of storage or theft.
  • Inflation-indexed bonds (IIBs): Indexed as per the Consumer Price Index (CPI) or Wholesale Price Index (WPI) to allow investors to safeguard their portfolio against inflation. Returns on these bonds have no correlation with the market and provides a hedge against inflation.
  • Treasury bills: Government securities that are issued for a maturity of less than one year are issued as treasury bills. Treasury bills are issued for 91 days, 182 days, and 364 days.
  • Cash Management Bills: Cash Management Bills are securities issued by the government for less than 91 days. 
  • 7.75% GOI Savings Bond: Pay out a taxable interest at a fixed rate of 7.75%. 
  • State Development Loans (SDLs) : These bonds are issued by the State Government to address their funding needs. These bonds generally have higher coupons than bonds issued by the Central Government.

Benefits of Investing in Government Bonds in India


Indian investors get multiple benefits by investing in public bonds. These include:

1. Regular, Safest and consistent returns

Government bonds are a type of fixed-income security, allowing investors to earn consistent and regular income. Moreover, they can earn this income for a long period since most G-Secs have a maturity period of at least 5 years. Also, Government bonds are safest to invest among all classes of investment options. 

2. Government’s repayment guarantee 

The risk of default is non-existent because the issuer is the government itself and gsecs are administered through the RBI. The bond issuance is a type of formal declaration of the government’s debt obligation, which is the safest.

3. Opportunity for portfolio diversification 

Since there is no-risk and assured returns, government bonds enable investors to balance or diversify their fixed-income portfolio and lower the risk in their portfolio. 

4. Tax benefits 

Certain bonds issued by public sector entities such as National Highway Authority of India, NTPC Limited, Indian Railways, and Rural Electrification Corporation, Housing and Urban Development Corporation, Indian Renewable Energy Development Agency, Rural Electrification Limited, and Power Finance Corporation etc.  are issued as tax free bonds. .Tax free bonds are lucrative options for investors falling in higher tax bracket since they do not have to pay any tax on the interest income. Further, there is no TDS on the tax free bonds. Capital gains on Sovereign Gold Bonds are exempt in the hands of individuals. 

5. Hedge Against inflation 

Some government bonds, such as IIBs, offer real returns that are unaffected by inflation. Investing in such bonds increases the real value of the deposited funds, protecting investors from inflation-related losses especially in the rising inflation scenario. 

6. Liquidity 

Government bonds are tradeable on exchanges. Thus, you can also easily exit your investment before the bond maturity date if you urgently need funds. This makes G-Secs more liquid than fixed-income instruments like bank fixed deposits (FDs) wherein you have to pay a penalty for premature withdrawal of the deposit.

7. Low minimum investment 

Government bonds are issued with a face value of as low as Rs. 1000 which makes the minimum investment amount bar low unlike fixed deposits wherein for receiving higher interest you have to invest higher amounts .  .

Who Should Invest in Government Bonds?

G-Secs are a good investment option for investors whose main goal is to earn a consistent income without taking any risk. Investors looking to dilute the risk in their investment portfolios or wanting to supplement their primary income with regular interest payouts can also benefit by investing in government bonds.

These are extremely suitable for investors who have a low-risk appetite and are willing to accept slightly lower (albeit regular) returns.

If you fall into any of these categories, you might consider investing in a government bond. But how can you purchase these bonds? The next section will show you how.

How to Buy Government Bonds?

There are a few ways in which one can buy government bonds in India:

1. Banks and Post Offices

To buy a G-Sec from a bank or post office, you will have to submit a form, your Demat account number, and relevant documents such as your Aadhaar card, PAN card, voter ID card, or some other address/identity proof. The bank or post office will process your request and then issue a bond certificate in your name. 

2. Brokerage House

You can also purchase bonds through a brokerage house. You will need a Demat account as well as a trading account with that firm. They will specify the documentation required for you to start buying or selling your bonds and charge you a brokerage fee.

3. Gilt Mutual funds (MFs) and Exchange-Traded Funds (ETFs)

When you buy a G-Sec through an ETF or gilt MF, the burden of choosing the “best” bond is no longer on you. Instead, the MF or ETF provider will select the bonds for you, making it easy to invest in G-Secs and earn regular returns.

Do consider the instrument’s expense ratio before investing. This ratio changes depending on the fees that fund houses charge investors for managing their funds. If the ratio of a particularly G-Sec is higher than you are comfortable with, it will eat into your returns. For this reason, it’s important to select a G-Sec that offers a competitive and affordable expense ratio.

4. RBI Retail Direct

RBI’s Retail Direct scheme, launched in November 2021, allows individual investors to invest directly in G-Secs. To use this option, register for the Retail Direct Gilt (RDG) account with the RBI. This gilt securities account will allow you to participate in the primary issuance of many kinds of G-Secs. Unlike a brokerage trading account, there is no fee for opening and maintaining the RDG account.

5. NSE goBID or BSE Direct

The RBI allows eligible investors to buy G-Secs, State Development Loans (SDLs) and Treasury Bills (T-Bills) by participating in non-competitive bidding (NCB) on the NSE’s goBID or BSE’s BSE Direct web portal or mobile application. These investors can be banks and NBFCs, primary dealers, mutual funds, insurance companies or retail investors. . NSE or BSE acts as facilitator of Gsec auctions conducted by RBI. 

YubiInvest: An Easy, Hassle-free Way to Invest in Government Bonds in India

Over the years, the Indian bond landscape has evolved and created new investment opportunities for fixed-income investors. And as we have seen, these investors have many different investment pathways to choose from. Even so, investing in bonds can be overwhelming for many investors and even for knowledgeable wealth partners and HNIs/family offices. YubiInvest eliminates this overwhelm with the power of new-age technology. 

YubiInvest is a feature-rich, user-friendly fixed-income platform that’s ideal for wealth advisors, family offices, HNI investors, and independent investors looking for a way to easily invest in  fixed income instruments..

With YubiInvest, investors can access a wide range of  fixed income investment options, and get all the advantages of fast credit and price discovery, access to liquidity in the secondary market, and reliable issuer due diligence. You will also get unparalleled efficiency, quality execution, actionable insights, and reliable data security so you can invest with full confidence and full peace of mind.

Click here to know how YubiInvest can ease your bond investment journey.