Start investing in G-Secs

October 16, 2018
Featured

Investors,

We Indians love fixed income instruments, hence over Rs 110 lakh crores sit in bank fixed deposits (FD) and over Rs 10lk crores (over 50% of total MF AUM) in debt mutual funds. What most of us don’t know are the various alternatives that exist which are better than bank FD’s, namely Government Securities (G-Secs), Corporate bonds, Tax-free bonds, and more. 

Over the last 8 years, thanks to all your support, we have been able to become the largest retail stock brokerage by trading turnover and 2nd largest by active clients. We are now working on introducing fixed income instruments, educate, help you invest and optimize returns.

Introducing Government securities (G-Secs)

What are G-Secs?

In order to meet its fiscal expenditure, the government has to borrow money. The RBI issues T-bills and Bonds on behalf of the Govt to raise money by offering a fixed return on investment. Very similar to how banks give interest on fixed deposits and use that money to lend to others, Govt uses it to run our country. G-Secs is a collective term for these two type of securities: maturities less than 1 year are called T-bills and those more than one year are called bonds.

Make sure to read this chapter on Varsity which explains about G-secs in detail.

Why G-Secs?

G-Secs across maturities offer higher yields compared to bank FD’s. You can potentially lockin the interest rate for as long as 40 years whereas FDs have a maximum tenure of 10 years. 

G-Secs Vs Fixed deposits

G-Secs are guaranteed by Govt of India and are virtually risk-free, unlike bank FDs. Did you know that if a bank defaults, deposits are only guaranteed up to Rs 1 lakh under deposit insurance and credit guarantee scheme of India. Debt mutual funds can lose value, as you must have realized in the last few months during the NBFC crisis. 

How to invest?

The exchanges open a non-competitive bidding window every week for G-Secs. Bids for T-Bills are collected from Monday to Tuesday and for Bonds from Tuesday to Thursday with cut-off time at 8 PM. Apply using your Zerodha account and the funds will be deducted from your trading balance. G-Secs will be credited to your demat upon successful allotment within 2 days and all interest payments will be credited to your bank account.

Head over to coin.zerodha.com/gsec and click on Invest now.

Place an order against the G-Sec of your choice. The minimum amount is Rs 10,000 and multiples of 10,000 up to Rs 2 crores can be applied at one time. 

Place orders for T-bills and Bonds

Ensure to have sufficient funds in the trading account on the bid closing or application date. 

Help spread the word on a much better alternative to bank fixed deposits. Based on the response we will start working on offering other instruments like corporate and tax-free bonds. Make sure to check out for taxation and more on varsity module on G-Secs. 

coin.zerodha.com/gsec

Happy investing,

Nithin Kamath

[email protected] Zerodha, working towards breaking all barriers that I personally faced as a retail trader for over a decade. Love playing poker, basketball, and guitar. “You don't have to be a hero to accomplish great things---to compete. You can just be an ordinary chap, sufficiently motivated to reach challenging goals.” - Edmund Hillary

153 comments

  1. Rajat says:

    Would you allow pledging of Gsecs for margin ?

    • Bhuvanesh says:

      Hey Rajat, working on it.

      • GAURAV SHARMA says:

        I think zerodha must provide margin by pledging against g sec otherwise it makes no sense that risk-averse people will take so much pain of opening demat account, placing order etc. just to take marginal benefit than FD especially in times when Auto sweep facility in banks provides FD returns with 100% liquidity.

    • Kushaldeep singh says:

      Kal kyun brokerage free trading session de raha Diwali ewe pe??????
      So dat u wanna make people wiped out easily??????

  2. Shyam says:

    Nice move. Is it possible to pledge the g-secs for collateral margin?

  3. Anurag Agrawal says:

    That’s great!!! economy finally moving to retail participation.

  4. Anand says:

    How is this income or loss treated for income tax purposes?

  5. hhlucky says:

    Looks good. What about charges and tax?

  6. Neeraj K says:

    Can The G-Secs bought in Demat be pledged for margin in trading account ? Just like shares, LiquidBees, MFs, etc.
    If yes, On FD there is NO haircut, i.e. 100% margin grranted. Presume no haircut in on G-Secs as well. Please confirm ?

    • Ash says:

      I do not think Zerodha allows pledging MFs as margins?

    • nabarun says:

      banks give 90 p.c margin on fd for loan.

    • Bhuvanesh says:

      Hey Neeraj, we are working on enabling pledging.

      • kishore says:

        Hi Bhuvanesh,

        We have been hearing from last 3-6 months that Zerodha is working on enabling Pledging on MF’s & now you have added G Sec’s as well, appreciate if you can inform all of us on the timelines, to keep you updates, lot of investors/traders are moving to different brokers due to this feature.

        We love trading with Zerodha but like to have pledging against MF’s, Liquid Funds & now G Sec’s so tell us the timelines. Thank You

  7. Ashutosh says:

    Zerodha is best …..

  8. Amer Zaidi says:

    Hi,

    Please provide details

  9. Tanuja Mishra says:

    Can Zerodha provide margin in Gsecs

  10. Urvij says:

    What is lock in period?

  11. Harshal Khichariya says:

    Great work ,👍👍👍
    Thats all we need

  12. Abhay says:

    Hi Nithin,

    Can we use the G-Secs as collateral with zerodha online?

  13. aneel m says:

    Awesome.
    So if i invest in 3 month tbill for 4 times a year, I make 24% a year?

  14. Rahul says:

    What is interest on bond security and t bill?

  15. Mehul Shah says:

    Very Good Team Zerodha.

    Thanks for serving us by offering products like this….😊

  16. Shiji says:

    Sir what is the benefits if share is hold long time
    How to work interest percentage

    • Bhuvanesh says:

      Hey Shiji, the advantage is that these securities are guaranteed by the government and you get assured interest. The interest rate differs across different securities. You can check the interest rate by logging in here: http://coin.zerodha.com/gsec. For example, this is the name of the security “7.72% GS 2055”. The first 3 digits denote the interest rate.

  17. ARUN KUMAR says:

    tell me about Taxation and unmatured withdraw

  18. VIJAY LALWANI says:

    What are the tax implications of a G-Sec? Is it as tax efficient as a conventional debt fund?

  19. Sandeep says:

    Looking for details (If possible with a example).. New to this..

  20. Rama says:

    Why only in coin zerodha?? Why not in kite

  21. Arup Das says:

    What will be brokerage and other redaction costs

  22. Arup Das says:

    What will be brokerage and other
    transaction costs

  23. Ashwin says:

    Awesome initiative Nithin. Let’s people invest safely directly on G-Secs. No more depending on 3rd parties and worry about commissions! You should introduce other instruments like corporate and tax-free bonds.

    • Bhuvanesh says:

      Hey Ashwin, this is just the first step to gauge the response, since these are the safest securities. But yeah, we do have plans to offer corporate bonds and tax-free bonds.

  24. Kaushik says:

    What about gold bonds issued by RBI can i invest in that also??

  25. TRV says:

    After bidding & buying, can we later sell them in secondary market?

    • Bhuvanesh says:

      Hey, these bonds aren’t listed on the secondary market yet. The exchanges have said that they will be listing these securities. But if you wish to sell, you can get in touch with us.

  26. Ash says:

    How is the taxation calculated?
    What is the penalty for early withdrawal?

  27. Ashwin says:

    What is the penalty for early withdrawal?

    • Bhuvanesh says:

      Hey Ashwin, there are no penalties involved if you wish to sell prematurely. You can get in touch with us and we’ll help you out.

  28. shripad kulkarni says:

    Sir, may I know about tax treatment of G-Sec? How is the repayment of interest & principal?

  29. Abhishek Rai says:

    How liquid are these G-Secs? And what is the settlement cycle?

    • Bhuvanesh says:

      Hey Abhishek, these securities aren’t listed on the secondary market yet. The exchanges have said that they will be listing these securities. But if you wish to sell, you can get in touch with us.

  30. Prakash Joshi says:

    Can I trade the T bills and Gsec bonds, if I am in need of cash? What will be the charges? i am really interested in moving my bank FDs to such type of investment. I am a senior citizen and hence I need liquidity as well.

    • Bhuvanesh says:

      Prakash, these securities aren’t listed on the secondary market yet, so you cannot trade them. The exchanges have said that they will be listing these securities soon. But if you wish to sell, you can get in touch with us.

      • Abhijit says:

        Once they are listed how the trading account will be used to sell them?

        Can we buy these from secondary market now if there are existing ones being sold?

      • Kushal says:

        Bhuvanesh, this is a great initiative! If I want to sell the bonds who do I contact? Can you share contact details? You will provide liquidity at what price? at the current market yield?

  31. S D says:

    Can G-Secs bought through zerodha be used as Margin for f&o trading?
    If not, then when will this start?

  32. ronit says:

    can we short it ? also

  33. G Kannan says:

    wow, simply amazing nithin sir. only you could do this first time in india. simply amazing.

    can I pledge this for trading margins?

  34. Ashish says:

    After gsec credit in my demat a/c, When and how can sell them.. Is there any fix tenure?

  35. Abhishek Kundan says:

    This is a great initiative for retail investors. Looking forward to have corporate debt instruments as well.

  36. rajesh says:

    What if I invest in Government sec and say I want to exit after a month, then whom do I sell to, plus would I get interest in proportionate days of investment for that period. Exit is more important than entry. Please clarify.

  37. Pritam Hait says:

    Plz make a video in Hindi in YouTube…that will be easy for understand…

  38. Sharad says:

    What will be the tax implication on the interest portion..??

  39. Ankur Bhargava says:

    Its a great move by Zerodha to bring all instruments available for trading under one common umbrella.

    Nice work

  40. Sameer says:

    Allowed for NRIs?

  41. Ratan says:

    Wow👌🏻 what an initiative team kudos, i find this best platform for investment s unlike other firms are charging more brokerage & hope brokerages @ zerodha wouldn’t go higher in future

  42. Aashish says:

    Is there a TDS on the interest earned?

  43. Augustus says:

    Good Work by Zerodha … Opening Gsec investing to retail population…

    Will Zerodha console capture the income earned through investing in Gsec (t-bills and bonds)

  44. Banibrata Chowdhury says:

    What about those situations when I need money? I can run to bank to borrow some with 1% higher interest rate against FD. What would happen if I need some urgent money?

    • Trdp says:

      I don’t think the bank would offer you a credit backed by a G-Sec collateral. Even if they were to offer such a credit, I reckon the G-Sec must be of short term.
      There’s another similar question I have: do I have to remain a Zerodha customer for as many years as my subscribed G-Sec?

    • Bhuvanesh says:

      Hey Banibrata, you can write to us at [email protected], if you wish to exit.

  45. Balaji says:

    Nice option . For bonds, Is interest annually or will be paid at maturity.

  46. Siva says:

    What’s the tax implications on investing in G-sec?

  47. Shivanand Vijay Tavakari says:

    This is best platform provide to G-sec buyers. Really done great job Thanks to ZERODHA Team.

  48. Deepesh Jain says:

    When will State developmental loans ( SDL) that provide higher interest than G-Sec would be available.

    • Bhuvanesh says:

      Hey Deepak, currently SDL’s aren’t available through non-competitive bidding. We’ll make them available when they are.

      • Ashish says:

        Can SDLs be purchased on Secondary market through access to NDS-OM. Without SDLs on offer pure G-Sec will not help retailers. It will be a good service to retailers if SDLs through Non-Competitive Bids may be allowed.

        regards

        Ashish

  49. Dahale says:

    will be happy if Zerodha , publishes its views/ terms on twitter/ blogs

  50. Sagar H R says:

    I’m an amateur investor and I’m not earning any other income as of now.
    So if I invest in these G-Secs and earn interest, how will it be taxed?

  51. Prakash Patil says:

    When will we get the interest paid?
    Weekly, monthly or yearly.

  52. Sashank says:

    If the growth rate for a 3 month t bill is 6.5% does it mean my money will increase by 6.5% for three months?
    I.e. is the growth percentage for the tbill period or annual?

  53. Abhishek says:

    I cannot recollect any broker, anywherein the world who offers this level of technology to retailers. Kudos. Keep going till you blow away ICICI from the top spot. Keep going further after that.

    Regards,
    Abhishek

  54. MITHUN NANDI says:

    I am not able to invest in Gsecs. Help me for this

    • Bhuvanesh says:

      Hey Mithun, what seems to be the issue? Just head over to http://coin.zerodha.com/gsec and place an order for the security you wish to invest in.

      • MITHUN NANDI says:

        When I login in coin it show me as below:

        Mutual Funds is not enabled on your account. The exchanges may take 24-48 hours from your account opening to activate your Mutual funds account.
        Please contact Zerodha support for further queries.
        Click here to logout completely from Zerodha Kite

  55. Kanwaljit says:

    If you could explain on each bond and t bill of what is 7.62%bond2025 on the below of every instruments then it will be easy to understand for investor to buy ….now there is simple grid over there and nothing explanation was there …how could I get to know what is indicative yield and what is the meaning of % written in bond name ….see you are doing good job …but think like layman who does not much about the financial instruments but want to save his money in good way .

    • Bhuvanesh says:

      Hey Kanwaljit, fair point. We’ll add this as an FAQ. So, to explain “7.50% GS 2034” 7.50% is the coupon (interest) which is paid semi-annually. 2034 is the maturity year of the bond.

  56. Kanwaljit says:

    If you could explain on each bond and t bill of what is 7.62%bond2025 on the below of every instruments then it will be easy to understand for investor to buy ….now there is simple grid over there and nothing explanation was there …how could I get to know what is indicative yield and what is the meaning of % written in bond name ….see you are doing good job …but think like layman who does not much about the financial instruments but want to save his money in good way …..

  57. Piyush says:

    Hi
    Idbi samruddhi platform does provide similar services but in select securities.
    Will you be giving the option to invest in all the securities notified for bidding by rbi or also on the secondary platform operated by ccil.
    Also it’s observed that entry can be easy in the gsec in small lots but in case of exit it becomes very difficult to sell.

    • Bhuvanesh says:

      Hey Piyush,
      1. Yes, all securities that are available for bidding in a given week will be available.
      2, CCIL NDS-OM isn’t available as of now.
      3. Theexcahnges have sadi that they’ll be listing these securities soon. In the meanwhile, you can write to usa t [email protected] if you wish to sell.

  58. Naveen Jain says:

    Can you please add a link on either coin or kite for the same.

  59. Nilesh Prajapati says:

    I want invest my fund and want to get regullar income from
    Pls guide me ..

    • Bhuvanesh says:

      Hey Nilesh, if you wish to invest for the short-term, then T-bills have maturities of 91 Days, 182 Days and 364 Days. What this means is that, if you buy a 91 Day T-bill at let’s say, Rs.98, it will mature at Rs.100 after 91 days. The Rs.2 will be your return. Bonds are for durations over 1 year. There are various bonds with maturities ranging from 1 to 40 years.

      if you buy a bond, you will receive the interest every 6 months to your bank account. The interest rates vary across bonds. I would suggest, you check out this chapter on Varsity: https://zerodha.com/varsity/chapter/government-securities/.

  60. Hemant Meena says:

    I applied for bond for 10000 rs. But my account debited by 10379 rs. Can you please explain ?

  61. Ashish says:

    Hello Zerodha,
    It’s really a great move. Zerodha keeps on surprising (delighting) it’s customers and create win-win situation.
    Really appreciate the efforts you and your team is taking !!!

    Regarding G-Sec, I have 2 questions :
    1. In case of emergency, how liquid are they ? ( For FD’s, some bank doesn’t allow to liquidate through E-Banking and one needs to visit the bank ). So how do G-Sec work in case of breaking / liquidating the investment before maturity ?
    2. How frequently is the interest paid on the investment ?

    • Bhuvanesh says:

      Hey Ashish, since these securities aren’t listed yet, selling won’t be immediate. You will have to get in touch with us and we’ll help you out. The sales will be through an off-market transaction. The other alternative is through IDBI Samriddhi.
      2. The interest is paid out semi-annually.

  62. Nishanth says:

    Interface says Currently no issue open. does this means this is only available on selected weeks?. I’m checking on monday

  63. MITHUN NANDI says:

    When I login in coin it show me as below:

    Mutual Funds is not enabled on your account. The exchanges may take 24-48 hours from your account opening to activate your Mutual funds account.
    Please contact Zerodha support for further queries.
    Click here to logout completely from Zerodha Kite

  64. PM says:

    I subscribed for 182-day T-bill on 16-Oct-2018. However, I was issued a 364-day Tbill. I contacted support.zerodha.com to explain the discrepancy, but they are unable to understand the issue. Please help.

  65. Narayanan Alaghappan says:

    Hi Team,

    We subscribed for the bonds but where do we see the allotment once confirmed.

    Regards,
    Narayanan

  66. Kishor kumar Mahanta says:

    May I talk to ur customer care reprasentive….give me number plz

  67. Kishor kumar Mahanta says:

    May I talk to ur customer care reprasentive….give me number plz
    Plz contact me

  68. Ronak says:

    Today is Tuesday. Since morning I am waiting for the Bonds to show up on the GSec page but at almost noon, no luck yet. Can you please clarify the timings of when these open and also some clarity around what are the interest payment dates please….

  69. Nakul Saxena says:

    Think you have a great product here on G-sec buying, but a few more options to buy various securtites will help. Also think you need to have modules on Gsec basic and advance enabling people like me to better understand and therefore trade more in the same.

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