--> Best Online Share Trading Company in Indore

About Us
Help Desk
Contact Us
Sign In
  • Home
  • blogs
  • Ways to invest in Government Bonds in India.

Ways to invest in Government Bonds in India.

Government Bonds in India

So, what are these fascinating Government Bonds? Well, Investing in government bonds is often considered one of the safest and most reliable ways to grow your wealth. The securities represent loans made by individuals to the government, and in return, you receive periodic interest payments along with the principal amount when the bond matures.


Why should you invest in Government Bonds?

Government bonds, also known as G-Secs, are debt instruments issued by the Indian government to raise funds. They are low-risk investments due to the government's backing schemes, which makes them an attractive option for conservative investors. Government bonds come with fixed tenures ranging from a few years to several decades. Plus, they offer regular interest payments and offers a fixed maturity period.


What are the ways to buy government bonds?

So you want to invest in government bonds? Well, lucky for you, there are a few ways you can go about it. Let's take a look.

  1. Primary Market: You can purchase government bonds directly from the primary market through authorized banks. They offer a range of government bonds that you can choose from. The Central and State Governments of India conduct auctions for new bond issuances in India. To participate, you must open a gilt account with an RBI-approved bank or financial institution.
  2. Secondary Market: Government bonds can also be bought and sold on the secondary market, just like stocks. Here, you can purchase bonds from other investors. You'll need a Demat account and a trading account with a registered stockbroker to do this.
  3. Online Platform: ​Now, if you're more of a tech-savvy investor, you might prefer to invest through online platforms. Just hop on the internet, find a trustworthy platform, and start buying those government bonds from the comfort of your own home.


​So, whether you prefer the traditional route of banks, the charm of stock brokers, or the convenience of online platforms, there's a way for everyone to get their hands on those government bonds. 


Types of Government Bonds Offered in India

1. Sovereign Gold Bonds (SGBs): These bonds allow you to invest in gold without holding physical gold. They're denominated in grams of gold and offer a way to benefit from gold price movements.

2. Zero-Coupon Bonds: These bonds don't pay periodic interest. Instead, they're sold at a discount and pay the face value at maturity. The difference between the purchase price and face value is your return.

3. Inflation-Indexed Bonds: These bonds are designed to protect your investment from the eroding effects of inflation. They adjust their value based on changes in the inflation rate, ensuring your purchasing power remains intact.

4. 7.75% Government of India Savings Bond: These bonds offer a fixed interest rate, currently at 7.75%. The Indian government issues them and provide a stable source of income.

5. Floating Rate Bonds (FRBs): These bonds have an interest rate that adjusts periodically based on a benchmark interest rate. They can provide protection against rising interest rates.

6. Fixed-Rate Bonds: Unlike FRBs, these bonds offer a fixed interest rate throughout their term. This predictability can be attractive to investors seeking stable returns.

7. Guaranteed by the Indian Government: Many government bonds come with the assurance that the Indian government stands behind them, making them a very safe investment.


Best Government Securities to Buy in India

Government securities in India encompass a diverse range of options beyond the conventional G-Secs, each catering to specific investment objectives.

  • Sovereign Gold Bonds (SGBs): Sovereign Gold Bonds offer an innovative avenue for those looking to diversify their investments beyond traditional G-Secs. Denominated in grams of gold, these bonds provide a unique opportunity to invest in the precious metal. Besides the potential for capital appreciation, SGBs also offer investors the benefit of fixed interest payments, effectively combining the security of government bonds with the allure of gold.


  • National Savings Certificates (NSC): Issued by the post office, National Savings Certificates are a secure and long-term investment option. They come with the added advantage of tax benefits under Section 80C of the Income Tax Act, making them a popular choice among risk-averse investors. NSCs offer a fixed interest rate and a defined maturity period, making them suitable for those seeking stable returns over the long haul.


  • Public Provident Fund (PPF): Although not a conventional bond, the Public Provident Fund is a favoured government-backed savings scheme among Indian investors. PPF offers an attractive combination of tax benefits and competitive interest rates. With a long-term investment horizon, it serves as a reliable means to accumulate wealth for various financial goals.


  • Other Government Securities: In addition to the options mentioned above, government securities also come in various forms, such as Dated Government Securities (DTCs), State Development Loans (SDLs), and Treasury Bills (T-bills). Each of these instruments caters to distinct investment needs and preferences. DTCs, for instance, are long-term bonds with fixed interest rates, state governments issue SDLs, and T-bills offer short-term, highly liquid investment opportunities.


Advantages of Investing in Government Bonds

  1. Safety and Reliability: Government bonds, especially those issued by the Indian government, are considered one of the safest investment options. The government is unlikely to default on its debt obligations, providing investors with a high level of security.
  2. Fixed Income: Government bonds offer a predictable and fixed interest income, making them suitable for individuals looking for stable investment returns.
  3. Tax Benefits: Some government bonds, such as the Sovereign Gold Bond (SGB), offer tax benefits like exemption from capital gains tax upon maturity.
  4. Liquidity: Government bonds are relatively liquid and can be sold in the secondary market if needed before maturity.
  5. Regular Interest Payments: Many government bonds pay periodic interest, providing investors with a regular income stream.


Disadvantage of Investing in Government Bonds

  1. Lower Returns: Government bonds typically offer lower returns compared to riskier investment options like stocks or corporate bonds. This can be a disadvantage for investors seeking higher yields.
  2. Inflation Risk: Government bonds may not keep pace with inflation, leading to a decrease in purchasing power over time. This is especially relevant for long-term bonds.
  3. Lock-in Period: Some government bonds have a lock-in period, restricting liquidity for a specified period.
  4. Market Fluctuations: Prices of government bonds can be influenced by market sentiment, economic conditions, and global factors, leading to fluctuations in their market value.



Government bonds in India present a secure and reliable means of investment. They offer a stable source of income and the backing of the government, making bonds an attractive option for those seeking safety in their investments.Whether you opt for investment via the primary market, secondary market, or online platforms, government bonds present an opportunity to diversify your investment portfolio.So, take advantage of these opportunities to grow wealth while ensuring financial security.


Related Blogs

Issued in the interest of investors: Prevent Unauthorised transactions in your trading and Demat account. Update your mobile numbers/email IDs with Tradingbells. Receive alerts and information of all debit and other important transactions in your trading and Demat account directly from Exchange/Depository on your mobile/email at the end of the day. KYC is a onetime exercise while dealing in securities markets. Once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary.

No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries of refund as money remains in investor's account.

2021-22, TradingBells All rights reserved