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Banking & RBI

Government securities: G-secs, T-bills and SDLs

The bonds and bills through which the Centre and States borrow, managed by the RBI; exams ask about their types, auctions and the price-yield link.

Pareto Academy · updated 26 October 2026

At a glance

A government security (G-sec) is a tradeable debt instrument issued by the Central or a State government to borrow money. The Centre issues short-term Treasury bills and long-term dated securities; States issue State Development Loans (SDLs). The RBI runs the auctions and manages this debt, and banks hold large amounts of G-secs to meet their SLR requirement.

Key facts

  • Legal framework: Government Securities Act, 2006, and the Public Debt rules made under it
  • Debt manager: RBI, for the Centre under Section 21 and for States by agreement under Section 21A of the RBI Act, 1934
  • Treasury bills: Centre only; 91, 182 and 364 days; issued at a discount and redeemed at face value
  • Cash Management Bills (CMBs): very short T-bill-like paper (under 91 days) for temporary cash mismatches
  • Dated securities: fixed or floating coupon, paid half-yearly; tenors so far up to 50 years
  • SDLs: dated bonds of State governments; also SLR-eligible
  • States' borrowing limit: Article 293; a State owing money to the Centre needs its consent (Article 293(3))
  • Auction platform: RBI's E-Kuber; secondary trading on NDS-OM
  • Retail access: RBI Retail Direct, launched 12 November 2021
  • Current 10-year benchmark: 6.94% GS 2036 (October 2026)

How it works

Issuance. The Centre announces a half-yearly borrowing calendar and the RBI holds weekly auctions (T-bills every week, dated securities on most Fridays). Bids can be competitive (banks, PDs, institutions) or non-competitive (small investors, who get the cut-off price). Primary Dealers underwrite auctions so that they do not fail. States follow a quarterly indicative calendar.

Price and yield. A bond's coupon is fixed, so when market interest rates rise its price falls until the yield matches the market; when rates fall, the price rises. Rising yields therefore mean mark-to-market losses for banks holding G-secs.

Type Issuer Tenor Interest
T-bill Centre 91/182/364 days None; issued at discount
CMB Centre Under 91 days Discount
Dated G-sec Centre Usually 2–50 years Coupon, half-yearly
SDL State/UT Usually 3–30 years Coupon, half-yearly

Liquidity link. Through open market operations (OMOs) the RBI buys G-secs to inject rupees or sells them to drain rupees from the banking system.

Global investors. Bonds under the Fully Accessible Route (FAR, 2020) have no foreign-investment limit. JP Morgan added them to its GBI-EM index from 28 June 2024 and Bloomberg to its EM local-currency index from January 2025.

Recent developments

  • 23 Oct 2026: The 10-year G-sec yield closed at about 7.47%, its highest since March 2023 and up about 78 bps in four months, as crude stayed high and markets expected more rate hikes after the 7 October repo hike to 5.50%.
  • 13 Oct 2026: The RBI sold ₹25,000 crore of G-secs in an OMO auction (cut-off yields 7.14%–7.39%) to drain liquidity.
  • 1 Oct 2026: States' Q3 FY27 borrowing calendar was set at ₹3,60,820 crore. The Benchmark Issuance Strategy for SDLs, piloted with nine States in Q1, now covers 24 States and 2 UTs.

Exam traps

  • T-bills are issued only by the Centre; States do not issue T-bills.
  • T-bills carry no coupon: the return is the gap between the discounted issue price and face value.
  • Price and yield move in opposite directions; "yields rose" means "bond prices fell".
  • OMO sale = liquidity absorbed; OMO purchase = liquidity injected.
  • CMBs are not the same as T-bills: they have no fixed tenor and are issued only as needed.

Quick check

  • Q: What are the three T-bill tenors? A: 91, 182 and 364 days.
  • Q: Which article lets the Centre control borrowing by an indebted State? A: Article 293(3).
  • Q: If the RBI sells G-secs through an OMO, what happens to liquidity? A: It falls (rupees are absorbed).

Further reading

Sources

In the news

Every time this topic has appeared in our current affairs, newest first:

  1. 26 October 202610-year G-sec yield climbs to a three-year high
  2. Week of 8–14 October 2026RBI sells ₹25,000 crore of government bonds in an OMO to drain liquidity
  3. Week of 1–7 October 2026States to borrow ₹3.61 lakh crore in October–December; benchmark issuance widened