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8/2/2019 Forex Banking

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S U B M I T T E D B Y : -

N A R E N D E R J A K H A R

D . V A G A D

GOVERNMENT SECURITIES

MARKET


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GOVERNMENT SECURITIES MARKET

The government securities market is at the core of financial markets inmost countries. It deals with tradable debt instruments issued by the

Government for meeting its financing requirements.

Government security (G-Sec) means a security created and issued by

the Government for the purpose of raising a public loan or any other

purpose as notified by the Government in the Official Gazette and

having one of the following forms.

a Government Promissory Note (GPN) payable to or to the order of a

certain person

a bearer bond payable to a bearer

a stock

a bond held in a Bond Ledger Account (BLA).


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Nature and organizations of GSM

The supply of govt. securities stems from issue of govt.

marketable debt.

These securities are issued by the

central govt.

State govt.

Semi-govt. authorities


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GSs as a unique and important financial instrument

Government securities , unlike the other instruments (except TBs)

is held by the central bank of the country.

It also working with the techniques(open market operations ,

statutory liquidity ratio) of monetary control of the central bank.

Unlike others its helpful in implementing of fiscal policy of govt.

Govt. securities are free of default risk or credit risk.

GS provides certainty of capital value not only at maturity but

also prior of maturity.


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Denomination

The govt. securities were normally issued In the denomination of

Rs. 100 till the middle of 1918.

Now it is Rs. 1000.(increased in recent passed year)

The rate of interest on these securities is relatively lower because

they are being liquid and safe.


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interest

Interest on these securities is payable half yearly.

The value of investment in securities and other investments

specified in to wealth tax is exempt from wealth tax up to a limit.


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liquidity

There is no active market particularly in semi govt. Securities market.

There is no need for underwriting the sale of sale of central and state

govt. securities.

The fact is that RBI is always ready to buy the unsubscribed part ofany loan issued amounts to underwriting of these issue.

GS are liquid and safe.


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Forms of GS

There are 3 forms of GS

1-Inscribed stock or stock certificate.

2-promissry note.

3-bearer bond.


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Mode of issue of GS


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Role of brokers and dealers

Broker and dealer are mediator b/w the buyer and seller.

dealers act as jobbers.

Provides information about the market condition to buyer and the

seller .

They also keep in touch with RBI ,Banks & other institution as a result

of their activities gilt edged securities enjoyed the benefit of extremely

fine quotation.

Brokers and dealers provides knowledge to investor that particular

govt. securities should be hold or note.


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Purpose of securities issue

The issue of securities may be undertaken for

(A) Refunding

(B) Advance refunding

(C) Cash financing


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Role of RBI

provide the rules and regulation to all banks.

In the switch transactions RBI being the middle party.

RBI fixes the annual quota based on the size of the bank.

RBI purchase securities out of the surplus funds of IDBI , EXIMBANK OR NABARD under special arrangement


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