DEPARTMENT OF HUMANITIES & SCIENCES @MRCET (EAMCET CODE:MLRD) Page 46
are attached to the bond. The interest is paid to the holder of the coupon and the bond is
discharged on the due date of the debt to which it relates by physical presentation of the
bearer. A change of ownership is effected by simple delivery of bonds by the transferor to
the transferee.
Among the three forms of government securities, the stock certificates are most
advantageous from the point of view of security and convenience of bid holders of
government debt. As between PN and bearer bonds, the former is more secure while the
latter is more convenient to transfer and getting interest and repayment with the least
difficulty. problems involved in respect of transferability and negotiability. Stock
certificates are generally bought by investors like LIC, PF, etc., while banks prefer PNs.
As regards mode of distribution of g-securities, these securities are distributed through
competitive public auctions. The conventional auctions of g-securities follow multiple
price auction system for issuance of conventional securities and uniform price auction
system for securities with special features such as inflation-indexed bonds where there is
market uncertainty.
Most countries adopt a system of Primary Dealers (PDs) to ensure that auctions are well-
bid. PDs also act as a regular source of liquidity in the secondary market and provide
useful information to public debt managers on market developments and debt management
issues. Further, competition among PDs facilitates efficient price discovery in the g-
securities market.
7. Regarding the maturity structure of g-securities traded in the market, it has been
observed that depending on the funds requirements of the government, securities of
different maturities ranging from short-term to long-term are issued. Governments issue
securities with maturities spanning from less than a year to a very long-term stretching up
to 50 years. Typically, securities of short-term maturities up to one year, viz., Treasury
Bills, form a part of the money market and facilitate the government's cash management
operations. Bonds having maturities of more than one year facilitate the government's
medium to long-term financial requirements.
8. The government securities in India are ordinarily issued in the denominations of ` 100
and ` 1000. Earlier, the face value of the security was ` 100. But after 1985, the
denomination was raised to ` 1, 000.
9. As for interest on government securities, it is payable half-yearly and is exempt from
income tax subject to a limit. The value of investments in these securities and other
investment specified in the Wealth Tax Act is exempt from wealth tax up to a limit.
10. As regards participants in the government securities market, central government, state
governments, semi-government authorities, e.g., city governments and municipalities,
autonomous institutions such as metropolitan authorities, port trusts, improvement of
developments trusts, state electricity boards, PSUs and other government agencies like
IFCI, NABARD, SIDCs, housing boards, etc., represent suppliers of the market while the