Dated Government securities are long term securities or bonds of the government that carries a fixed or floating coupon (interest rate). Securities are issued by the government (centre or state) for mobilizing funds. Mostly financing the fiscal deficit is the most important purpose for issuing the dated securities. The remuneration for buying the dated securities is the interest payment which are called coupon. The interest payment is fixed and is a percentage of the face value of the security. Interest is paid at regular intervals (usually half-yearly). The tenor of dated securities can be up to 30 years. But the most common tenure is five year and ten year.
Why they are called as dated securities?
The securities are named as dated securities because of the date of maturity expressed. For example, a January 1st, 2018 security will mature on January 1st, 2018. Its interest may be expressed as say, 7.97% as the coupon rate.
Securities are held mostly by commercial banks (in the form of SLR) and other financial institutions. The government securities are tradable in the stock market.
Role of RBI in the issue of dated securities
On behalf of the government, the RBI issue the securities, pays interest and give backs money at the maturity period. RBI’s public debt office manage all these activities. The RBI sells securities through auction through the Negotiated Dealing System (NDS) and they are bought by institutions known as primary dealers (Primary dealers are mostly commercial banks, insurance companies etc).
What is the difference between dated securities and treasury bills?
Dated securities are long term instruments issued by the government for borrowing. Short term instruments are treasury bills that have a maturity of less than one year (91 days, 182 days (now not issued) and 364 days). For treasury bills, there is no interest payments but the bill is obtained at a discount. For example, for a Rs 100 treasury bill can be availed at Rs 97.5 rupees and at the maturity date, Rs 100 will be paid to the buyer.