About Non-Competitive Bidding in G-Sec, SDL & T-bill
Government of India securities (G-sec), State Development Loans (SDL) and Treasury Bills (T-Bills are issued in the primary market through auctions conducted by Reserve Bank of India (RBI). An investor, depending upon eligibility, may bid in an auction under Competitive Bidding or Non-Competitive Bidding.
Institutional investors such as banks, financial institutions, primary dealers, mutual funds, and insurance companies are generally eligible to make competitive bids.
To encourage retail investors in G-sec, SDL and T-Bills, the facility of non-competitive bidding (NCB) has been introduced. Under the scheme, eligible retail investors apply for a certain amount of securities in an auction without mentioning price/yield. Such bidders are allotted securities at the weighted average price/yield of the auction.
RBI conducts auction usually every week to issue G-sec, SDL and T-Bills. The details of upcoming auction are made available by NSE.
Investing in Government Securities
Eligible retail investors necessarily have to participate in non-competitive bidding (NCB) at RBI through an aggregator or facilitator. NSE acts as facilitator in NCB to aggregate the bids received from the retail investors and submits a single bid at RBI.
Retail investors have multiple channels through which they can place their bids. Retail investors can place their bids through trading members of NSE or using the NSE goBID mobile app/web platform.
Government Securities (G-Sec) are issued by the Central Government. It acknowledges the Government's debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities. G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
About State Development Loan - State Development Loans (SDL) are securities issued through RBI on behalf of State Governments to meet their borrowing requirements and form part of the government securities market. Securities are largely issued in the range of 3 year to 35 year maturities with majority of issuances taking place in 10 year maturity segment (to be included)