NRI Investments in Government Securities in India

NRI Investments in Government Securities in India

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Key Takeaways

For NRIs interested in investing in India, Government Securities are ideal investment instruments. You can invest in them directly through your NRE or NRO account. Under the Fully Accessible Route, the RBI allows you to invest in securities with no upper investment limits. G-secs are safe, government-backed instruments that are ideal for conservative investors.

Introduction

As an NRI, you get the unique opportunity to live and earn in a foreign land, create savings in foreign currencies and invest your money in your country of residence and your home country. Your NRI status opens you up to a wide range of investment options, which can incredibly advantageous. If you are sorted with your investments abroad and are looking for some opportunities in India, then you can consider investing in Government Securities in your home country. Here is the ultimate guide to investment for NRIs in India.

What are Government Securities?

Government securities are those investment vehicles issued by the State and Central Government of India. These securities are issued with the aim of funding various projects, including infrastructure and development work in India. The funds raised from the investments are also used in balancing the fiscal deficit of the country. When you invest in Government Securities, you earn fixed or floating interest on your investment (known as coupon rate). The interest is paid out at regular intervals. Since the government backs these investments, they are considered incredibly safe, and you do not have to worry about losing your capital.

Types of Government Securities

Broadly, Government Securities are categorised into three types:

  1. Government dated securities with tenures of 5 to 40 years created for development and fiscal deficit management purposes.
  2. Treasury bills with tenures of up to 1 year, which are issued at discounted rates and redeemable at face value.
  3. Cash Management bills with tenures of up to 91 days, which help the government manage temporary cash flows.

Investing in Government Securities as an NRI – The Procedure

The process of NRI investment in government securities in India is quite simple. Here is what you need to do.

  1. First, you need to submit your application through a designated and authorised dealer bank branch. Note that while most banks allow NRIs to invest in India, not all branches of the same bank may offer this facility. Your home branch can refer you to an authorised branch.
  2. Since Government Securities are typically issued on specific dates, your bank has to apply to the RBI or other institutions that deal in Government Securities during the banking hours on those specified dates.
  3. Next, you need to choose your preferred G-Sec instrument to invest in and determine the sums you wish to invest. The minimum investment amount for Government Securities for NRIs is INR 10,000 and multiples of INR 10,000 after that.
  4. You can now use your NRE or NRO bank account to pay for the securities. Alternatively, you can issue a cheque or banker’s pay order, drawn in favour of the RBI or RBI specified offices, as applicable.

Depending on your chosen payment method, you will get a document certifying your proof of investment. You can hold the securities in your DEMAT account or physical form (as certificates), per your preference.

You will receive interest payments on your investments on a half-yearly basis. The interest will be directly credited into your NRE or NRO account, per your request.

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Issuance of Government Securities

The Government of India typically issues the securities in three ways: through an auction, through pre-fixed coupon rates, and through tap sales. Of these, auctioning is the most popular method of issuing securities. The RBI releases a notification on its website each time it releases a bond.

As an NRI, you can approach your bank with which you have your NRI account to know more about participating in G-sec auctions. You may participate in the auction under the competitive bidding category via your authorised bank branch or a primary dealer. The auction itself is categorised into two types as under:

  1. Price-based Auction

    The price-based auction method is typically used for re-issuing government securities. Here, bids are entertained in terms of price. A successful bid is one that is at par or above the cut-off price.

  2. Yield-based Auction

    A yield-based auction is one in which the government issues new or fresh government securities. In this auction, bids are entertained in terms of the security yield, up to 2 decimals. A successful bid is one that is at par or below the cut-off yield.

    A crucial thing to note for investment for NRI in India in Government Securities is that dated securities are auctioned by the government on Fridays, whereas Treasury Bills are auctioned on Wednesdays. Also, auctioned securities are settled in T+1 days.

NRI Investment in Government Securities

The RBI has created a separate channel called the ‘Fully Accessible Route’ or FAR that enables investment for NRIs in India without any upper limit in specific securities. However, the NRI must undertake the investments jointly with domestic investors. Under FAR, NRIs can invest in the below securities without any ceiling on investment amounts.

ISIN

Security

IN0020190396

06.18% GS 2024

IN0020180488

07.32% GS 2024

IN0020190362

06.45% GS 2029

IN0020180454

07.26% GS 2029

IN0020190032

07.72% GS 2049

IN0020200054

07.16% GS 2050

IN0020200070

05.79% GS 2030

IN0020200112

05.22% GS 2025

Besides these above-mentioned Government Securities, any new G-secs with tenures of 5, 10, and 30 years will be designated as specified securities and will come under the purview of FAR with no upper limits on investment amounts. As an NRI, if you wish to invest in these securities, you can approach your bank.

How can NRIs Benefit from Investing in Government Securities in India?

NRI investment in Government Securities proves beneficial because:

  • Government Securities are safe and risk-free investments that do not carry any risk of default.
  • They are backed by the government and come with a payback guarantee.
  • You can choose your preferred investment tenure, ranging from 91 days to 40 years.
  • G-sec investments help you diversify your investment portfolio while mitigating the risks associated with the investment.

Final Note

If you wish to invest in government-backed, risk-free instruments in India, Government Securities are ideal. These investments are excellent for conservative investors with a lower risk appetite. By investing in G-secs, you are not only ensuring that your investment is safe; you are also contributing to the development of your homeland.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.

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