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Investing in government securities has long remained an area of interest for a niche array of investors, especially large fund houses. Market participants who are inclined to invest in debt securities for a fixed income but do not want to take high risks associated with private lenders seek government-issued securities. However, investing in these hasn’t been an easy task, at least as easy as investing in the equity markets, all thanks to relatively lesser developed debt market infrastructure in the country.
The NSE is looking to ease the trading/investing in these government-issued securities and would now be increasing the listing of SDLs (State Development Loans) and T-Bills (Treasury Bills, which is a money market instrument) on its platform from 2 September 2022. This move is a key step toward increasing participation and liquidity in the debt market. So what are these 2 instruments that you can trade/invest in directly from the NSE?
State Development Loans
A State Development Loan (SDL) is simply a type of loan that the state government issues to fund its expenses. These debt instruments are a way to raise money to help the state government to ramp up its revenue to meet budgetary expenditures. Just like other debt instruments, investors get a fixed coupon rate till maturity and the full repayment of the principal amount on maturity. The interest rate on these SDLs depends on the fiscal strength of the state which reflects the inherent risks associated with SDLs.
Treasury Bills
Treasury Bills (T-Bills) are short-term (less than 1 year of maturity) money market instruments issued by the government of India and are generally issued for three specific maturities – 91 days, 182 days, and 364 days. These securities serve the immediate need for funds for the central government and because its GOI issued, these debt securities have almost negligible credit risk/risk of default. Unlike SDLs, there is no interest paid on T-Bills. They are issued at a discounted price to the face value but are redeemed at the face value at maturity. The difference between the discounted price and the face value is the actual return on these instruments.
Image Description: List of SDLs & T-Bills to be listed on the NSE from 2 September 2022
Image Source: NSE
There is a specific list of such instruments that would be listed on the NSE from tomorrow which includes SDLs ranging from maturities – 2030 to 2042 and T-Bills of all three maturities – 1 December 2022 (91 days), 2 March 2023 (182 days) and 31 August 2023 (364 days). Find attached (above) the full list of these securities with their symbol, coupon rate, ISIN code, etc.
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