Ever thought of buying government bonds and are not sure on how to proceed. How to buy government bonds is indeed a tricky position and lot of permutations and combinations come into play. The Reserve Bank of India issues GOI bonds which are issued from time to time by the government, but for the citizens to hold these bonds they must hold a valid Demat account which are normally held through the electronic forms.
The governments are issued by the government with the promise to pay a specified sum of money at face value on a particular date. In addition to this one is entitled to periodic interest payments as well. The government bonds are influenced to a great extent on the currency which is operating in the country. The first government bond was introduced way back in 1963 by the Bank of England for funding wars as other forms of government funding. Later the various European governments began to issue government bonds with no cap on the maturity framework. Over the course of time How to buy government bonds involves a lot of research as well. It needs to be kept in mind that the form of bond determines the outcome of purchase of it and one has to be absolutely clear on how to buy government bonds in the first place. In a way they are debt obligations which are issued by federal governments.
Traditionally government bonds can be purchased in a couple of forms. They can be brought in the primary as well as the secondary market. In the primary market they can be brought through auctions as well as the bids and this method is commonly referred to as non competiting bids. The message from the RBI regarding such mechanisms is pretty clear as it acts as a guide to the retail investors who lack the knowledge as well as the skill to participate in the process of auction and this was introduced way back in the year 2002. This is open to individuals, financial institutions, companies, provident funds along with trusts. In each and every auction of such undated securities, a maximum of 5 % of such amount is reserved for such competitive bids.
If one wants to buy government bonds in the primary market, they have to first approach a primary dealer or the bank in question. In this close to 20 such dealers which are approved by the RBI and it is mentioned in their official website as well. The process is pretty simple as the banks or the primary dealers place the bids on the behalf of the investors. After the bid process and the auction formalities the bonds are transferred in the name of the investors. Though it must be mentioned that the investor needs to make an upfront payment in this regard.