A government bond is referred to a debt instrument which is issued by Central and State Governments of India. More often not, issuance of these bonds take place when issuing body (Central or State governments) sees liquidity crisis and needs funds for infrastructure development or any other purpose focused towards economic development.
According to Securities and Exchange Board of India (SEBI), AIFs can be divided into 3 categories:
Government bond in India is a contract between issuer and investor. Under this, issuer guarantees interest earnings on face value of the bonds which are held by investors. Apart from these interest payments, repayment of the principal value is also guaranteed on a stipulated date. Government Bonds in India fall under a category of government securities (G-Sec). Such debt instruments are principally long-term investment tools issued for periods that range from 5-40 years. Government bonds can be issued by both Central and State governments of India.
Government bonds which are issued by State Governments are called State Development Loans (SDLs). Earlier, most G-Secs were issued to large and renowned investors, including companies and commercial banks. Nowadays, GOI has made government securities available to smaller investors including individual investors, co-operative banks, etc