| Definition |
Long-term debt instruments issued by the government to raise funds, with maturity typically over one year. |
Short-term debt instruments issued by the government, with maturity of less than one year. |
| Tenure |
Medium to long-term (generally 5 to 40 years). |
Short-term (91 days, 182 days, or 364 days). |
| Interest Payment |
Pays periodic (usually semi-annual) interest called coupon. |
No periodic interest; issued at discount and redeemed at face value. |
| Issuer |
Central or state governments. |
Only central government. |
| Return Type |
Coupon-bearing return. |
Discount-based return. |
| Risk Level |
Very low risk (sovereign guarantee). |
Extremely low risk (backed by government). |
| Tradability |
Tradable in secondary markets. |
Highly liquid and tradable in money markets. |
| Minimum Investment |
Generally ₹10,000 or as prescribed by RBI. |
Starts from ₹10,000 (varies per issuance). |
| Investment Horizon |
Suitable for long-term investors seeking regular income. |
Ideal for short-term investors and cash management. |
| Liquidity |
Moderately liquid depending on bond type. |
Highly liquid due to short maturity and demand. |
| Usage |
Used to finance long-term infrastructure and development projects. |
Used for managing short-term government borrowing needs. |
| Taxation |
Interest is taxable as income; capital gains may apply. |
Discount (gain) is considered interest income and is taxable. |
| Market |
Capital market instruments. |
Money market instruments. |
| Frequency of Issue |
Issued as per fiscal schedule, often through auctions. |
Issued weekly by RBI. |
| Example |
10-Year Government Bond at 7.26% coupon. |
91-Day Treasury Bill issued at ₹97.5, redeemed at ₹100. |
| Income Predictability |
Predictable due to fixed coupon payments. |
Known return at maturity but no regular income. |
| Risk of Capital Loss |
Possible if sold before maturity at lower market price. |
Minimal due to short tenure and high liquidity. |
| Who Buys |
Retail investors, banks, insurance firms, pension funds. |
Banks, mutual funds, corporates, and institutions. |
| Inflation Protection |
Some may be linked to inflation; others are fixed rate. |
No inflation protection. |
| Impact on Budget |
Used for financing fiscal deficits. |
Used for cash flow and liquidity management. |
| Form of Issue |
Issued in demat form via auction. |
Issued in demat form at a discount. |
| Eligibility for SLR |
Eligible for Statutory Liquidity Ratio (SLR) requirements. |
Not eligible for SLR. |
Government Bonds vs Treasury Bills