6.67% Government Securities Bonds of 2050 [Dec-20 issue details]
GOI – G-Sec Bonds of 2050 (re-issue) would open for subscription on 1st December, 2020. Retail investors can invest in such bonds to get guaranteed fixed income for the long term of 30 years. Majority of banks would issue fixed deposit for 10 years. Some banks would issue for beyond 10 years with a specific rate of interest. G-Sec bonds are issued for long term of 30 years with a fixed rate of interest, hence investors might get tempted to invest in such schemes. Should you invest in Government Securities Bonds of 2050 of December, 2020 issue?
Also Read: 5 Smallcap Mutual Funds with 1 Year return up to 60%
Details of Government Securities Bonds of 2050 of Dec-20 issue
Here are the issue details of G-Sec bonds 2050 of 30 years tenure.
- Bidding would start on 1st December, 2020
- Bidding would end on 3rd December, 2020
- RBI would auction these bonds on 4th December, 2020
- RBI would settle for successful bidders by 7th December, 2020
- Issue size is Rs 5,000 Crores
- The symbol for this issue is 667GS2050A. Security name is 6.67% GS 2050 and ISIN number is IN0020200252
- If RBI allots you these bonds in auction, you would get these bonds in your demat account.
- These bonds have a maturity period of 30 years.
- There is no need to show a life certificate (the way we have for pension schemes) in this scheme to get interest every year.
- The face value of the bond is Rs 100.
- The bidding price is Rs 107 per bond.
- Interest payable is 6.67% per annum on face value of the bond. Such interest received from G-Sec bonds are taxable. One needs to show them as income from other sources and pay income tax as per income tax slab applicable to them.
- At maturity the principal amount of Rs 100 per bond would be paid back to investor / nominee.
- Retail investors can invest minimum of Rs 10,000 and maximum of Rs 2 Crores.
- More information can be obtained at this NSE link
How to invest in these G-Sec bonds of 2050?
One can invest them at NSEGOBid platform of NSE.
Step-1: Login to NSEGoBid platform
If you do not have an account yet, you can sign up. Use the same above link for new users sign-up
Step-2: Select T-Bill/Bond available for subscription
Step-3: Make Online Payment from Bank Account Linked to Demat Account
Step-4: Receive Bonds directly in your Demat Account. In case of non allotment, you would get a refund to your demat linked bank account.
How can we sell these G-Sec Bonds?
These bonds would have a maturity period of 30 years and maturity amount would be paid back to demat linked bank account. However, if one wants to sell these bonds before maturity, they should check with their demat account broker. Demat account broker should provide the option on their platform to sell G-Sec bonds. If there are buyers and price matched (buyer agreeing to buy at a price which seller is willing to sell or vice versa) then one can sell them. Otherwise, one can consider these as illiquid investments.
Reasons to invest in G-Sec Bonds of 2050
1) Investors can get a fixed interest of 6.67% if the allotment happens to successful investors.
2) Investors can lock their money for long term of 30 years and get fixed income with 6.67% interest rates.
3) Since these bonds are held in demat form, there is no TDS.
4) There is no default risk as these are issued by Govt of India.
Reasons NOT to invest in G-Sec Bonds of 2050
1) While you would bid for G-Sec bonds, you might not get allotment if there are more bidders.
2) These are G-Sec Bonds which have low liquidity, but has a high maturity period of 30 years. There are better schemes like RBI Floating rate bonds where there is low liquidity, but maturity is 7 years.
3) The effective yield would be at 6.23% as the bond is available at a premium of Rs 107 and not Rs 100 (6.67% / 107 x 100).
4) Future G-Sec bonds can have higher interest rates.
5) There are better investment options that can provide higher returns in the long term of 30 years.
Alternatives to G-Sec Bonds of 2050
This is not comprehensive list, but can give an idea if you are looking for some alternative options.
1) Since the maturity period is 30 years, one can invest in Equity Mutual Funds that can provide better returns.
2) If you are looking for fixed income, you can check for RBI floating rate bonds. RBI Floating rating bonds have current interest rate of 7.15% with a tenure of 7 years
3) For investors who have their retirement age < 10 years can invest in debt mutual funds and some portion in equity funds. If you want to avoid mutual funds, go for bank fixed deposits and post office saving schemes. If you still look for more safety, consider taking LIC’s New Jeevan Shanti as a worst case.
4) Senior citizens can opt for SCSS, Bank FDs, PMVVY etc., If you are looking for safe fixed income, you can go for Jeevan Akshay VII Plan from LIC as a last resort.
Should you opt for G-Sec Bonds 2050 of Dec 2020 issue?
While one would be getting fixed income for 30 years at fixed interest rates (6.23%), one should ask themselves whether they are comfortable with such interest rates. If you invest in G-Sec bonds for 30 years, your money is blocked. Unless there are some buyers in the secondary market, you cannot sell them. In the long term of 30 years, there are plenty of investment options where one can play. If they are not happy, they can switch to better investment option. The decision would depend on how comfortable you are with this investment option in terms of returns + 30 years tenure + liquidity issue.
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Thank you for the post
Suresh what happens incase the GSec holder dies before 30 yrs? Will Govt refund the principal amount immediately to nominee?
Mukul, In case of death of Gsec holder, nominee need to claim these demat holdings, transfer holdings in his name and nominee would get the yearly interest post transfer of holdings. The maturity amount would be paid to nominee on maturity date i.e. 30 years only unless nominee can sell them in stock exchange if any buyers are available before maturity period
Thanks Suresh!