To cover its financial needs, the government resorts to borrowing money. The RBI acts as the intermediary, issuing T-bills and Bonds on behalf of the government to generate funds by providing a fixed return on investment. This process is akin to how banks offer interest on fixed deposits and utilize those funds for lending. In the case of the government, these funds are essential for running the country.

The term G-Secs encompasses these two types of securities those with maturities of less than 1 year are referred to as T-bills, while those with maturities exceeding one year are known as bonds.