When you lend money, the critical thing to check is how credible the borrower is. And in terms of credibility, nothing surpasses the government. When you invest in gilt funds, you're essentially investing in central or state government bonds.
The term "Gilt" refers to government securities. These are sovereign instruments. They invest in securities with medium to long maturities ranging from three years to twenty years. A lock-in period of 10 years is only applicable to Gilt Funds with a constant duration of 10 years.
As per SEBI guidelines, Gilt Funds must invest at least 80% of their money in Government Securities and State Development Loans (SDLs), the balance in cash and cash equivalents.
Working Mechanism of Gilt Funds
When the government needs funds, it borrows money through an issue of sovereign
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