State government guaranteed bonds work like regular bonds for most parts. Like regular bonds, they pay interest and return your principal at the end of the bond’s life.

The key advantage of state guaranteed bonds is that the interest payments and return of principal is guaranteed by the state where they are issued.

Investing in State Government Guaranteed Bonds is accessible to both institutional and individual investors. There are two main ways to invest in these bonds: through primary issuance or in the secondary market.

1. Primary Issuance: In primary issuance, investors can participate in the bond auction process. During these auctions, investors submit their bids for the bonds they want to purchase. The state government then issues the bonds to the winning bidders at the determined price and interest rate.
2. Secondary Market: Bonds can also be bought and sold in the secondary market. So you can purchase State Government Guaranteed Bonds from other investors who are selling them in the secondary market through a broker.

State-guaranteed bonds are those guaranteed by the state. For example - Certain bonds of Uttar Pradesh Power Corporation Limited (UPPCL) are guaranteed by the government of Uttar Pradesh. This adds a layer of safety to the bonds because it means that if UPPCL is unable to return your money, the UP government will step in and return your money.

State Development Loans (SDLs), on the other hand, are government securities issued by the various states in India. For example - 6.81% MH SDL 2028 is an SDL issued by the government of Maharashtra with an interest rate of 6.81% that matures in the year 2028