On July 12, 2021, the Reserve Bank of India (RBI) introduced a scheme named ‘RBI Retail Direct’ to facilitate investment in Government Securities(G-Sec) by retail investors (individuals).
- Objective: The bond-buying window was opened to increase the retail participation in G-Sec, and to democratize the ownership of G-Sec beyond banks and managers of pooled resources such as mutual funds.
i.Under the scheme, the retail investors are enabled to open and maintain their gilt securities account named ‘Retail Direct Gilt Account’ (RDG Account) with RBI through an ‘Online portal’.
ii.Using the portal, Retail investors could access the primary issuance of G-Sec auctions and the Negotiated Dealing System – Order Matching (NDS-OM) platform, the RBI platform which is used for buying and selling G-Secs and other money market instruments in the secondary market.
Key Points about Individual’s G-Sec Investment:
i.List of G-Secs under the scheme:
- Government of India Treasury Bills
- Government of India dated securities
- Sovereign Gold Bonds (SGB)
- State Development Loans (SDLs)
- Retail investors who intend to join the scheme, need to have a Rupee savings bank account maintained in India, Permanent Account Number (PAN) (issued by the Income Tax Department), OVD (Officially Valid Document) for Know Your Customer (KYC) purpose, email id, and Registered mobile number.
- Non-Resident individuals who are eligible to invest in G-Sec under Foreign Exchange Management Act, 1999 are also eligible under the scheme.
iii.Type: The RDG account could be opened singly or jointly with another retail investor.
iv.Fees and Charges: No fee will be charged for opening and maintaining the RDG Account, and for submitting bids in the primary auctions.
Buying & Selling of G-Sec:
i.The RDG Account would be available for both primary market participation and secondary market transactions.
ii.Under bidding in the Primary market, the participation and allotment of securities will be as per the non-competitive bidding scheme of the RBI, which is designed by it for non-institutional small buyers.
iii.Only one bid per security is permitted under the primary market and after submission of the bid, the total amount payable will be displayed.
iv.Payment to the Aggregator/Receiving Office: The retail investor should transfer the amount to the designated account of Clearing Corporation of India Limited (CCIL) using net-banking/UPI facility from the linked bank account before the start of trading hours or during the day.
v.Based on the transfer, a funding limit (buying limit) will be given to the investor for placing ‘buy’ orders and at the end of the trading session, the excess funds will be refunded.
vi.Once the investors made the payments, RBI will credit the G-Sec to their RDG Accounts. Under the Secondary market, the buying and selling of G-Sec are similar to that of shares.
Note – CCIL of NDS-OM or other entity that is approved by RBI are the Aggregator/Receiving Office under the scheme.
Recent Related News:
In June 2021, RBI permitted Authorised Dealer banks to place margins on behalf of their Foreign Portfolio Investors (FPIs) clients for their transactions in G-Secs (including State Development Loans and Treasury Bills), within the credit risk management framework of banks.
About Reserve Bank of India(RBI):
Established – 1st April 1935
Headquarters– Mumbai, Maharashtra
Governor– Shaktikanta Das
Deputy Governors – Mahesh Kumar Jain, Michael Debabrata Patra, M. Rajeshwar Rao, T. Rabi Sankar