Last month, on November 12, 2021, Prime Minister Narendra Modi released the Reserve Bank of India (RBI) Retail Direct Scheme. The scheme provides investors an opportunity to invest in government securities in a safe and hassle-free way, in the primary and secondary market. Government securities under this scheme, includes Government of India Treasury Bills (T-Bills), Government of India dated securities (dated G-Sec), State Development Loans (SDLs), Sovereign Gold Bonds (SGB). Retail Direct Scheme offers retail investors the opportunity to buy securities directly and free of charges. Individual retailers can open a Gilt Securities Account, called a Retail Direct Gilt (RDG) account with RBI to participate in the buying and selling of government securities through an online portal (https://rbiretaildirect.org.in). Under the scheme the individual can also access secondary market through NDS-OM- RBI’s trading system.
Earlier, government securities could be bought through two mechanisms:
- Through gilt mutual funds
- Through Government securities dealers who would place it in RBI’s primary market auction which was held every Friday
Additionally, existing government securities from the secondary market could be bought via BSE and NSE.
However, the demand for government securities was less among investors due to procedural issues, lack of awareness and low liquidity in the secondary market. According to experts, the government securities sector was largely dominated by institutional investor such as banks, insurance companies, mutual funds, among others, with lot sizes of over INR 5 crore. Therefore, this segment was inaccessible for retail participants. However, with the Retail Direct Scheme, retail investors would be able to participate in government securities with flexible investment horizons, with the ability to get regular cash flow in a risk free manner.
The scheme aimed at mobilizing individual investments in government securities has garnered an encouraging response since its launch. The scheme received over 12,000 registrations within two days after its launch.
This blog has been authored by Kanika Verma.
- https://www.cnbctv18.com/finance/rbi-retail-direct-scheme-for-retail-investors-all-faqs-answered-11467742.htm
- https://www.business-standard.com/podcast/finance/will-rbi-s-retail-direct-scheme-spur-retail-investor-interest-in-bonds-121111500026_1.html
- https://www.thehindubusinessline.com/money-and-banking/rbis-retail-direct-scheme-clocks-over-12000-registrations/article37478486.ece
- https://www.rbiretaildirect.org.in/#/FaqRbiRetailDirect
