Explained | RBI Retail Direct: How can you invest in G-Secs? All questions answered

The RBI committee has recommended that the scope of Section 5 of the SARFAESI Act be expanded to permit ARCs to acquire financial assets from all regulated entities

Prime Minister Narendra Modi, on November 12, launched the Reserve Bank of India (RBI) Retail Direct Scheme, which allows individual retail investors direct access to buy and sell government securities at rbiretaildirect.org.in

With the RBI Retail Direct Scheme, small investors in the country now have a safe medium of investment in government securities, Modi said. He added, “The RBI Retail Direct Scheme will expand the scope of investment in the country and make access to capital markets easier and more secure for investors.”

RBI governor Shaktikanta Das in his February 2021 monetary policy announcement had proposed the retail direct scheme allowing retail investors direct access to G-Secs.

Here is an explainer on what the scheme is about and how you can access it:

What is RBI Retail Direct?

The scheme is a portal that facilitates investment in government securities by individual investors. Individuals can open gilt securities account—retail direct gilt (RDG) account—with the RBI on www.rbiretaildirect.org.in.

Retail investors defined under the scheme can register and maintain an RDG account. Investors need to have:

- Rupee savings bank account maintained in India
- Permanent account number issued by the income tax department
- Any officially valid document to meet know-your-customer norms
- Valid email id
- Registered mobile number

Further, non-resident retail investors are eligible to invest in government securities under the Foreign Exchange Management Act, 1999. The RDG account can be opened singly or jointly on meeting the eligibility criteria.

Currently, retail investors did have access to G-Secs via aggregator gilt mutual funds but that avenue wasn’t seamless compared to RBI Retail Direct being proposed as a one-stop portal.

How to access the scheme and portal?

Individual investors will have to open and maintain the RDG account with the RBI on www.rbiretaildirect.org.in.

Investors will have to place non-competitive bids in primary issuance of all central government securities which include treasury bills and sovereign gold bonds, and securities issued by various state governments.

Investors will also get access to the secondary market through NDS-OM (Negotiated Dealing System – Order Matching System) which is an RBI trading system. Investors will receive interest/maturity proceeds in their bank accounts linked to the RDG account.

Are there any charges/fees payable?

There are no charges/fees for opening or maintaining the RDG account; further, no fees will be charged by the aggregator for submitting bids in the primary auction. However, investors will have to bear the charges levied by the payment gateway.

What is the procedure to carry out trades in the system?

Investors can trade in securities of the central and state governments, treasury bills, and sovereign gold bonds in the odd-lot segment. RDG account available balances will be transferred to NDS-OM at the beginning of the day. Investors will be able to place sell orders only to the extent of the balance available.

Buy orders can be placed only after funds are transferred using different payment channels to the NDS-OM retail portal.

Trades executed will flow to Clearing Corporation of India Ltd (CCIL). CCIL is authorized by the RBI to act as an aggregator for primary issuances and to operate the NDS-OM platform. Settlement will happen on T+1 day.

How will this benefit the RBI and the Union government?

The opening of G-Secs to retail investors will help the government mop up additional sources of funds to meet its financial requirement to carry out public expenditure. The move is a major structural reform towards deepening the bond markets that is currently limited to financial institutions. It will also lead to better price discovery and yield curve.

“The need to deepen the bond market –providing direct access to G-secs under the RBI Retail Direct Scheme is aimed at strengthening the financial market by harnessing digital payment technology that that the retail investor in India is now familiar with," Anjana Potti, Partner, J Sagar Associates (JSA) said.

This will put access to G-secs on par with the already robust corporate bond market, Anjana added.