RBI's Retail Direct primary market subscription surges over 42% in 5 months; T-bills see biggest traction

“As we see the stability in markets and pause in policy rates, investors have drawn a lot of comfort and started pouring in for safety aspects as sovereign is the best asset class from a credit perspective,” said Ajay Manglunia, managing director at JM Financial.

Further, Anshul Gupta, Chief Investment Officer and Co-Founder, Wint Wealth said investors are looking to lock in high rates for a longer duration. 10-year government securities (G-Sec) are giving 7.2 percent, which is higher than the fixed deposit rates of large banks.

“Investors are also utilising the market arbitrage between treasury bills (T-Bill) and savings account rates. While large banks offer a 3-4 percent rate on savings accounts, the latest 91-day T-bill was issued at 6.85 percent. It makes sense for investors to park money in T-bills compared to savings accounts,” Gupta added.

Also read: Exclusive: Kotak Bank expects RBI approval for Sonata Finance acquisition by FY24-end

Rise in subscription

Subscription in T-Bills in the primary market constituted the biggest portion, which rose by 52.86 percent since the start of this fiscal to Rs 1,702.61 crore as on August 21, from Rs 1,113.85 crore as on April 3.

“As we see that the curve is more flattish, there is no incentive to buy duration, hence we visibly see the trend of more investment in T-Bills,” Manglunia said.

This was followed by central and state government securities increasing by 21.24 percent and 23.53 percent, respectively.

Similarly, retail investors also tested the secondary market, which led to an increase in total traded value in the secondary market by 46.17 percent.

In absolute terms, the secondary market total traded volume rose to Rs 433.11 crore on August 21, as compared to Rs 296.30 crore on April 3.

"Even though the volume growth looks high, in absolute terms, the volume is still quite low. Most investors might invest in the platform with the view of holding till maturity," said Vijay Kuppa, CEO, InCred Money.

How does this platform work?

The RBI retail direct scheme is meant to be a one-stop solution to facilitate investment in government securities by individual investors.

Retail investors can open and maintain an RDG account with the RBI and trade in these securities. Individual investors can use the RDG account to invest in T-bills, coupon-bearing government bonds and state development loans through primary and secondary market transactions besides buying sovereign gold bonds.

The online registration process is user-friendly with a video KYC (know your customer) facility.

Also read: BPCL to spend $18.16 billion in oil, green energy over 5 years

The way ahead

Money market experts said the participation of retail investors on the RBI Retail Direct platform will increase in the coming days as rates are likely to remain attractive.

Gupta from Wint Wealth said the trend should continue since the base is still low at Rs 2,500 crore. As more and more investors become aware, the volumes on the portal will increase.

“The next three months are suitable for investors to lock in rates since the rates are expected to start decreasing in the next calendar year,” Gupta added.

Further Kuppa added that with better marketing and more awareness, investment in G-Secs, etc. should pick up significantly.