MUMBAI: The Reserve Bank of India introduced a dedicated window for retail investors, who can now buy or sell government debt securities directly. They can open a “Retail Direct Gilt Account” with the central bank, which is for the first time giving such direct access to individuals, who otherwise invest through mutual fund plans.
“Retail investors (individuals) will have the facility to open and maintain the ‘Retail Direct Gilt Account’ (RDG Account) with RBI,” the central bank said in a release Monday. “RDG Account can be opened through an ‘Online portal’ provided for the purpose of the scheme.”
RBI will not charge any fee for maintaining an RDG Account.
The ‘RBI Retail Direct’ Scheme acts as a one-stop solution to facilitate investment in government securities by individual investors.
It allows online access to individuals, who can open and maintain a RDG Account. Using it s/he can buy from the primary market, where bond houses or institutional investors traditionally dominate.
Although retail participation may not change the landscape of the sovereign bond market drastically, this could well be a prelude to a long-term investment story especially when you are seeking safety of investments amid a record low interest rate.
“Direct retail participation should give competition to banks and other investment products,” said Soumyajit Niyogi, associate director at India Ratings. “This has come at a time when interest rates have reached a decadal low. This is a positive beginning as individuals will be able to buy sovereign securities across the tenor of investment from less than a week to 40 years.”
“The development of market microstructure is encouraging,” he said.
To qualify for such account opening, investors should have a savings bank account in India. They should be valid documents including Permanent Account Number (PAN). A non-resident too can be eligible provided s/he is compliant to Foreign Exchange Management Act.
The RDG account can be opened singly or jointly with another retail investor who meets the eligibility criteria, RBI said.
At the same time, investors can transact in the NDS-OM, a platform provided by the Clearing Corporation of India for secondary market trading.
Earlier in February this year, the central bank brought in the concept of “RBI Retail Direct”, a coveted project paving the way for retail participation in sovereign securities directly.
So far the only way for direct participation in the primary bond sale is through non-competitive bids, little-known option, where wealthy investors buy papers in thin volumes.