Investors can now buy and sell government bonds with ease

With the launch of the retail direct mobile app, investors can now buy G-Secs in the primary auctions as well as buy and sell the same in secondary market
Reserve Bank of India
Reserve Bank of India (File Photo | PTI)

MUMBAI: Nearly two-and-a-half years after launching a dedicated portal to facilitate retail investors (RBI Retail Direct) directly invest in government bonds or sovereign gold bonds during the issuance time or later through the secondary markets, as part of its financial inclusion initiatives, last week, the Reserve Bank has launched a mobile app for the same giving a further leg-up to the inclusion drive.

The RBI Retail Direct portal was launched on November 12, 2021, while the mobile app (Retail Direct Mobile app) was personally launched by the governor Shaktikanta Das on May 28, 2024 in the presence of some key central board members and all the four deputy governors along with heads of major banks and other stakeholders—only showing how serious the monetary authority is on this project.

What’s Retail Direct?

The Retail Direct is a one-stop solution to facilitate investment primarily in government bonds by individual investors. It also allows one to trade in state government bonds, sovereign gold bonds and floating rate saving bonds as well. Under this scheme, individual retail investors can open gilt securities accounts – Retail Direct Gilt Account with RBI and participate in the primary issuance of government bonds, or invest in sovereign gold bonds or to invest in floating rate saving bonds. And not just that such an account opened with the RBI can also help you hold these assets with the most secured and guaranteed money manager that the RBI is.

The Retail Direct Scheme allows retail investors to buy G-Secs in the primary auctions as well as buy and sell G-Secs in the secondary market. With the launch of the retail direct mobile app, retail investors can now transact in G-Secs using the mobile app on their smartphones. The mobile app can be downloaded from the Play Store and App Store.

How it fared since launch?

The scheme has been a success, though not a runaway success, partly because since the period it was introduced, the equity market and mutual funds were on a song. As of May 27, 2024, the total number of registrations stood at 1,38,819 while the total number of accounts opened stood at 1,24,951. The respective numbers stood at 69,536 and 56,714 as of October 22, 2022, which was exactly a year after the launch of the portal.

From an asset class point of view, the overall primary market subscriptions were worth R 4,625.40 crore as of May 27, of which dated Central government bonds were worth R 627.64 crore (the G-Secs market is over R87 lakh crore), state government bonds were worth R372.29 crore, treasury bills R3,139.32 crore, sovereign gold bonds were worth R298.61 crore, floating rate savings bonds were at R187.54 crore.

The same respective numbers on October 22,2022 were: primary market Gilt subscriptions at R681.82 crore, of which dated G-Secs at R233.86 crore, state government bonds at R103.97 crore, treasury bills were at R301.12 crore and sovereign gold bonds were at R42.87 crore.

The secondary market numbers are much lower with the overall traded volume at R690.74 crore as on May 27, of which dated G-Secs were R612.09 crore, state government bonds were R49.23 crore, treasury bills were at R28.41 crore, sovereign gold bonds were at a low R 1.01 crore. During this period, the total holdings were R2,153.15 crore, of which dated G-Secs were R 750.12 crore, state bonds were at R395.24 crore, treasury bills were at R820.25 crore, floating rate savings bonds were at R 187.54 crore. The respective secondary market numbers forOctober 22, 2022 were: total traded volume R138.89 crore, of which dated G-Secs were R125.29 crore, state bonds at R11.25 crore, treasury bills at R2.34 crore, sovereign gold bonds stood at a miniscule R0.01 crore.

When it comes to total holdings, it was R670.67 crore, of which dated G-Secs stood at R286.53 crore, state bonds R 113.87 crore, and treasury bills at R270.27 crore. The numbers clearly show the investors are more interested in the primary market and not the secondary market.

Why should one open a Retail Direct Gilt account?

Opening such an account allows an individual to buy government bonds directly in the primary market (auctions) as well as buy/sell in the secondary market. For the retail investor, government securities offer an option for assured long-term investment.

The advantages for retail investors are manifold: G-Secs are risk free and carry no credit risk and offer decent yields for longer duration, up to 40 years. G-Secs are an attractive option for savers who need low risk investment options for longer durations. G-Sec also offers capital gains as there is an inverse relationship between bond prices and interest rates, there is a high chance of capital gains when interest rates moderate.

G-Secs have good liquidity and they can be transacted without any notice. With the introduction of the portal, retail investors can now participate easily in the primary and secondary market. It also helps diversify portfolio and consequently reduce risk for retail investors. Moreover, the account attracts zero charges and does not involve any intermediary thus overall reducing transaction charges for the investor.

Who can open an RDG a/c?

Any retail investor is allowed to open an RDG account. The following are required to open an account: a rupee savings bank account maintained in the country, PAN, any officially valid document for KYC, a valid email id and a registered mobile number.

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