The Reserve Bank of India announced an open opportunity for small investors to directly access its government securities trading platforms. In its statement on Development and Regulatory Policies, it mentioned that retail investors can open their gilt accounts with RBI, and trade directly in government securities. One of the topmost market analysts in India Deepak Talwar, agrees with the Governor of the Central Bank who describes it as a major structural reform and further talks about the avenue this scheme offers to the retail investors.
According to the expert, anything new that comes into the financial market bringing the sovereign bonds directly to the investors is a good move. Until now, the participation in government securities was that of only giant institutions. In case a retail investor wanted to participate, they had to go through the mutual fund groups.
In this strategic move, individuals can participate in the government securities market as a one-stop solution to facilitate investment in G-Secs. It is beneficial for small investors to explore a safe medium of investment accessing a wider range of securities markets to earn better peril modified returns.
The expert states, “With this move, India will join a few selected countries that ensure access of retail investors to government supervised trading platforms. In this unstable market atmosphere, the scheme provides guaranteed safety to small investors – small businessmen, senior citizens, middle class people, and even to housewives who have assured returns with ready liquidity through secondary market operations.”
Deepak Talwar, a seasoned market analyst, explains that an investor can choose the tenure of the bond that they want to invest into. After registering with the retail direct gilt account, an investor can pick and choose the security for themselves too. The registration process is self-explanatory, having said that, RBI has also provided helplines to guide investors assisted by the clearing corporation of India’s employees.
For the investors trying to cut their teeth in the sovereign bond market, Deepak Talwar counts on the benefits of RBI scheme, he elaborates, “It will allow domestic investors to directly participate in G-Secs markets. Intending investors can now open and maintain a ‘Retail Direct Gilt Account’ with RBI through an online portal that will provide access to primary assurance of G-Secs with secondary market opportunities. Government of India Treasury Bills, Government of India dated securities, Sovereign Gold Bonds (SCB), and State Development Loans (SDLs) are the categories that will attract broad investments.”
While the RBI puts priority on reviving growth, it faces the challenges in managing the government’s massive borrowing programme at a cheaper cost. With the rise in crude oil prices, commodity prices are translating into higher input costs and could cause a broad-based rise in prices.
Currently, banks hold several government securities but if the demand for credit picks up, a possible reduction in banks’ holding of these bonds could be expected. When government securities become more market-oriented because of a multifarious investor base, the management of debt will attract major challenges. While direct government bonds for diversified investors is a gratifying step, this needs to be followed by full bond market integration on the one hand and separation of debt management functions on the other.