Prime Minister Narendra Modi today in a virtual meet launched the ‘RBI Retail Direct scheme’. The scheme allows retail investors to buy and sell government bonds online. The Reserve Bank of India (RBI) announced the scheme in its February 2021 monetary policy.
The portal for buying and selling of government securities can be accessed at rbiretaildirect.org.in
Here is all you need to know about the scheme and how you can invest in government securities.
What is RBI Retail Direct Scheme?
RBI Retail Direct Scheme allows retail investors to buy and sell government securities (G-sec) online both in the primary and secondary markets. According to details provided by RBI, these small investors can now invest in G-Secs by opening a gilt securities account with the RBI. The account opened will be called Retail Direct Gilt (RDG) Account.
Who can open the RDG account?
As per the notification issued by the RBI on July 12, 2021, a retail investor can open the RDG account if they have following:
- Rupee savings bank account maintained in India;
- PAN issued by the Income Tax Department;
- Any official valid document such as Aadhaar, Voter ID for KYC purpose;
- Valid email ID; and
- Registered mobile number
The RDG account can be opened singly or jointly with another retail investor who meets the eligibility criteria.
How to register on the online portal
Investors can register on the online portal by filling up the online form and use the OTP received on the registered mobile number and email ID to authenticate the information. Upon successful registration, ‘Retail Direct Gilt Account’ will be opened and details for accessing the online portal will be conveyed through SMS/e-mail.
RDG Account shall be available for primary market participation as well as secondary market transactions on NDS-OM.
Buying and selling of government securities via online portal
Once the account is opened, retail investors can buy government securities in the primary market, where government bonds are issued for the first time or buy/sell the existing government bonds in the secondary market.
Buying government securities in primary market: Participation and allotment of securities will be as per the non-competitive scheme for participation in the primary auction of government securities and procedural guidelines for sovereign government bond issuance. Only one bid per security is permitted. On submission of the bid, the total amount payable will be displayed. Payment to the aggregator / receiving office can be made through using the net-banking/UPI facility from the linked bank account, whereby funds will be debited at the time of submission of bids on the portal.
The retail investors can also use ASBA facility where funds in the linked bank account can be blocked at the time of submission of bids on the portal which will be debited from this account on successful allotment in the auction. Similar facility through banks will be made available in due course. Refund, if any, will be credited to the investor’s bank account as per the timelines specified by the aggregator. Allotted securities will be issued to the investors by credit to their RDG Account on the day of settlement.
Buying and selling of government bonds in secondary market: Registered investors can access the secondary market transaction link on the online portal to buy or sell government securities through NDS-OM.
For buying of government bonds, payment can be made through either of the following ways: Before start of trading hours or during the day, the investor should transfer funds to the designated account of CCIL (Clearing Corporation of India NDS-OM) using net-banking/UPI from the linked bank account. Based on actual transfer/success message, a funding limit (Buying Limit) will be given for placing ‘Buy’ orders. At the end of the trading session, any excess funds lying to the credit of the investor will be refunded. Another method is using the UPI facility, whereby funds in the linked bank account can be blocked at the time of placing order which will be debited from this account on the day of settlement. Similar facility through banks will be made available in due course.
Securities purchased will be credited to the RDG Account on the day of settlement.
For selling of government bonds, securities identified for sale will be blocked at the time of placing order till the settlement of the trade. Funds from the sale transactions will be credited to the linked bank account on the day of settlement.
Charges for opening of RDG account
As per RBI, no fee will be charged for opening and maintaining ‘Retail Direct Gilt account’. Further, no fee will be charged by the aggregator for submitting bids in the primary auctions. However, any payment gateway charges will be borne by the registered investor, as applicable.
Other investor services
- The online portal will offer an account statement showing transaction history and balance position of securities holdings in the Retail Direct Gilt Account. All transaction alerts will be provided through e-mail/SMS.
- A nomination facility will also be provided to the registered user. There can be a maximum of two nominees. In the event of death of the registered investor, the securities available in the RDG Account can be transmitted to the RDG Account or any other Government securities account of the nominee on submission of death certificate and transmission form.
- A retail investor can take a loan against the securities available in the RDG account.
- Retail investors will have a facility to gift government securities to other retail investors.
- Any query or grievances related to the scheme can be raised on the portal which will be handled/resolved by the Public Debt Office (PDO) Mumbai, RBI.
“The retail direct scheme offered by RBI is a good opportunity for retail investors to invest in government securities, sovereign bonds etc. It is the first time in India when retail investors will have an option of simple and direct channel for investment in government securities. The government securities offers a low risk and low return on the investment as compared to investment in equity or asset. We advice the retail investors must diversify their investment and go for this advantage to have a better and safe return,” said Dr. Ravi Singh, Head of Research & Vice President, ShareIndia .
