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In order to increase retail participation in government securities, the RBI, – Retail Direct facility was launched in the Statement of Developmental and Regulatory Policies on February 5, 2021. Its goal is to make it simple for retail investors to invest by offering online access to both the primary and secondary markets for government securities. A gilt securities account (“Retail Direct”) can be opened directly with the Reserve Bank of India using this. The scheme offers a comprehensive approach to making it easier for retail investors to invest in government securities. As honorable Prime Minister, Shri Narendra Modi, launches the Retail Direct Scheme of RBI, individual investors can now directly buy government securities such as treasury bills, sovereign gold bonds, and state development loans from both primary as well as secondary markets.
Under this initiative, retail investors (or individuals) will be able to create an online Retail Direct Gilt Account (RDG Account) with the Reserve Bank of India (RBI)1. These accounts can be connected to their savings bank accounts.
The central bank originally proposed the Retail Direct Scheme in February. This arrangement encourages Individual investors to invest in government securities (G-Sec). G-Secs are government-issued debt instruments. Prior to the Retail Direct Scheme, retail investors could only purchase G-Secs through non-competitive bidding in significant stock market auctions. The other alternative option to invest in G-Secs was through the debt mutual fund schemes that made investments in government securities. Given the sovereign guarantee, G-Secs are exceptionally secure instruments because the government issues them. The Retail Direct Scheme helps to broaden the G-Sec market, which has become necessary due to the increasing magnitude of government borrowing in recent years.
The features of the scheme are as follows:
Easy access to government securities was formerly unavailable to individual investors. But with the option to purchase government securities through the RBI portal, individual investors will now be able to invest for durations ranging from one to thirty years in a fully risk-free environment.
The honorable Prime Minister said that the Retail Direct Scheme would strengthen the economy’s inclusiveness by allowing the middle class, employees, small company owners, and elderly people to invest their modest savings directly and safely in government securities. Small investors can be assured of safety since government securities contain a provision for guaranteed settlement.
According to analysts, the G-Sec market has been dominated mainly by institutional investors such as banks, insurance firms, and mutual funds, with lot sizes of rupees 5 crores or more, and retail involvement has been restricted. Even if ordinary investors were able to purchase debt mutual funds that invested in G-Secs, the three-year investment horizon required to qualify for long-term capital gains deterred many of them.
Because G-Secs offer a risk-free rate and hence no credit risk, they have the biggest volume in the fixed-income market. The RBI’s Retail Direct Scheme will allow investors to invest in G-Securities across a range of tenors, with variable investment horizons and the potential to receive monthly cash flows via risk-free coupons.
The Reserve Bank of India (RBI) has reported a positive response to its Retail Direct Scheme (RDS), which was launched on November 12, 2021. The total number of registrations has significantly increased during the last six months, according to data from the central bank, by more than 43%. As of May 8, 2023, there were 99,548 registrations, compared to 69,536 on October 10, 2022. The program’s goal is to make it easier for individual investors to invest in government securities (G-Secs).
Investors in Sovereign Gold Bonds (SGBs), which are estimated at roughly 4.50 lakh, are likely to actively participate in G-Secs through the medium of RBI’s RDS. According to central bank sources, the scheme is envisioned as a one-stop solution for retail investments in G-Secs.
For retail investors looking to invest in the government securities market, the RBI’s Retail Direct Scheme is a viable option. The scheme offers affordable costs and convenience with its reduced investment level, transparent approach and direct access to G-Secs. Retail investors can take advantage of the reliability and security of government assets by learning more about the Retail Direct Scheme, ultimately growing their investment portfolio and reaching long-term financial objectives. For individuals looking for a trustworthy investment choice, it is a possibility worth looking into. The Reserve Bank of India’s Retail Direct Scheme is a one-stop solution for them. The Government of India and the Reserve Bank of India have focused on encouraging retail involvement in the government securities market.
There are no charges for RBI Retail Direct account.
RBI Retail Direct is safe as it option for investment in government securities, provided by government.
The minimum amount for RBI Retail Direct Scheme is Rs. 10,000
First and foremost you will need to open a Retail Direct Gilt (RDG)” account with RBI, then you can trade in RBI retail direct.
The benefits of RBI Retail Direct are: • No credit risk • Strengthens the economic inclusiveness • Easy access of government securities • Reliable and safe investment options
• Hard to exist • No tax benefits
To open the RBI Retail Direct account you will need to provide your name, address details, Pan Card Number, Mobile number along with other information to a OTP based process. All the guidelines of KYC will be followed.
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