RBI’s Retail Direct Scheme to facilitate investment in G-Secs

Shreya Patel

12 May, 2025

Introduction

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.

New Investment Scheme

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.

Types of Government Securities in India

1. Treasury Bills (T-Bills): Treasury Bills are short-term government securities that have been issued and have maturities of 91 days, 182 days, and 364 days. These securities have zero coupons, which means that they were initially sold below face value and were eventually redeemed for face value. They are popular amongst investors looking for secure, short investment choices and are frequently traded in the secondary market.
2. Dated G-Sec or Government Bonds: Dated Government Securities are long-term financial instruments with fixed coupon payments and predetermined maturities, typically ranging from five to forty years. These securities are sold at auctions, and coupons representing the interest on them are issued on a half-yearly basis. Upon maturity, the principal amount is returned.
3. State Development Loans: State Development Loans are debt instruments that Indian states and union territories issue to meet their financial requirements. SDLs are structured similarly to Dated Government Securities in that they offer fixed coupon payments and definite maturity times.
4. Sovereign Gold Bonds: Government securities known as SGBs, or Sovereign Gold Bonds, are priced according to the grams weight of gold. These bonds can be used as a substitute for actual gold. Individual investors can invest up to 4 kilograms. However, the minimum investment level for SGBs is equal to 1 gram of gold.

Features of the Retail Direct Scheme

The features of the scheme are as follows:

1. The retail investors can register/create a Retail Direct Gilt (RDG) account with RBI and invest a minimum amount of rupees 10,000 and multiples thereof in Central Government Securities (CG), State Government Securities (SG), and Treasury Bills (T-Bills). Registration can be made by using the online portal (https://rbiretaildirect.org.in).
2. The minimum investment unit for a Sovereign Gold Bond (SGB) is 1 gm. Moreover, the RBI has set a maximum investment restriction per bid of rupees 2 crores for CG securities/T-Bills and 1% for SG securities.
3. The scheme stipulates that there would be no charges for creating and maintaining an RDG account with the RBI. The payments for transactions can be made using online banking through a savings bank account or using the Unified Payments Interface (UPI).
4. All individual investors can open an RDG account with the Reserve Bank. Investors must have a PAN issued by the income tax department, a rupee savings bank account in India, KYC documentation, and a registered email and cell phone number. The scheme is also open to non-resident retail investors who are entitled to participate in G-Secs under the Foreign Exchange Management Act (FEMA)
5. The investors will be subject to KYC (know your customer) standards if they register an account on their own or jointly. Both account holders must complete the KYC procedure if they have a joint account. The bank account must be verified by the investor as well. The account will be opened when the KYC procedure is completed successfully, and information will be delivered through the mail. The nomination will be required as well.
6. After opening an RDG account with the RBI, a retail investor can submit non-competitive bids in all primary offerings of central government securities. Treasury bills and sovereign gold bonds (SGB) are examples of this. The investor might also make non-competitive bids on state government securities. The RBI’s trading system now allows investors to access the secondary market also.
7. Any interest or maturity proceeds paid on a specific G-Sec will be deposited directly to the bank account that the investor has registered.
8. Retail investors now have access to the secondary G-Sec market also, which is a significant benefit of this scheme. Through the RBI’s Retail Direct portal, you may get to the secondary market portal (NDS OM). CCIL (Clearing Corporation of India Ltd) will give a unique identification number to each retail direct investor who chooses to trade on the secondary market. The order matching and request for quotation (RFQ) components of the platform are then accessible to these investors.
9. After transferring funds to the NDS OM retail portal via means such as net banking or UPI, RDG account holders can place buy orders. Sell orders can also be put up to the amount of money in the RDG account. T+1 is the time it takes to settle a deal (that is, the settlement of the trade takes place in one working day).

Benefits to Retail Investors

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.

Response to the Retail Direct Scheme

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.

Conclusion 

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.

FAQ

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1. https://www.rbi.org.in/