Using the RBI Retail Direct platform, we can now invest in Government Bonds online. In the month of February 2021, RBI announced that it will allow retail investors to directly buy and sell Government Bonds online. Now through the RBI Retail Direct scheme, we can invest in Government Bonds online.

The launch date of the portal is not yet decided. According to the notification, “the date of commencement of the scheme will be announced at a later date”.

These are the securities which investors can invest: 

  1. Government of India Treasury Bills 
  2. Government of India dated securities 
  3. Sovereign Gold Bonds (SGB) 
  4. State Development Loans (SDLs)

ELIGIBILITY

Retail investors, as defined under the scheme, will be able to register under the Scheme and maintain an RDG Account, if they have the following:

i) Rupee savings bank account maintained in India;

ii) Permanent Account Number (PAN) issued by the Income Tax Department;

iii) Any OVD for KYC purpose;

iv) Valid email id; and

v) Registered mobile number.

Non-Resident retail investors eligible to invest in Government Securities under Foreign Exchange Management Act, 1999 will also be eligible under the scheme. The RDG account can be opened singly or jointly with another retail investor who meets the eligibility criteria.

SCOPE OF THE SCHEME

‘RBI Retail Direct’ is a comprehensive scheme that will provide the following facilities to retail investors in the government securities market through an online portal:

i) Open and maintain a ‘Retail Direct Gilt Account’ (RDG Account)

ii) Access to primary issuance of Government securities

iii) Access to NDS-OM

WHAT ARE THE SERVICES OFFERED?

The registered investors can opt for the following investment services: 

a. Financial Statement: The link provides transaction history and the balance position of securities holdings in the Retail Direct Gilt Account. All transaction alerts will be sent by e-mail or SMS. 

b. Provision for nominations: You can fill up and upload the nomination form in the appropriate format, which must be signed. A maximum of two nominations is allowed. 

c. Pledges and liens: Securities held in the RDG Account will be available for pledge/lien.

d. Transfers of Gifts Retail Direct: Investors will be able to give government securities to other Retail Direct Investors through an online platform. 

e. Grievance redressal: Any query or grievances related to the ‘Retail Direct’ Scheme can be raised on the portal which will be handled/resolved by Public Debt Office (PDO) Mumbai, RBI.

REGISTRATION:

Investors can register on the online portal by filling up the online form and using the OTP received on the registered mobile number and email ID to authenticate and submit the form. On successful registration, a ‘Retail Direct Gilt Account’ will be opened and details will be given through SMS/e-mail to access the online portal. The RDG account will be available for primary market participation as well as secondary market transactions on NDS-OM.

PROCEDURE

After registering on the online portal, retail investors will need to authenticate themselves by using OTP (one-time password) received on their registered mobile number and email address. They will need to submit the KYC document to open the RDG Account.

BUYING AND SELLING

During the bidding, the participation and allotment of securities will be as per the non-competitive bidding scheme of the RBI. The regulator has designed a non-competitive bidding scheme for non-institutional small buyers.

Once investors make the payments, RBI will credit the securities to their RDG Accounts.

To buy and sell securities in the secondary market, the procedure is similar to buying and selling of shares.

Before the start of trading hours or during the day, the investor must transfer funds to the designated account of CCIL (Clearing corporation of NDS-OM) online.

Based on actual transfer, a funding limit (buying limit) will be given to the investor for placing ‘buy’ orders. At the end of the trading session, any excess funds will be refunded.

FEES AND CHARGES

There are no fees charged for opening or maintaining the RDG account nor for Submitting bids in the primary auction. However, the registered investor will have to pay fees for payment gateway, etc. that are applicable.

However, do remember one thing that even though in such Government securities, default or downgrade may not be there, they are highly sensitive to the interest rate movement based on the time horizon of maturity of the bond.

 

Hence, investing in such Government securities does not mean they are safe. If you buy today and try to sell tomorrow (before maturity), then the risk of interest rate movement will be there. DO REMEMBER THAT INVESTING IN BANK FIXED DEPOSIT IS DIFFERENT THAN INVESTING IN GOVERNMENT BONDS. Understand the features and how they fluctuate and accordingly based on your need, you can buy. 

Where you do not wish to invest directly in government bonds as liquidity can be a concern here. Please note that RBI bonds are not as liquid as equity shares (where you are able to sell your equity shares anytime you'd like), there could be a situation where you do not find a buyer immediately, in that case, you must be ready to hold on to bonds for a longer duration. So where you want exposure to government bonds but not directly, mutual funds are the way forward for you.