BQ Explains: What Is The RBI's Retail Direct Scheme For Bond Investments?
How can you trade directly in the government securities market? BQ Explains.
The Reserve Bank of India has launched a retail direct scheme which allows retail investors to directly trade in government securities. The idea, according to RBI governor Shaktikanta Das, is to "democratise" access to the bond markets, which are mostly institutional in nature unlike the equity markets.
Under the 'Retail Direct' option, retail investors can directly open accounts with the RBI. They can use these to participate in both primary auctions of government securities and also trade in the secondary markets.
So how will it work? BQ explains.
The Platform
A special platform has been launched for direct retail access to the government securities market. This platform is available on www.rbiretaildirect.org.in.
Via the platform, you can open and maintain a ‘Retail Direct Gilt Account’.
Retail investors having a rupee savings bank account, a Permanent Account Number (PAN) issued by the Income Tax Department or another other valid KYC document will be eligible.
Non-resident retail investors eligible to invest in government securities under Foreign Exchange Management Act, 1999 are also eligible.
An account can be opened singly or jointly with another retail investor who meets the eligibility criteria.
What Can You Buy & Sell?
Once you have an account, you get access to primary issuance of government securities. You also get access to the existing order matching system for secondary market transactions in government bonds.
Securities available for trade for retail investors include:
Government of India treasury bills
Government of India dated securities
Sovereign gold bonds
State development loans
Fee and Charges
There will be no fee for opening and maintaining ‘Retail Direct Gilt account’ with RBI.
No fee will be charged by the aggregator for submitting bids in the primary auctions.
Fee for payment gateways, as applicable, will be borne by the registered investor.
Making A Secondary Market Trade
Having registered on the platform, if you are looking to trade in the secondary market for an existing government security, this is what the procedure will look like.
A link will be available to you via which you access to the NDS-OM or order matching system. You can use that to select the specific security you want to buy or sell.
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 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.
Using the UPI facility, 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.
Securities purchased will be credited to the account on the day of settlement.
Similarly, if you want to sell securities:
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.
Making A Primary Market Purchase
If you want to buy a security in a primary auction, you can submit a bit under the "non competitive bidding" segment. On submission of the bid, the total amount payable will be displayed.
Just like in the case of a secondary market trade, funds will have to be set aside from your net banking or UPI account to cover for your bid.
Should your bid get accepted and securities allotted, these will be credited to the account on the day of settlement.