The RBI has proposed to provide retail investors with on the internet access to the government securities industry – each principal and secondary – straight by way of the Reserve Bank. The facility of obtaining government securities straight although RBI is to be known as Retail Direct. This will be achievable by opening Gilt accounts straight with RBI.
As of now, retail investors can invest in government securities and therefore it is not a new investment alternative for them. However, obtaining it straight from the RBI is the new route to personal them now.
Government securities carry the highest security as far as principal and interest payment is concerned. The coupon price or the interest price that the G-sec carries will be what you get if held till maturity of the bond.
Currently, retail investors can invest in government securities by way of non-competitive bidding in principal auctions and stock exchanges are permitted to route principal purchases and also permits a particular retail segment in the secondary industry.
The eligible retail investors have to participate in non-competitive bidding (NCB) at RBI by way of an aggregator or facilitator. NSE acts as one of the facilitators in NCB to aggregate the bids received from the retail investors and submits a single bid at RBI.
Going forward, retail investors can invest in government securities straight from RBI by opening Gilt account.
RBI expects that the move will broaden the investor base and provide retail investors with enhanced access to participate in the government securities industry. G-Sec are traded on stock exchanges and bond costs could go up and down but if held till maturity, the capital is secure.
A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. Such securities are brief term popularly known as treasury bills, with original maturities of significantly less than one year or lengthy term normally known as Government bonds or dated securities with an original maturity of one year or more.
In India, the Central Government challenges each, treasury bills and bonds or dated securities although the State Governments challenge only bonds or dated securities, which are known as the State Development Loans (SDLs). G-Secs carry virtually no danger of default and, therefore, are known as danger-totally free gilt-edged instruments.
Besides supplying a return in the kind of coupons (interest), G-Secs supply the maximum security as they carry the Sovereign’s commitment for payment of interest and repayment of principal. G-Secs are accessible in a wide variety of maturities from 91 days to as lengthy as 40 years to suit the duration of varied liability structure of a variety of institutions. G-Secs can be sold effortlessly in the secondary industry to meet money specifications.