Understanding RBI’s direct bond investment scheme

Understanding RBI’s direct bond investment scheme

Recently, the Reserve Bank of India (RBI) recently offered a new investment opportunity for investor. Let’s understand the dynamics of the scheme.
The scheme 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.
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, an individual 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.
Once an account is created, investor get access to primary issuance of government securities as well as access to the existing order matching system for secondary market transactions in government bonds.

On this platform securities available for trade include:
Government of India treasury bills, dated securities, sovereign gold bonds, State development loans, etc.
There will be no fee for opening and maintaining ‘Retail Direct Gilt account’ with RBI.
Also, 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.
After, having registered on the platform, investors are looking to trade in the secondary market for an existing government security, will get access to the NDS-OM or order matching system via link. Investors can select the specific security to buy or sell.
Payment can be made before the 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 an investor want to sell securities, the same will be identified and 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.
In case of the primary market purchase, an investor can submit a bid 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 the investor’s net banking or UPI account to cover the bid.
Once the bid get accepted and securities allotted, these will be credited to the account on the day of settlement.

Disclaimer –
This document is meant for the recipient only for use as intended and not for circulation. This document should not be reproduced or copied or made available to others. The information contained herein is from the public domain or sources believed to be reliable. While reasonable care has been taken to ensure that information given is at the time believed to be fair and correct and opinions based thereupon are reasonable, due to the very nature of research it cannot be warranted or represented that it is accurate or complete and it should not be relied upon as such. Also above note is not a recommendation to Buy or SELL and is only a view based on facts and figures and we will be in no way responsible for any losses incurred by anyone who uses this information to either trade or invests securities mentioned herein.