‘RBI Retail Direct’ scheme
What are Government Securities (G-Secs)?
- G-Secs are tradable instruments like bonds issued by the Central Government or the State Governments with a promise of repayment upon maturity.
- The Central Government can issue both treasury bills and bonds while the State Governments can issue only bonds, which are called the State Development Loans (SDLs).
- These securities are considered low-risk, since they involve the government and hence, are called risk-free gilt-edged instruments.
- The G-sec market is dominated by institutional investors such as banks, mutual funds and insurance companies.
Why in News?
- The Reserve Bank of India has announced details of a scheme that would allow retail investors to directly buy and sell G-Secs on its platform, seeking to democratize the ownership of government debt securities beyond banks and managers of pooled resources such as mutual funds.
- Through RBI’s Retail Direct scheme, an investor would be able to bid in G-Secs auctions and buy them in the secondary market as well.
- Retail investors will need to open and maintain a Retail Direct Gilt Account (RDG Account) with RBI to access its G-Sec platform.
- RBI will not charge any fee for maintaining an RDG Account. Using the RDG account, a saver can buy from the primary market, which is hitherto dominated by bond houses or institutional investors.
- The date of commencement of the scheme will be announced at a later date,
Eligibility
- To open an RDG Account, a retail investor should have a savings bank account, PAN (Permanent Account Number), KYC (Know Your Customer) documents, a valid email address and a mobile number. The RDG account can be held either by one person or jointly.
- Non-resident retail investors will also be eligible to invest in government securities, but as per the rules set by Foreign Exchange Management Act.
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