Your Questions Answered: How to invest in government securities through RBI Direct Retail scheme?
RBI Retail Direct allows retail investors to directly buy and sell G-Secs online, with competitive pricing, transparent market information, no fees or commissions and direct interest and maturity proceeds through a GSA.
Q. I am a 25-year-old civil engineer. I have been investing in index mutual funds for the past two years. I now wish to diversify into other asset classes. I recently heard that RBI has launched a platform: RBI Direct Retail through which retail investors like me can directly invest in government securities (G-Secs) and Sovereign Gold Bonds (SGBs). However, because of my limited understanding of G-Secs and RBI Direct Retail, I have not invested in G-Secs yet. Can you please elaborate on what G-Secs are and how can one invest in G-Secs through RBI Direct Retail?
G-sec or government securities are securities issued by the central or state governments of India to borrow money from the financial market. They are either short-term (also known as T-Bills with a maturity of less than 1 year) or long-term (also known as government bonds or dated securities with a maturity of more than 1 year).
Retail investors can invest in g-sec through various channels, such as primary dealers, banks, stock exchanges, mutual funds and depository participants. The Reserve Bank of India (RBI) has recently launched a new scheme called RBI Retail Direct, which allows retail investors to directly invest in government securities (G-Secs) through an online portal. This scheme is aimed at increasing the participation of retail investors in the G-Sec market and diversifying the investor base.
RBI Retail Direct
RBI Retail Direct is a one-stop solution for retail investors to access the G-Sec market. Some of the features of this scheme are:
- It is open to all resident individuals, including minors and Hindu Undivided Families (HUFs).
- It allows investors to open and maintain a gilt securities account (GSA) with RBI, through which they can buy and sell G-Secs online.
- It offers a wide range of G-Secs, including treasury bills, dated securities, state development loans, sovereign gold bonds, and inflation-indexed bonds.
- It provides competitive pricing and transparent market information to investors.
- It does not charge any fees or commissions for opening and maintaining the GSA or for transactions in G-Secs.
- It enables investors to receive interest payments and maturity proceeds directly in their bank accounts linked to the GSA.
Pros of investing in G-Sec
- They are extremely low risk as they are backed by the sovereign guarantee of the government.
- They offer regular and assured income through coupon payments.
- They have a wide range of tenors and yields to suit different investment needs and preferences.
- They are highly liquid and can be easily bought and sold in the secondary market.
Cons of investing in G-Sec
- They are subject to interest rate risk, which means their prices may fall when interest rates rise and vice versa.
- They may have lower returns than other fixed income instruments such as corporate bonds or debentures.
- They may have higher transaction costs and lower transparency than other marketable securities.
How can one register on RBI Retail Direct?
To register on RBI Retail Direct, one needs to follow these steps:
- Visit the RBI Retail Direct website and click on "Register".
- Fill up the online registration form with personal details, KYC documents, bank account details, nomination details, etc.
- Submit the registration form and verify the email address and mobile number provided.
- Login to the portal using the user ID and password generated.
- Complete the e-KYC verification process using Aadhaar or PAN card.
- Activate the GSA by accepting the terms and conditions.
Once registered, one can start investing in G-Secs using RBI Retail Direct by following these steps:
- Login to the portal and click on "Dashboard".
- Select the type of G-Sec to invest in (primary or secondary market) and click on "Buy".
- Enter the amount, price, and other details of the transaction and click on "Submit".
- Confirm the transaction details and make the payment using net banking or UPI.
- Receive the confirmation message and email with the transaction details.
- One can also view their portfolio, transaction history, interest payments, maturity proceeds, etc. on the portal.
RBI Retail Direct is a novel initiative by RBI to democratise the G-Sec market and empower retail investors. It offers an attractive opportunity for retail investors to diversify their portfolio and earn risk-free returns. However, it also requires investors to be aware of the risks and rewards involved in investing in G-Secs and make informed decisions accordingly.
In conclusion, G-Sec is an important component of the Indian debt market and offers a safe and stable investment option for retail investors. However, they also have some drawbacks that need to be considered before investing. Investors should understand their risk-return profile, investment horizon and liquidity needs before choosing g-sec as an investment avenue.
Kuvera is a free direct mutual fund investing platform.
Note: This is for informational purposes. Please speak to a financial advisor for detailed solutions to your questions.
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First Published:30 Jun 2023, 09:44 AM IST
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