Opening government bond market to small investors

An open opportunity for small investors was announced by the RBI to directly access its government securities trading platforms. It mentioned in its statement on Development and Regulatory Policies that retail investors can open their gilt accounts with the Reserve Bank of India and trade directly in government securities. Deepak Talwar, one of the topmost market analysts in India describes it as a major structural reform and informs the avenue this scheme brings to the small investors of India.

Deepak Talwar quotes, “Anything new that comes into the financial market bringing the sovereign bonds directly to the investors is a good move. Until now, the participation in government securities was that of only giant institutions. In case a retail investor wanted to participate, they had to go through the mutual fund groups.”

Through this calculated step, financers, small investors, and common people can take part in the government owned securities as a one-stop solution. It will expedite investments in G-Secs and be beneficial for retailers. To explore a secured medium of investments approaching a wider spectrum of securities, they will earn better threat-limited returns.

This move will make India count as one of the few countries that provide ingress of small investors to government supervised trading platforms. It will provide sure-shot safety to organisation investors including small businessmen, senior citizens, middle class people, and even to housewives who have assured returns with ready liquidity through secondary market operations, during this unstable market atmosphere.

A seasoned market analyst, Deepak Talwar informs, “Investors have the liberty to choose tenure of the bond they want to invest into. And after the registration on the retail direct gilt account, they can also pick and choose the security that suits them the most. RBI has also presented helplines to guide investors and assist. Although the registration process is self-explanatory, a team of clearing corporations of India have been employed to do the needful.”

Furthermore, he counts on the benefits of the RBI scheme for the investors who are trying to cut their teeth in the sovereign bond market. He says, “Intending investors have a chance to open and preserve a ‘Retail Direct Gilt Account’ with RBI through an online portal will provide access to primary assurance of G-Secs with secondary market opportunities.” Deepak Talwar adds, “It will enable small investors to participate directly in G-Secs markets. Government of India Treasury Bills, Government of India dated securities, Sovereign Gold Bonds (SCB), and State Development Loans (SDLs) are the categories that will attract broad investments.”

As the Reserve Bank of India prioritises on reviving growth, it also faces challenges in maintaining the government’s huge lending programme at a cheaper cost. With the rise in crude oil prices, commodity prices are translating into higher input costs and could cause a broad-based rise in prices.

Presently, banks hold many government securities. In case the demands for credit picks up, a reduction in banks’ holdings of bonds could be expected. When government securities become more market-oriented, the management of debt attracts major challenges because of a multifarious investor base.

Direct government bonds are undoubtedly satisfying for diversified investors, it still requires to be followed by both, full bond market integration and separation of debt management functions.

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