Primarily, large institutional investors participated in India’s government securities market. The situation changed to quite an extent with various changes in the legal environment and the introduction of dematerialized holding and electronic screen-based trading systems. Now, retail investors can also invest in G-secs without any hassle, and RBI plays a major role in this.
Any time the central government or any state government senses the need to issue security to raise money for development projects or other budgetary requirements, RBI is responsible for planning and executing the issuance. It has specific regulations to ensure transparency among investors and takes initiatives to make the investment market more accessible. The RBI Retail Direct Scheme is an example of this.
Besides providing all important information, RBI also allows direct G sec investment. Let’s explore the different ways and benefits of direct investment to evaluate its suitability.
Direct GSec Investment through RBI
RBI issues government securities through auctions on E-Kuber. After consulting the respective government regarding the amount to be borrowed, tenure, and other important details, RBI releases an indicative auction calendar, followed by press releases and newspaper advertisements a week prior to the auction. Specific days for auctions and payments are specified for each type of securities. Settlements are generally done on a T + 1 basis, i.e., the next working day following the date of trade.
GSecs Available for Direct Purchase through RBI
Investors can invest in the following government securities directly via RBI.
- Government of India Treasury Bills (T-Bills)
- Government of India dated securities (dated G-Sec)
- State Development Loans (SDLs)
- Sovereign Gold Bonds (SGB)
Note: the table below contains the dates of auctions and payments for the different types of securities.
| Type of Security | Day of Auction | Day of Payment |
|---|---|---|
| 14-day bill | Fridays | Following Saturday |
| 91-day bill | Fridays | Following Saturday |
| 182-day bill | Wednesday of the non-reporting week | Following Thursday |
| 364-day bill | Wednesday of the reporting week | Following Thursday |
| Dated Securities | Fridays | Following Monday |
| Sovereign Gold Bonds (SGB) | Weekly windows announced by RBI in its press release | T + 1 basis |
| State Development Loans (SDLs) | Tuesdays | T + 1 basis |
Ways to Invest in GSecs Directly through RBI
Here are the three ways investors are allowed to make Gsec RBI investments.
Competitive Bidding
Well-informed and experienced institutional inventors, like commercial banks, mostly partake in competitive bidding. For the bidding, investors can bid a price, and if it is within the cut-off mark, the securities are allotted. Multiple bidding is allowed.
Investors must have a funds account or current account and securities accounts or a Subsidiary General Ledger (SGL) account are considered E-Kuber members and can participate in the auctions held on the platform.
Non-Competitive Bidding
Retail investors with no current account or Subsidiary General Ledger can also invest directly via RBI through its non-competitive bidding section. This initiative is aimed at encouraging retail participation. In this case, investors are limited to making a single bid. The bid is to be made indirectly through an aggregator or facilitator permitted under the scheme, like a scheduled bank, primary dealer, or specified stock exchange.
The minimum investment amount is INR 10,000 and thereafter in multiples in INR 10,000. The amount should be more than INR 2 crore per auction. The minimum and maximum caps are applicable for both competitive and non-competitive bidding.
Retail Direct Scheme
RBI’s Retail Direct Scheme simplifies Gsec investments for individual investors. Retail investors can open a Gilt Securities Account or a Retail Direct Gilt Account with RBI under the scheme. This account will allow investors to purchase and sell Gsecs through the RBI Retail Direct Portal.
Once the account is opened, investors can log in to the portal and participate in primary auctions of securities (during the subscription windows for SGBs). Investors can also place quotes in the secondary market portal.
Benefits of Investing in GSec Directly through RBI
The procedures of direct G sec RBI investment have been made simple, which is a huge perk for retail investors. Here are some more benefits of opting for direct investments.
Easy Access to all Securities
Investors will have access to both primary auctions and secondary markets. A visit to the Retail Direct Portal will provide all details on the auction dates, timing, price, results, and so on.
Low Cost & Affordability
When investing directly under the Retail Direct Scheme, investors need not go through brokers, eliminating the brokerage charges and helping keep the investment cost low.
No Charges Under the Retail Direct Scheme
Under the Retail Direct Scheme, when investing on the Retail Direct Portal, no intermediary is involved, and the investors are not charged with any fee. It cuts down the overall transaction charges.
Improved Transparency
Investors have direct access to every auction and accurate information, with no chance of dilution while passing through any intermediary. This way, investors can make the most informed and well-fitted investment decisions.
Limitations of Investing in GSec Directly through RBI
The following factors are crucial and require consideration to ensure flexibility and ease of investment.
Liquidity Risk
Investors looking to sell government securities before maturity may not find much scope in the secondary market since the Direct Retail Scheme is comparatively a new initiative, and the number of retail investors participating is still limited.
Limited Guidance or Expertise
Since investors will have to carry out all the tasks of researching, evaluating the benefits against the risk level and other factors, participating in bids, and so on, they might lack the expert guidance provided by intermediaries. Retail investors must be seasoned or well-informed to ensure maximum benefits.
Learn How to Invest in Government Securities with GoldnPi: Easy & Simple Guide!
GoldenPi brings a user-friendly and highly transparent portal to simplify and streamline investments in government securities. It has all the latest issues and their crucial details, including the interest rates, maturity periods, and so on. Expert guidance is available whenever you need to make the most of your investment. You will be able to do your research, compare your options, and make the investment on the same platform without requiring much time and effort.
Here’s how to invest in Gsec in 3 simple steps on GoldenPi!
- Step 1: Complete your KYC easily with digital documentation.
- Step 2: Check out all the government securities and select one.
- Step 3: Make the payment to finalize the investment.
FAQs About Should You Invest in GSec Directly through RBI
1. Is Gsec investment worthwhile in the current investment market?
Risk and return have always been the two most important parameters for investments. Government securities have low to zero chances of default because they are guaranteed by sovereign backing. They mostly offer fixed interest rates along with steady, periodic payouts. These factors make government securities attractive options in the investment market.
2. How do you pick the best government security for investment?
Determine personal investment goals to decide on the best government security. For instance, T-bills and CMBs are best suited if you want to park your investment for less than a year. However, dated securities with tenure going up to 40 years are ideal for long-term investment goals.
3. Why should I open a Retail Direct Gilt account?
A Retail Direct Gilt account will allow retail investors to invest in government securities, like T-bills, dated securities, SGBs, and so on, directly via RBI. It removes any need for an intermediary, helping you to get all authentic information and reduce broker charges.
4. What documents are required to open a Retail Direct Gilt account?
When opening a Retail Direct Gilt account, you must show the following documents:
- PAN
- Mobile number
- Aadhaar number with the mobile number linked to it
- A scanned copy of your signature
- E-mail address
- Bank account details (upload a canceled cheque or enter the details on the portal manually)
5. What is the charge for opening and maintaining a Retail Direct Gilt account?
You can open a Retail Direct Gilt account without any cost on the Retail Direct Portal. There is no maintenance cost as well.
6. How safe are government security investments?
A key risk factor associated with investment is the default risk. In the case of government securities, you come in a direct contract with the government itself, which has the lowest chance of defaulting in the market. Furthermore, as you opt for the fixed interest rate securities, the coupons will be uninfluenced by any market volatility.
7. How do you open a Retail Direct Gilt account?
Visit the Retail Direct Portal and get registered using the quick link for registration available on the home page. Provide the necessary details and complete the OTP verification. Next, proceed with the KYC. Upon successful KYC, the account will be opened. Entering nomination details is mandatory. Note that the account will linked with your savings bank account.
8. Can I open a Retail Direct Gilt account if I have already invested in Gsecs through other means?
You can open a Retail Direct Gilt account on the Retail Direct Portal even if you have invested in government securities before through any other channel.
