The Reserve Bank of India (RBI) said it would allow retail investors to open gilt accounts with the central bank to invest in government securities directly and without the help of intermediaries.
“The Central government and the Reserve Bank have taken several measures to encourage retail investment in government securities,” the RBI said.
“These include introduction of non-competitive bidding in primary auctions, permitting stock exchanges to route primary purchases and allowing a specific retail segment in the secondary market.”
“In continuation of these efforts,It is proposed to provide retail investors with online access to the government securities market — both primary and secondary — directly through the Reserve Bank (Retail Direct),” RBI Governor Shaktikanta Das said in a statement.
“This will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market,” he added.
“This is a major structural reform placing India among select few countries which have similar facilities. This measure together with HTM [hold to maturity] relaxation, will facilitate smooth completion of the government borrowing programme in 2021-22,” the RBI Governor added.
The RBI will soon come out with modalities for opening of such accounts.
Later, answering questions at a press conference, Mr. Das said this move placed India in the select league of nations such as the U.S. and Brazil which have such facilities. “Possibly India is the first in Asia to do so. We want to provide direct access to investors and they can directly participate in the bidding process using the RBI’s ekuber system.”
He said the provision would not in any way hinder flow of investors’ funds into mutual fund schemes and bank deposits.
“Allowing retail participation in the G-Sec market is a bold step towards the financialisation of a vast pool of domestic savings and could be a game-changer,” said SBI Chairman Dinesh Khara.
Rajiv Sabharwal, MD and CEO, Tata Capital said “Allowing direct retail participation in the government securities’ markets is a welcome move which broadens the investor base. Also, from a retail perspective, this opens up an additional investment avenue.”