RBI Retail Direct Scheme

Prime Minister Narendra Modi launched the RBI Retail Direct Scheme on 12 Nov 2021 to bring the Government securities (G-sec) within easy reach of the average person and retail investors by simplifying the process of investment. This will significantly develop G-sec market and facilitate smooth completion of the government borrowing programme 2021-22. Under the Scheme, retail individual investors will be able to open a Retail Direct Gilt (RDG) Account with the Reserve Bank of India using an online portal (https://rbiretaildirect.org.in). The scheme aims to provide a safe, simple, direct, and secured platform to investors.

Government securities that an investor can invest through this scheme are Government of India Treasury Bills (T-Bills), Government of India dated securities (dated G-Sec), State Development Loans (SDLs), and Sovereign Gold Bonds (SGB). Any resident individual can open the RDG account and a NRI can open the account if he is eligible to invest in Government Securities under Foreign Exchange Management Act, 1999. You can hold the RDG account either singly or jointly with another retail investor who meets the eligibility criteria. The RDG accounts facilitates the investor to buy Government securities through primary auctions (non-competitive segment only), buy and sell Government securities in the secondary market, buy, and sell Sovereign Gold Bonds (SGBs) in the primary and secondary market, investor services such as account statement, nomination facility, pledge/lien, gift transactions, grievance redressal, and managing profile like contact details etc. The auction periodicity of various financial instruments in the primary markets is as indicated in the table below:

 

S. No. Government security Primary auction usually held on Minimum Investment Amount/ Quantity Maximum Amount of Investment
1 Government of India Treasury Bills (T-Bills) Wednesdays ₹ 10,000/- Government restricts the aggregate allocation of all non-competitive bids to a maximum of 5% of the aggregate nominal amount of the issue within the notified amount, as specified by the Government of India, or any other percentage determined by RBI.
2 Government of India dated securities (dated G-Sec) Fridays ₹ 10,000/- ₹2 crore (face value) per security per auction
3 State Development Loans (SDLs) Tuesdays ₹ 10,000/- 1% of notified amount (face value) per auction
4 Sovereign Gold Bonds (SGBs) Weekly windows announced by RBI in its press release One gram of gold An individual may subscribe max 4 kg of SGBs per fiscal year

 

The RBI charges no fee for opening and maintaining the Retail Direct Gilt (RDG) account. It also does not charge any fee at the time of submission of bids in primary auctions. However, the investor must bear the applicable payment gateway charges while funding his/her purchases. For the retail investor, Government securities offer an option for low-risk, long term investment because G-sec yield curve extends up to 40 years, and government issues securities at different points on the yield curve. The major advantage of G-Secs is that they are risk free in the domestic market context and carry no credit risk since they carry sovereign guarantee. However, almost all G-Secs are taxable securities and hence the entire interest received during the financial year on such investment is taxable in the hand of the investor at his applicable tax slab rate. On the other hand, government treats investment in Gilt mutual funds as a capital investment and thus applies capital gains tax on the gains made at the time of redemption on such funds. Thus, investments in Gilt funds are more tax advantageous than direct investments in the G-Secs.

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Welcome to Maloo Investwise

Disclaimer: Dear Investor, By clicking on the submit button you will be redirected to our secured website. This link is provided only for the convenience of our visitors. The site has the necessary tools to help you understand your risk profile, asset allocation, and goal calculations. You will also be able to open a folio and transact online in mutual funds.