The Reserve Bank of India (RBI) announced a plan earlier this week that allows ordinary investors to participate directly in the government securities market. They can create and maintain a ‘Retail Direct Gilt Account' (RDG Account) with the RBI via a portal, which will also provide them access to the primary issuance of G-Secs as well as the secondary market. Increased involvement will help the government's borrowing strategy, which is expected to total approximately Rs.12 lakh crore each year. It may also put pressure on bank fixed deposits and post-office savings.
Investors must have a rupee savings bank account in India, a PAN, and a valid KYC document to register online. The Foreign Exchange Management Act of 1999 allows non-resident individual investors to participate in government assets. An RDG Account can be created either individually or jointly. Investors complete an online form. When their RDG Account is activated, they will receive information on how to access the site through SMS/email. There will be no fees associated with opening/maintaining the account or submitting bids.
Only one bid per security is permitted for primary market participation. Payment can be done using online banking or UPI. If UPI is utilised, monies in the connected bank account can be blocked at the time of bid submission; the amount would be deducted upon auction allotment. In due future, a similar option through banks will be made accessible. On the day of settlement, allotted securities will be credited to the investor's RDG Account. Any refunds will be refunded to the investor's bank account. For secondary market trading, registered investors can use the portal's transaction link to purchase or sell gilts. On the day of settlement, securities purchased will be credited to the RDG Account. The date of commencement will be announced by the RBI.
G-Sec rates fluctuate due to a variety of variables, and investors must keep a watch on both domestic and global trends. Fixed-income investors, according to the market, sink and sail with the direction of interest rates. In a rising interest rate environment, investors suffer capital losses while making capital profits in a falling rate environment. When gilts are held to maturity, this risk is eliminated. In turn, inflation and interest rates are influenced by a variety of other variables, including economic growth, sovereign rating, money supply, government borrowing, global liquidity, and geopolitical developments. As a result, investors must keep a close eye on everything.
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