RBI Notifications

What is the Retail Direct Scheme for investors in G-Secs?


From UPSC perspective, the following things are important :

Prelims level : Integrated Ombudsman Scheme, RBI Retail Direct Scheme

Mains level : Not Much

The RBI has announced proposals for the Retail Direct Scheme for investors in government securities and the Integrated Ombudsman Scheme.

What is the Retail Direct Scheme?

  • Under the scheme, small investors can buy or sell government securities (G-Secs), or bonds, directly without an intermediary like a mutual fund.
  • It is similar to placing funds in debt instruments such as fixed deposits in banks.
  • However, the same tax rules apply to income from G-Secs.

Benefits of RDS

  • With the government being the borrower, there is a sovereign guarantee for the funds and hence zero risk of default.
  • Also, government securities may offer better interest rates than bank fixed deposits, depending on prevailing interest rate trends.
  • For example, the latest yield on the benchmark 10-year government securities is 6.366%.

How can individuals access G-Sec offerings?

  • Investors wishing to open a Retail Direct Gilt account directly with the RBI can do so through an online portal set up for the purpose of the scheme.
  • Once the account is activated with the aid of a password sent to the user’s mobile phone, investors will be permitted to buy securities either in the primary market or in the secondary market.
  • The minimum amount for a bid is ₹10,000 and in multiples of ₹10,000 thereafter. Payments may be made through Net banking or the UPI platform.

Why was it necessary to introduce this scheme?

  • Broader investor base: The scheme would help broaden the investor base and provide retail investors with enhanced access to the government securities market — both primary and secondary.
  • Institutional investment: Accessing retail investors could free up room for companies to bring funds from institutional investors which may otherwise have been cornered by the government.
  • Diverse borrowing for government: This scheme would facilitate smooth completion of the Government borrowing programme in 2021-22.
  • Structural reform: It is a major structural reform placing India among select few countries which have similar facilities.

Why is the RBI setting up an Integrated Ombudsman?

  • Prior to the introduction of this scheme, the RBI had three different ombudsman schemes to aid dispute resolution with respect to banks, NBFCs, and non-bank pre-paid payment issuers (PPIs).
  • They were operated by the RBI through 22 ombudsman offices.
  • The RBI would now appoint the Ombudsman and a Deputy Ombudsman for three years.
  • Complaints may be made either physically to the Centralised Receipt and Processing Centre or the RBI’s offices; or electronically through the regulator’s complaint management system.

Back2Basics: Government Securities

  • These are debt instruments issued by the government to borrow money.
  • The two key categories are:
  1. Treasury bills (T-Bills) – short-term instruments which mature in 91 days, 182 days, or 364 days, and
  2. Dated securities – long-term instruments, which mature anywhere between 5 years and 40 years
  • T-Bills are issued only by the central government, and the interest on them is determined by market forces.


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