Q. With reference to India, consider the following statements:

1. Retail investors through Demat account can invest in Treasury Bills and Government of India Debt Bonds in the primary market
2. The “Negotiated Dealing System-Ordering Matching” is a government securities trading platform of the Reserve Bank of India.
3. The “Central Depository Services Ltd” is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.

Which of the statements given above is/are correct?

  • 1 only
  • 1 and 2
  • 3 only
  • 2 and 3

Answer: b) 1 and 2

Notes:
  • Retail investors have multiple channels to invest in treasury bills (T-Bills) and Government bonds. It is mandatory to open demat account for a retail investor to invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in primary market.
  • The Negotiated Dealing System Order Matching is an electronic trading platform operated by the Reserve Bank of India to facilitate the issuing and exchange of government securities and other types of money market instruments. 
  • CDSL was promoted by BSE Ltd. jointly with leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC Bank, Standard Chartered Bank and Union Bank of India.
    • Reserve Bank of India is not its promoter.
RBI Retail Direct Scheme
  • As part of continuing efforts to increase retail participation in Government Securities, the RBI Retail Direct facility was announced in the Statement of Developmental and Regulatory Policies dated February 05, 2021 for improving ease of access by retail investors through online access to the Government Securities Market – both primary and secondary – along with the facility to open their gilt securities account (Retail Direct) with the RBI.
    • Retail Investor is a non-professional investor who buys and sells securities or funds that contain a basket of securities such as mutual funds and Exchange Traded Funds (ETFs).
    • A Gilt Account can be compared with a bank account, except that the account is debited or credited with treasury bills or government securities instead of money.
  • Scope:
    • RBI Retail Direct is a comprehensive scheme which provides the following facilities to retail investors in Government Securities market through an online portal:
      • Open and maintain a Retail Direct Gilt Account (RDG Account)
      • Access to primary issuance of Government Securities
      • Access to Negotiated Dealing System-Order Matching Segment (NDS-OM)
  • Eligibility:
    • Retail investors, as defined under the scheme, can register under the Scheme and maintain a RDG Account, if they have the following:
      • Permanent Account Number (PAN) issued by the Income Tax Department
      • Access to primary issuance of Government Securities
      • Any Officially Valid documents (OVD) for KYC purpose
      • Valid e-mail ID
      • Registered mobile number
    • Non-Resident retail investors eligible to invest in Government Securities under Foreign Exchange Management Act, 1999 are eligible under the scheme.
    • The RDG account can be opened singly or jointly with another retail investor who meets the eligibility criteria.
  • Significance:
    • Building an Atmanirbhar Bharat:
      • So far, in the government securities market, small investors class, salaried class, small traders had to invest through banks and mutual funds in an indirect manner.
    • Improved Ease of Access:
      • It will make the process of G-sec trading smoother for small investors therefore it will raise retail participation in G-secs and will improve ease of access.
    • Facilitate Government Borrowings:
      • This measure together with relaxation in mandatory Hold To Maturity (securities that are purchased to be owned until maturity) provisions will facilitate smooth completion of the government borrowing programme in 2021-22.
    • Financialise Domestic Savings:
      • Allowing direct retail participation in the G-Sec market will promote financialisation of a vast pool of domestic savings and could be a game-changer in India’s investment market.
  • Other Measures Taken to Increase Retail Investment in Government Securities:
    • Introduction of non-competitive bidding in primary auctions.
      • Non-competitive bidding means the bidder would be able to participate in the auctions of dated government securities without having to quote the yield or price in the bid.
    • Stock exchanges to act as aggregators and facilitators of retail bids.
    • Allowing a specific retail segment in the secondary market.
      • The secondary market is the market where investors buy and sell securities they already own.
      • Primary market deals with new securities being issued for the first time.