The Reserve Bank of India (RBI) has announced that it will open its direct account with the central bank for the purchase of Government Securities (G-Sec) by giving its account to small investors. G-sec is colloquially known as Bond. RBI Governor Shaktikanta Das said retail investors can now buy government bonds directly through Retail Direct. With the introduction of this system, India has joined select countries that provide direct access to buy and sell government securities.
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Experts say this level of RBI provides a great tool for government borrowing. The central bank expects to expand the gilt market and the credit market by a large margin, particularly with the government meeting its target of borrowing Rs 12 trillion in the next financial year. In this way, the RBI has now opened up a huge and endless path to borrowing from the government as it did in the domestic stock market. The difference, however, is that it is under RBI supervision.
What is the current situation
Currently, RBI allows small investors to buy government bonds on the BSE and NSE through the GoBid platform. “As part of ongoing efforts to increase retail participation and easy access to government securities, the Government Securities Market is moving beyond the aggregation model and enabling retail investors to open Gilt Securities Accounts (Retail Direct) RBI – scheduled to provide direct online access to primary and secondary markets.
India will join these countries
India will be the first country in Asia and is allowed in very few countries in the world. Currently, small investors in the UK, Brazil and Hungary are allowed to directly buy and sell government securities, which are regulated by third parties.
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