RBI’s retail direct scheme for government securities to widen investor base: Economic Survey

RBI Retail Direct Scheme was launched on 12 November 2021 as a one-stop access to facilitate investment in Government securities by retail investors.

According to the survey, a vibrant secondary market provides an opportunity for investors to balance their portfolio at will.

“Availability of government securities of up to 40 years provides wide options to the investors. Trading although currently concentrated in a few securities, is showing signs of even greater spread… with the aim of facilitating the efficient direct access of retail individual investors to the G-Sec market, previously only directly accessed by large institutional investors. The scheme was going to promote financial inclusion and widen the investor base,” the Economic Survey said.

Under this scheme, retail investors can open Retail Direct Gilt (RDG) account using an online portal through which they can directly make minimum investment 10,000 and max 2 crore per security.

Retail investors can place a non-competitive bid not only in the primary issue of all central and state government securities such as treasury bills and bonds, but also in the secondary through Negotiated Dealing System-Order Matching (NDS OM), RBI’s trading system can also reach the market. Which was earlier available only to select financial institutions.

The survey also highlights that as of now, the bulk of G-Secs are held by some institutional investors such as commercial banks, insurance companies and mutual funds.

“The diversified investor base provides the government with flexibility in its lending programme. Moreover, it will enable stable demand for G-Secs from various investor categories.”

The survey also highlighted that the share of mutual funds in India’s public debt increased from 1.4% at the end of March 2020 to 2.94% at the end of March 2021. Public debt is largely owned by institutional sectors such as banks, insurance companies, provident funds. Etcetera.

Meanwhile, the share of commercial banks stood at 37.77% at the end of March 2021, down from 40.4% at the end of March 2020. The share of insurance companies and provident funds stood at 25.3% and 4.44% respectively at the end of March 2021. RBI’s share in public debt increased from 15.1% at the end of March 2020 to 16.2% as of March 31, 2021.

Meanwhile, according to the Economic Survey, the net assets under management (AUM) of the mutual fund industry rose by 24.4%. 37.3 lakh crore by the end of November 2021. From 30.0 lakh crore at the end of November 2020.