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Direct Access To Its Government Securities Trading Platform : RBI

Direct Access To Its Government Securities Trading Platform:

The Reserve Bank of India (RBI) has given small investors direct access to its government securities trading platform.

  • Now, Retail investors can directly open their gilt accounts with RBI, and trade in government securities.
    What is the need for the current proposal, then?
  • The g-sec market is dominated by institutional investors such as banks, mutual funds, and insurance companies. These entities trade in lot sizes of Rs 5 crore or more.
  • So, there is no liquidity in the secondary market for small investors who would want to trade in smaller lot sizes. In other words, there is no easy way for them to exit their investments.
  • Thus, currently, direct g-secs trading is not popular among retail investors.

G- Secs:

  • Government security (G-Sec) is a tradeable instrument issued by the central government or state governments
  • It acknowledges the government’s debt obligations.
  • Such securities can be both short term (treasury bills — with original maturities of less than one year) or long term (government bonds or dated securities — with an original maturity of one year or more).
  • The central government issues both: treasury bills and bonds or dated securities.
  • State governments issue only bonds or dated securities, which are called state development loans.
  • Since they are issued by the government, they carry no risk of default, and hence, are called risk-free gilt-edged instruments.
  • FPIs are allowed to participate in the G-Secs market within the quantitative limits prescribed from time to time.
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