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RBI’s Retail Direct Scheme

RBI’s Retail Direct Scheme:

The Prime Minister has launched the Reserve Bank of India (RBI)- Retail Direct Scheme to open up the Government bond market for the retail investors.

  • In February 2021, RBI proposed to allow retail investors to open gilt accounts with the central bank to invest in Government securities (G-secs) directly.
  • Under the scheme, retail investors (individuals) will have the facility to open and maintain the ‘Retail Direct Gilt Account’ (RDG Account) 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.
  • The scheme places India in a list of select few countries offering such a facility.
  • Aim:
    • The move is aimed at diversifying the government securities market, which is dominated by institutional investors such as banks, insurance companies, mutual funds and others.
    • While foreign portfolio investors were allowed to invest in G-secs, their holding is around 2-3% in the overall market.
  • Scope:
    • It offers a portal avenue to invest in Central government securities, treasury bills, State development loans and sovereign gold bonds.
    • They can invest in primary as well as secondary market government securities markets.
      Negotiated Dealing System-Order Matching Segment (NDS-OM) means RBI’s screen based, anonymous electronic order matching system for trading in Government securities in the secondary market.