RBI allows retail investors to open G-Sec accounts to directly participate in government securities
The Reserve Bank of India on Friday announced a major structural reform to allow retail investors to directly participate in government securities. RBI Governor Shaktikanta Das said that retail investors will soon be able to open Gilt (G-Sec) accounts with the central bank. The move will help deepen bond markets in the country.
The bank will soon issue guidelines for the process to open accounts. The platform will be called "Retail Direct".
With this, India will join a handful of countries where retail investors have direct access to government bonds - both primary and secondary.
“This will broaden the investor base and provide retail investors with enhanced access to participate in the government securities market. This is a major structural reform placing India among select few countries which have similar facilities,” he said.
What is G-Sec
A Government Security (G-Sec) is a tradeable instrument issued by the Centre or states. It acknowledges the government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more).
In our country, the Centre issues both, treasury bills and bonds or dated securities while the states issue only bonds or dated securities, which are called the State Development Loans (SDLs).
G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.
The RBI's move is aimed at encouraging retail investment in government securities.
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