Business EconomPosted at: Nov 12 2021 8:28PM Capital markets experts hail RBI scheme for retail investors
New Delhi, Nov 12 (UNI) Industry analysts and experts have given thumbs up to the Reserve Bank of India (RBI)'s scheme providing retail investors direct access to government securities (G-Sec) market.
Bal Krishna Piparaiya, Principal Director, Brickwork Ratings said that the scheme will boost the hitherto large untapped potentials of Gilt investment and will provide direct, convenient, cost-free liquid and zero risk investment opportunity in Gilt to high networth individuals (HNIs) and other retail investors.
"This is a widely much awaited positive reform and will forge a paradigm shift in the bond market, spiking up demand for government bonds and lowering the cost of the government borrowing (which has so far been higher than banks’ deposit rates), going forward, in the long run," Piparaiya said.
Under the Retail Direct Scheme of the RBI, small individual investors could open Retail Direct Gilt Account’ (RDG Account) with the central bank and buy government securities.
The scheme seeks to widen the investor base for government securities by creating an ecosystem whereby retail investors can easily participate in the government securities market which has so far been dominated by institutional investors.
Besides increasing retail participation in the government securities, the scheme would deepen the bond market and allow a fair, market determined rates across the yield curve.
Nitin Shanbhag, Sr. Executive group VP- Motilal Oswal Private Wealth Management said that G-sec market is currently dominated by institutional investors like banks, insurance companies, Mutual Funds, etc. with lot sizes of Rs 5 crores and higher.
"Hence this segment was largely inaccessible to retail participants. G-secs witnesses highest volumes within the fixed income market since they offer a risk-free rate, hence no credit risk. Retail investors could thus far participate in G-secs only through Debt Mutual Funds, although with limited options," he said.
The RBI Retail Direct Scheme will enable retail investors to participate into G-secs across various tenors with flexible investment horizons and with the ability to get regular cash flows through risk-free coupons, Shanbhag added.
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