Direct access to government securities trading platform to small investors
- Posted By
6th Feb, 2021
- The Reserve Bank of India (RBI) said that it will give small investors direct access to its government securities trading platform.
What are government securities (g-secs)?
- These are debt instruments issued by the government to borrow money.
- The two key categories are-
- Treasury bills – short-term instruments that mature in 91 days, 182 days, or 364 days
- Dated securities – long-term instruments, which mature anywhere between 5 years and 40 years
- Like bank fixed deposits, g-secs are not tax-free.
Status of small investors for g-sec
- Small investors can invest indirectly in g-secs by buying mutual funds or through certain policies issued by life insurance firms.
Previous initiatives to encourage direct investment by retail investors in g-sec
- Non- competitive bids: Retail investors are allowed to place non-competitive bids in auctions of government bonds through their Demat accounts.
- Facilitation: Stock exchanges act as aggregators and facilitators of retail bids.
- App-based service: NSE GoBid app or retail debt market (RDM) segment at the Exchange.
Need for the proposal
- Dominance of big investors: The g-sec market is dominated by institutional investors such as banks, mutual funds, and insurance companies.
- Crunch of liquidity: There is no liquidity in the secondary market for small investors who would want to trade in smaller lot sizes.
How it is beneficial for small investors?
- Easier process:RBI intends to make the whole process of g-sec trading smoother for small investors.
- Opening accounts: It will help investors by allowing people to open accounts in RBI’s e-kuber system.
- The market for small investors: It is hoping to create a market of small investors who will invest in these instruments.