6 Important Things to Know About RBI Retail Direct Scheme

Until now, the government bond market in India was primarily dominated by institutional investors and banks. But the launch of the RBI Retail Direct (RBI-RD) Scheme in November 2021 has paved the path for retail investors to trade government securities online seamlessly.These investors can now register for an RDG (Retail Direct Gilt) account online with the RBI to start investing in government securities and bonds . Here are 6 important things investors should know about the RBI Retail Direct Scheme -

The primary goal of the RBI-RD scheme is to provide investors with seamless access to government securities. Investors can trade government securities in primary and secondary markets through the platform. Moreover, the digital platform also makes the entire process of investing in government securities more convenient and transparent.The RD scheme eliminates the need for any intermediary between the government and investors. It can also aid financial inclusion by encouraging investors from the unorganized sector to invest in the capital markets.

Every retail investor or individual, including non-resident investors, can invest in the Retail Direct Scheme through their RDG account.But you’ll need the following to open the RDG account-

• INR savings account in India
• PAN
• Registered mobile number
• OVD (Officially Validated Document) for KYC
• Registered mobile number

To open an account, you can visit https://rbiretaildirect.in/#/rdg-account-registration and fill out the registration form. You’ll have to provide details like –

• Account Type (Single/Joint)
• Full Name
• PAN No.
• Email ID
• Mobile No.
• Date of Birth
• Login Name

Note that you’ll be required to enter the OTP received on your email address and mobile number for verification. This is followed by bank account and KYC verification. After finishing the process, you’ll receive a confirmation email with your login ID, password, and RDG account number within 3-4 days.You can then use these credentials to log in to your RDG account and start investing in government securities.

No, there are no charges for opening and maintaining the RDG account. Moreover, investors don’t even have to pay any fee to the aggregator to submit their auction bids in the primary market.But the payment gateways used to deposit and withdraw payments to and from the platform charge a fee that investors need to pay. Apart from this, there is no brokerage or account maintenance fee. This also makes the RBI Retail Direct Scheme a cost-effective method to directly invest in government securities.

Through their RDG accounts, investors can invest a minimum of Rs. 10,000 to Rs. 2 crores per security. The RBI has kept the minimum investment amount low to ensure that the maximum number of investors can benefit from the scheme.As for the securities, investors can invest in-

• Dated Government Securities (Dated G-Sec)
• State Development Loans (SDLs)
• Government Treasury Bills (T-Bills)
• Sovereign Gold Bonds (SGB)

Apart from placing non-competitive bids in the issuance of available government securities, investors can use the Retail Direct platform to access secondary markets through RBI’s trading system, known as NDS OM (Negotiated Dealing System- Order Matching).

Since its launch, more than 35,000 investors have already registered for the RBI Retail Direct Scheme . The scheme can be an excellent choice for risk-averse investors aiming to build a diversified portfolio.With sovereign bonds offering interest rates higher than traditional bank FDs, the bonds can be ideal for investors seeking a safe and reliable alternative to bank deposits. The RBI has also suggested to the government that the interest income from the RD Scheme be exempt from income tax. If the government agrees to this suggestion, then it'll further boost the scheme's popularity.

The RBI-RD scheme is an excellent initiative by the RBI to help investors access government securities. With a minimum investment of Rs. 10,000 and various securities to choose from, investors should take maximum advantage of this opportunity to generate excellent returns.But if you are new to government securities, then ensure that you clearly understand how they work before investing. An investment advisor can help you make an informed decision based on your investment objective and risk appetite.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.