- Date : 20/11/2018
- Read: 3 mins
Long-term investment opportunities in debt with sovereign guarantee now at retail investors’ fingertips.
Traditionally, retail investors have not been active stakeholders in Government Securities (G-Secs), even though yields on government bonds are currently outperforming those offered by term deposits and debt mutual funds.
With a view to making government securities more accessible to the common man and offering an opportunity to earn higher returns, the National Stock Exchange (NSE) launched an online platform on 19th November that will make it easy for retail investors to invest across a spectrum of treasury products.
The new service, named NSE goBID, was launched by SEBI Chairman Ajay Tyagi and will be available as a mobile application as well as a web-based platform.
Through the platform, investors can procure short-term Treasury Bills (T-Bills) of 91 days, 182 days, and 364 days (between Monday and Tuesday) going all the way to long-term bonds from 1 year to 40 years (between Tuesday and Thursday).
Investors need to place a bid after picking a security of their choice. The bid spread ranges from a minimum of Rs 10,000 to a maximum of Rs 2 crore. Once the bid is accepted, the securities reflect in the investor’s demat account within two days and all future interest income is also directly credited to the same account.
Both the components of interest income and capital gains on G-secs are taxable. The interest income attracts tax at a nominal rate, while capital gains are taxed at 10%.
Retail participation in G-Secs was allowed only after SEBI permitted the exchanges to set up non-competitive bidding platforms. This was announced by the RBI in the 2016-17 Union Budget.
RBI facilitates a weekly auction of G-Secs and T-Bills, where 5% of the notified amount is available for investors under the non-competitive bidding scheme.
At a time when the country is witnessing a surge in digital payments, the NSE goBID app sets another milestone for inclusive financial growth. The app will be available to all registered investors with any of the NSE’s trading members, including banks and brokering agencies.
The move is expected to attract new retail investors. Investors will be able to make direct payments using their bank accounts either through an internet banking platform or the Unified Payments Interface (UPI).
SEBI will review the performance of the app on a regular basis and coordinate with the exchanges to further improve the service.