Retail Direct Scheme: Meaning, Eligibility, How to open Retail Direct Gilt account, fees and charges

Many investors wish that they could buy and sell Government securities directly rather than doing it through debt mutual funds. The RBI has decided to fulfil this wish of retail investors and has taken a step in this direction by issuing guidelines for the Retail Direct Scheme. By opening a Retail Direct Gilt (RDG) account, you can buy and sell Government securities on your own.

Retail Direct Scheme

Before July 2021, if you wanted to invest in Government securities as a retail investor, one of the options was through debt mutual funds. If you took this route, the choice of securities to be bought and sold was with the fund manager. As an investor, you had no say in this. However, on 12 July 2021, the RBI announced the Retail Direct Scheme guidelines that allow retail investors to open gilt accounts with the RBI. 

Individual investors can use these accounts to invest directly in Government securities. As an investor, you will now have a choice to buy the securities that you want at any time. You will also have the choice to sell the securities that you own at any time. This article explains the Retail Direct Scheme, its features, and how an individual can use it to invest directly in Government securities.

What is the Retail Direct Scheme?

The Retail Direct Scheme is a comprehensive scheme that provides various facilities to retail investors in the Government securities market through an online portal. It allows an investor to do the following:

  • Open and maintain a Retail Direct Gilt (RDG) account
  • Invest in Government securities through the primary market using the RDG account
  • Buy and sell Government securities through the secondary market using the RDG account.
  • NDS-OM is RBI’s screen-based, anonymous electronic order matching system for trading in Government securities in the secondary market

Government securities retail investors can invest in

With an Retail Direct Gilt account, retail investors can invest in various Government securities such as:

  • Government of India Treasury Bills (T-Bills)
  • Government of India dated securities (A dated security is a Government security, usually with a tenure ranging from 5 to 40 years)
  • Sovereign Gold Bonds (SGBs)
  • State Development Loans (Securities issued by various State Governments)

Related: Dummy’s guide to investing in government bonds or G-Secs Eligibility criteria for opening an RDG account

Retail investors can register under the Retail Direct Scheme for opening a RDG account if they have the following:

  • A savings bank account in India
  • Permanent Account Number (PAN)
  • Any officially valid document (OVD) for KYC (Aadhaar, passport, driving licence, voter’s card, etc.)
  • Valid email ID
  • Registered mobile number

Retail investors can open an RDG account singly or jointly.

Opening an Retail Direct Gilt (RDG) account

A retail investor can take the following steps to open an RDG account:

  • Register on the online portal by filling up the registration form. 
  • A One Time Password (OTP) will be received on the registered mobile number and email ID. Use the OTP to authenticate and submit the form.
  • The applicant will have to adhere to the KYC guidelines at the time of registration.
  • On successful registration, the RDG account will be opened, and the online portal access details will be conveyed to the user through SMS and email.

As discussed earlier, the online platform gives retail investors to participate in Government securities through the primary as well as secondary market.

Primary market participation

A retail investor can participate in the issuance of Government securities and SGBs through the primary market in the following manner:

  • The investor must submit a bid for securities. 
  • Payment for securities can be made either through netbanking or UPI from the linked bank account. 
  • The amount will be debited at the time of submission of bids on the portal. 
  • The allotted securities will be credited to the investor’s RDG account on the day of settlement.

Buying and selling of Government securities through the secondary market

If a retail investor wishes to purchase an already issued Government security, they can do so through the secondary market. A registered investor can access the secondary market for buying and selling Government securities through the RBI’s NDS-OM system.

  • Buying of securities from the secondary market: An investor will have to place a ‘Buy’ order for the securities and make the payment. The purchased securities will be credited to the investor’s RDG account on the day of settlement.
  • Selling of securities from the secondary market: An investor will have to place a ‘Sell’ order for the securities. The securities will be blocked at the time of placing the order. On the day of settlement, the securities will be debited and the payment against the sale of securities will be credited to the investor’s linked bank account.

Investor services for Retail Direct Gilt (RDG) account

Apart from buying and selling Government securities through the primary and secondary market, an investor can avail of the following services through the online portal:

  • Account statement: An investor can check the transaction history and securities holdings by logging into the RDG account. The investor will receive all transaction alerts through SMS and email.
  • Nomination facility: An investor can fill the nomination form in the prescribed format, duly sign it, and upload it. A maximum of two nominees can be appointed. In the event of the death of the registered investor, the securities available in the RDG account can be transferred to the RDG account of the nominee on submission of the death certificate and transmission form.
  • Pledge/lien: Securities held in the RDG account will be available for pledge/lien. This service is useful for taking a loan by offering the securities as collateral.
  • Gift transactions: A retail direct investor will have an online facility to gift Government securities to other retail direct investors.
  • Grievance redressal: If an investor has any query or grievance related to the Retail Direct Scheme, they can raise it on the portal. The query/grievance will be handled/resolved by the Public Debt Office (PDO) of the RBI.

Fees and charges of Retail Direct Gilt (RDG) account

No fees will be charged by the RBI for any transactions done on the platform. There will be no fee for opening and maintaining an RDG account with the RBI. So, the account opening is free. Also, there is no annual maintenance charge. No fee will be charged for submitting bids for purchasing securities at the time of primary issuance. However, the investor will have to bear the payment gateway fee, if any.

Last words

At the start of the article, we mentioned how one of the ways of participating in the Government securities market is through debt mutual funds. If you take this route, the fund manager does the buying and selling of securities, and you have no say in this. But, with the introduction of the Retail Direct Scheme, you can now open a RDG account with the RBI and buy/sell Government securities at any time. In short, if you have a Retail Direct Gilt Account, you will always be in complete control of your Government securities portfolio.

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