- Date : 29/01/2020
- Read: 3 mins
Use the GoBid app to buy government bonds using your smartphone. Here’s how
The National Stock Exchange (NSE) has launched a new mobile- and web-based platform called ‘NSE GoBid’ (Government Bond Investment Destination) that will allow retail investors to invest in Government securities (G-secs).
What is it?
Government securities come with a sovereign guarantee and are considered credit risk-free instruments. These investments are available for varying duration and allow for portfolio diversification. They may often provide tax benefits.
Investors will be able to participate in the non-competitive auctioning of securities such as Treasury bills of 91 days, 182 days, and 364 days, and various government bonds ranging from 1 year to 40 years.
Related: What are tax-free bonds and how they work
How to register?
The GoBid facility is available for all investors who are registered with a trading member of the NSE. The desktop version is available via weblink or mobile app on Android phones (version 4.4 and above).
You will need to provide KYC details, PAN, and demat account particulars. The account details will have to be authenticated via an OTP sent to your registered mobile number and email ID.
How does it work?
After the one-time registration, users can participate in weekly auctions. The GoBid platform displays all securities available for bidding, with relevant details and price.
Only a single bid per security is allowed. For placing a bid, investors need to select the security and investment value (minimum Rs 10,000).
The payment for the security has to be made via the bank account linked to the demat account registered with the platform. The allocated securities will then be credited to the investor’s demat account.
Refunds, if any, will be credited back to the bank account.
Related: Bond ETFs may soon be a part of the Indian financial markets
From the government’s perspective, the cost associated with setting up the infrastructure is significantly low and allows for a broad-based participation from the general public. It offers the opportunity to make G-sec investments more mainstream and enhances the government’s borrowing capacity from retail investors.
Related: NSE launches online platform to boost retail participation in government securities
Are there any limitations?
Yes, there are a few things one needs to watch out for.
Understating bond pricing is not as simple. Bond allotment happens at the weighted/average yield in competitive auctions. The interest rate coupons change often and other yield changes may confuse retail investors.
The price for short-term treasury bills can be quite volatile, while super long-term bonds are usually stable.
Once purchased, the securities are difficult to liquidate mid-term in the secondary market. Even though you can try to sell them via the stock exchange, there isn’t a lot of demand there. In case you urgently need funds, the capital locked with G-secs cannot help.
Related: 5 benefits of demat account every Indian investor must know about
Another limitation is the inability to pledge or mortgage the investment. Loans cannot be sourced against G-secs.
While standard bank deposits offer good returns on investment (RoI) up to five years, G-secs provide a good option for those looking to park funds for 10 years or more. It can add a solid base to debt allocation in your investment portfolio.
The National Stock Exchange (NSE) has launched a new mobile- and web-based platform called ‘NSE GoBid’ (Government Bond Investment Destination) that will allow retail investors to invest in Government securities (G-secs).
What is it?
Government securities come with a sovereign guarantee and are considered credit risk-free instruments. These investments are available for varying duration and allow for portfolio diversification. They may often provide tax benefits.
Investors will be able to participate in the non-competitive auctioning of securities such as Treasury bills of 91 days, 182 days, and 364 days, and various government bonds ranging from 1 year to 40 years.
Related: What are tax-free bonds and how they work
How to register?
The GoBid facility is available for all investors who are registered with a trading member of the NSE. The desktop version is available via weblink or mobile app on Android phones (version 4.4 and above).
You will need to provide KYC details, PAN, and demat account particulars. The account details will have to be authenticated via an OTP sent to your registered mobile number and email ID.
How does it work?
After the one-time registration, users can participate in weekly auctions. The GoBid platform displays all securities available for bidding, with relevant details and price.
Only a single bid per security is allowed. For placing a bid, investors need to select the security and investment value (minimum Rs 10,000).
The payment for the security has to be made via the bank account linked to the demat account registered with the platform. The allocated securities will then be credited to the investor’s demat account.
Refunds, if any, will be credited back to the bank account.
Related: Bond ETFs may soon be a part of the Indian financial markets
From the government’s perspective, the cost associated with setting up the infrastructure is significantly low and allows for a broad-based participation from the general public. It offers the opportunity to make G-sec investments more mainstream and enhances the government’s borrowing capacity from retail investors.
Related: NSE launches online platform to boost retail participation in government securities
Are there any limitations?
Yes, there are a few things one needs to watch out for.
Understating bond pricing is not as simple. Bond allotment happens at the weighted/average yield in competitive auctions. The interest rate coupons change often and other yield changes may confuse retail investors.
The price for short-term treasury bills can be quite volatile, while super long-term bonds are usually stable.
Once purchased, the securities are difficult to liquidate mid-term in the secondary market. Even though you can try to sell them via the stock exchange, there isn’t a lot of demand there. In case you urgently need funds, the capital locked with G-secs cannot help.
Related: 5 benefits of demat account every Indian investor must know about
Another limitation is the inability to pledge or mortgage the investment. Loans cannot be sourced against G-secs.
While standard bank deposits offer good returns on investment (RoI) up to five years, G-secs provide a good option for those looking to park funds for 10 years or more. It can add a solid base to debt allocation in your investment portfolio.
