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RBI Retail Direct Scheme

The RBI Retail Direct Scheme was launched on November 12, 2021 by the Indian Government as a one-stop solution for individual investors to invest in government securities, treasury bills, and sovereign gold bonds issued by the Central and State governments. Prior to the introduction of this scheme in India, it was extremely difficult for individual investors to find a platform where they can freely and effortlessly trade in government bonds and securities. In fact, the only platform available for this purpose were the stock exchange markets of India. With the launch of the scheme, retail investors have now gained access to the trade of government securities in both primary and secondary financial markets in India.
Rbi Retail Direct Scheme
To give effect to a completely online and end-to-end trade in government securities, the Indian Government has also launched the RBI Direct Gilt portal which contains all financial, investment and payment related services provided under the scheme. Investors can avail the benefits of the portal by creating an account on it, by furnishing the required set of personal details and documents, absolutely free of cost. Additionally, the Clearing Corporation of India or CCIL has been mandated to oversee and ensure a smooth sale and transactions of securities on the platform by performing a range of roles and responsibilities under the authorisation of the Reserve Bank of India.

Table of Contents

RBI Retail Direct Scheme

RBI Retail Direct Scheme is a government initiative announced for individual retail investors in India, whereby they can invest in all kinds of government securities issued by the Central and State Governments in the online mode. RBI describes the scheme as a one-stop solution that facilitates the trade of government securities with individual retail investors, along with other additional related services. For the purpose, the investor shall have to open a Gilt Securities account termed as “Retail Direct Gilt” (RDG) with the RBI on the RBI Retail Direct Portal.

Other additional services provided under the scheme include delivery of account statements and financial transactions, tracking status of securities holding, choosing a nominee for the securities, pledges and liens of the securities held, gifting securities to other individual retail investors, and a grievance redressal mechanism for users of the RBI Retail Direct portal. Trading of securities under the RBI Retail Direct Scheme is applicable to both primary and secondary markets. The primary issue of securities can be bought by bidding in the auction held for the purpose, whereas the securities issued in the secondary markets are bought using the Negotiated Dealing System-Order Matching System or NDS-OM. Both primary bidding auction and NDS-OM have been discussed thoroughly in detail below.

Eligibility under the RBI Retail Direct Scheme

All individual retail investors must are eligible to participate in the scheme provided they possess: 
  • A Savings bank Account which accepts deposits in Rupees
  • A valid PAN card
  • Any Officially valid documents for the applicant’s KYC
  • A valid and functional e-mail address
  • A Registered mobile number
  • Non-resident retail investors must be eligible to invest in Government securities under Foreign Exchange Management Act, 1999

Benefits of the RBI retail Direct Scheme

S.No. Benefits of the Retail Direct Scheme
1.
Open a gift account with the RBI
2.
Investors can place non-competitive bids in primary issuance of government securities
3.
Government can also access secondary market through NDS-OM under RBI’s trading Scheme
4.
Investors will receive any interest or maturity proceeds directly into their bank accounts
5.
Accounts under the scheme can be opened both individually and jointly by retail investors

RBI Direct Gilt Account

To avail the benefits of the RBI Retail Direct Scheme, the beneficiaries must open an account under the scheme termed as RBI Direct Gilt Account. To open the Direct Gilt Account, the beneficiary must first register online on the RBI Retail Direct Portal. To register themselves, the applicant must begin filling out details like name, residential address, PAN, mobile number, e-mail ID, bank account number, and type of the account to be opened. After filling out all the required details, an OTP will be sent to the mobile number and email ID for their verification. The bank account details furnished in the application shall also be verified by sending an OTP on the registered mobile number. After the successful verification of the contact information and bank account number, the details can be finally submitted on the portal.
The next step is to initiate the KYC process of the applicant, which can be done in two ways, the CKYC method and the offline KYC method. In the CKYC method, the details of the applicant are searched in the CKYC database maintained by the government using the CKYC number. A CKYC number is the number allotted to any KYC document issued to the applicant by the government, for example- PAN, Aadhar number, etc. No additional information or documents are required to be submitted as the relevant details are drawn from the document itself.
To opt this method, the applicant must make sure that he has any of the prescribed government issued KYC documents in his possession. On the other hand, the applicants who lack KYC documentation, must complete his KYC in the offline mode, by submitting a copy of the PAN and Aadhar XML file from the UIDAI link provided, submit additional details, and make a declaration under the Prevention of Money Laundering Act and the Foreign Account Tax Compliance Act.
Following the successful KYC, the RBI Direct Gilt Account shall be opened in the name of the applicant and he shall receive a login ID, password, and account number, using which he can successfully login into his account on the RBI Retail Direct Portal. Opening and maintaining the RBI Retail Direct Gilt Account is absolutely free of cost.

RBI Retail Direct Gilt Portal

RBI Retail Direct Portal is a single platform where all the services under the RBI Retail Direct Scheme are present. It is on this portal that the investor can login to his Retail Direct Gilt Account and avail of all services and benefits under the scheme. The services present on this portal can be broadly categorized into four categories, namely, the on-boarding of retail investors, investment services, and Coupon Payment services.
As far as the on-borading of Retail Direct Investors are concerned, the following services are provided by the Retail Direct Portal: 
  • Opening and Management of the Retail Direct Gilt Account
  • Facilitate participation of retail investors in non-competitive bidding of primary issuance of government securities in auctions. 
  • Facilitate Sovereign Gold Bond Scheme
  • Facilitate the access of NDS-OM to retail investors buying government securities in the secondary market.
The investment services provided on this platform include:
  • Delivery of Account Statement
  • Facility to choose and file a nominee
  • Pledge and Lien of securities
  • Securities traded as gifts

Retail Investment

Primary Market

Securities issued by the Central Government, State governments, treasury bills, and Sovereign Gold Bonds can be traded in the primary market under the RBI Retail Direct Scheme, through the process of bidding in primary auctions organized for the purpose. The Clearing Corporation of India (CCIL) is the authority responsible for collecting the receiving bids of the Retail Direct Investors participating in such auctions. However, in case of SGBs, the bids of the investors are directly submitted to the Reserve Bank of India. The auctions are conducted on a non-competitive basis, meaning the biddings in the auctions are submitted on the basis of quantity, rather than price of the securities decided by its competitive bidders. Accordingly, the minimum and maximum limits on bids under the scheme have been mentioned in the table below.
Minimum Limits Maximum Limits
Government Securities
Rs. 10000
Rs. 2 crores
Treasury Bills
Rs. 10000
5% of the face value
Sovereign Gold Bonds
1 gram
1% of the face value of the SGB
Bids proposed by the investors under the scheme can be placed or withdrawn during the bidding interval or subscription period for government securities and SGBs respectively. While the fundings for government securities are based on indicative prices and accrued interests along with a markup for protection against adverse price movements till the settlement of the auction, the fundings for SDGs are based on price of the bonds, declared for that particular issue only. Such markups shall be refunded to the investor after the final allocation of securities, directly into the bank accounts of the investors. The payments of the fundings for bids can be made through UPI and net banking on payment gateways linked to the RBI Direct Gilt Portal. Such payments can be made either at the time of bidding, or later, but prior to the closure of bidding and subscription window. Bids not funded before the expiry of the due date shall be canceled by the RBI.
Based on the final results at the primary auction, the securities are allotted either as full allotments or partial allotments. In case of full allotments, each bidder is allotted securities worth the total amount of the bid he has placed, whereas in case of partial allotments, the bidder only receives a portion of the aggregate value of the bid, based on the percentage decided during the declaration of the auction results. Once the securities are allotted, a revised consideration for the allotment is made based on the weight average price of the securities declared by the RBI. After the revised consideration, the investor shall receive the securities, according to the face value of the securities allotted to him, in his RBI Retail Direct Gilt Account. SGBs are, however, allotted by the RBI, after which they are credited in the Gilt account of the retail investor.

Secondary Market

Securities under the scheme can be traded in the secondary market online, through the NDS-OM portal. The NDS portal can be accessed by the investors on the RBI Retail Direct Gilt portal itself. Investors can participate in the secondary market trade by accessing the Order matching (OM) and Request for Quote Segments on the NDS portal, using the CCIL ID allotted to them. The trades of securities in the secondary market are executed and settled by the CCIL, after which they are credited to the Retail Direct Gilt account of the investor. The funds with paid by the investor for the purchased securities are directly transferred from his bank account, to the Clearing Corporation of India.
In case CCIL fails to receive the funds, the purchased securities shall not be transferred to his Gilt Account, until he pays the concerned amount. On the other hand, if the seller fails to deliver the purchased by the due date, the amount spent for purchasing it shall be refunded to the buyer directly into his bank account, on The date of settlement. If any excess amount is paid by the buyer at the time of purchase of securities, it shall alsobe refunded to the buyer either on the date of receipt of such amount or on the day of settlement.

Role of CCIL

S.No. Role of CCIL under the RBI Retail Direct Scheme
1.
Authorised by RBI to act as the aggregator in the primary bidding auction of securities
2.
Authorised by the RBI to act as the Receiving Office of bids for Sovereign Gold Bonds
3.
Authorised to operate NDS OM portal
4.
Incharge of Clearing and Settlement between the buyer and seller of securities
5.
Ensures smooth and successful transactions between parties
6.
Ensures timely credit of purchased securities to avoid post-settlement arbitrations
7.
Its pivotal functions include improving market efficiency by ensuring transparency, liquidity, and risk management

Conclusion

Owing to its rapidly and endlessly rising consumer demand, the Indian economy is gradually turning into a global hub of retail investments. It is now more than ever that a plethora of investors are looking forward to investing in the safest and the least risky security instruments, for earning a decent amount of guaranteed returns. Moreover, there is an urgent need for enhancing easy availability and accessibility of such security instruments for the growing investment needs and demands of the general public as well.
The newly launched scheme by the Indian Government, namely the RBI Retail Direct Scheme, caters to both of these objectives in the most effective and efficient manner. The scheme has not only provided a one-stop integrated solution to retail investors for investing into securities issued by the government, considerably the most secure kinds of investments in India, but has also given way to extremely easy accessibility and effortless investments, owing to its completely online mode of operations.

About Setindiabiz

Setindiabiz is an organized team of experienced CA, CS, & Lawyers, duly supported by a pool of trained accountants & paralegal staff that provides quality & affordable compliance services to startups & small businesses in India. The views, statements and recommendations expressed in this article or post are only for the sole objective of providing information, and it does not constitute professional advice or recommendation of the company. Neither the author nor the company or its affiliates accepts any liability for any loss or damage arising from any information in this article or any actions taken in reliance thereon.
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