Retail Direct Scheme, Objectives, Features, Eligibility

Retail Direct Scheme launched by Reserve Bank of India has been initiated to motivate individual investors to invest in government securities directly. The scheme was launched on 12th July 2021 and allowed the individual investors to directly open their accounts with the central government in order to gain access to directly invest in government securities eliminating all the intermediaries. 

Retail Direct Scheme Overview

Retail Direct Scheme launched by RBI motivates the retail investors to open retail gilt accounts directly with the central bank. The scheme aims to increase access for the retail investors to invest more in the government securities through primary and secondary markets. 

Retail Direct Scheme democratizes the ownership of government debt securities.

The government securities under the retail direct scheme include securities issued in the form of stock by credit under section 3(iii) of Government Securities Act 2006. These securities include: 

• Government of India Treasury Bills ; (Central Government issues both treasury bills and bonds or dated securities).
• Government of India dated securities;
• Sovereign Gold Bonds (SGB);
• State Development Loans – SDLs (bonds and dated securities issued by the State Government). 

What are Government Securities?

Government securities, also known as G-secs are tradable instruments issued by the central or state government that carry no risk. 

Short term government securities can mature within an year and long term securities have a maturity period of more than one year. 

What is a Gilt Account?

A gilt account has a similar functionality like a bank account but with the only special purpose of holding government securities. Instead of holding money, this account consists of treasury bills and government securities. 

Retail Direct Scheme Objectives

The Retail Direct Scheme by RBI aims to provide the following facilities in the government securities market through online portal: 

• To open a retail direct gilt account. 
• Access the allotment of government securities at primary stage. 
• Access to RBI’s electric order matching system NDS-OM, for trading in government securities in secondary markets. 

Retail Direct Scheme Eligibility Criteria

Investors can register for the Retail Direct Scheme by RBI if they fulfill the following conditions: 

• A Rupee savings bank account maintained in India;
• A Permanent Account Number (PAN) issued by the Income Tax Department;
• Any Officially Valid Document (OVD) for KYC purpose;
• A valid email id; and
• A registered mobile number. 

Non- resident investors can also invest in government securities under the Foreign Exchange Management Act, 1999. The RDG account can be opened by an individual alone or also as a joint account with another investor who qualifies the eligibility criteria.

Importance of Retail Direct Scheme 

The Retail Direct scheme has the potential to revolutionize the Indian Investment market through tapping into the savings of its citizens. 

• The scheme makes government securities investment more accessible for investors, eventually leading to improved participation in G-secs and ease of accessibility. 
• The feature of relaxation in mandatory hold to maturity provision also makes it more accessible for people to invest in this scheme.

Retail Direct Scheme FAQs

Q1. What is the retail direct scheme?
Ans. The Retail Direct Scheme enables individual investors to directly purchase government securities online via the RBI Retail Direct portal.

Q2. What is retail direct and NDS-OM?
Ans. Retail Direct provides direct access to government securities for individuals, while NDS-OM (Negotiated Dealing System-Order Matching) is the RBI's platform for trading these securities.

Q3. Who launched the RBI Retail Direct scheme recently?
Ans. The Reserve Bank of India launched the Retail Direct Scheme.

Q4. What is the new RBI scheme in 2024?
Ans. The new RBI scheme in 2024 includes updates and enhancements to the Retail Direct Scheme to encourage individual participation in government securities.

Q5. What is the minimum amount for the RBI Retail Direct scheme?
Ans. The minimum amount for investment in the RBI Retail Direct Scheme is ₹10,000.

Q6. How do I buy RBI 7.75 bonds?
Ans. RBI 7.75% bonds can be purchased online through the Retail Direct portal or via authorized banks.

Q7. What is the interest rate for FD in RBI Retail Direct?
Ans. The interest rates in the RBI Retail Direct scheme vary based on the government security but are generally competitive and linked to market rates.