- The Reserve Bank of India has provided direct access to the government security trading platform for small investors.
- Henceforth, retail investors can open their gilt account directly with RBI, and trade in government securities.
Important facts regarding ‘Government Securities’:
- Government security are ‘tradable instruments’ issued by the central government or state governments.
- Government security may have a fixed or temporary coupon rate. These securities are calculated by banks to maintain SLR.
- It accepts the debt obligation of the government. Such securities are short-term (usually these securities with maturity of less than one year are called treasury bills, which are currently issued in three forms, i.e 91 days, 182 days and 364 days) or long-term (usually these securities with a maturity of one year or more are called government bonds or dated securities).
- In India, the central government issues both treasury bills and bonds or dated securities, while state governments only issue bonds or dated securities, known as state development loans (SDLs).
- Since they are issued by the government, there is no risk of default, and therefore, they are called Gilt-Edged Instruments.
- The central government issues both treasury bills and government bonds or dated securities.
- State governments only issue bonds or dated securities, known as state development loans.
Requirement of current proposal:
- The ‘government security’ market is mainly dominated by institutional investors, such as banks, mutual funds and insurance companies. These units trade for an amount of Rs. 5 crores or more.
- Therefore, liquidity is not available in the secondary market for small investors seeking to trade with small amounts. In other words, there is no easy way to invest in them.
- For this reason, at present time trading directly in ‘government security’ is not very popular among retail investors.
Source – The Hindu