SEBI Chairman Ajay Tyagi said that retail investors should be allowed to invest in g-secs directly through demat accounts.
Currently, g-secs are issued through auctions conducted by the RBI. And retail investors cannot bid for gilts directly. As a result, retail investors take exposure to g-secs through mutual funds.
Calling for issuing government securities in demat form, Tyagi said, "We have seen a huge surge in retail participation in equities in the last few months. Many of these are first time investors who are here due to lack of investment opportunities. With a view to facilitating the smooth entry to new comers in the capital market, it is ideal that they start their journey by first investing in risk free g-sec. I would suggest that to achieve this objective, we need to issue g-sec in demat form. These new demat account holders after gaining experience of investing in g-sec can gradually add other securities in their demat accounts."
A week ago, Tyagi had expressed concerns over the sharp increase in retail activity in equities and said that the market regulator is “perplexed”. Today at a conference conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI), the SEBI chief proposed that the first time retail investors should start with investment in government securities.
Tyagi’s proposal could also help the government in managing its finances. The government aims to borrow Rs.12 lakh crore in the ongoing financial year, which would include Rs.8 lakh crore budgeted borrowing along with an additional Rs.4 lakh crore to deal with covid-19 related contingencies.
