Recently, IDBI Bank launched a unique facility that allows individuals to buy government securities (G-secs) through the bank’s ATMs across the country. This comes less than a month after the finance minister announced in the Budget speech that measures will be taken to improve retail participation in the government securities market. IDBI Bank is taking forward its Samriddhi portal, an online facility set up in 2012 that allows individuals to register and begin transacting in government bonds and bank certificates of deposits starting with a minimum of Rs.10,000 to Rs.25 lakh.
Government bonds are not a traditional choice for long-term investors to allocate their savings. Access to this market has remained limited despite the product, which offers regular income, safety and high yield—features that have a high appeal for retail investors. Now that some changes are coming in this space, is it time for you to step up your awareness about the product or even switch some of that long-term savings into G-secs?
Here are some details that can help you understand the security and the market better.
Access to retail investors
Government bonds and securities are issued by the Government of India to raise funds (borrowings) and these come in varying tenures right from 14 days (treasury bill) to 30 years (G-secs).
Traditionally, retail investors haven’t participated in buying and selling government securities directly despite efforts by the Reserve Bank of India (RBI) over the past 20 years. This market has been the domain of large institutional investors like insurance funds, pension funds and banks. There is a retail debt segment on stock exchanges, but here as well, members need to have a net worth of Rs.1 crore to be eligible. Hence, for the average saver, investing in government securities is not at the top of the list.
Moreover, given that this is largely an institutional market, the liquidity required for retail investors to move in and out (small volume and ticket size) is missing.
