Reserve Bank of India Governor Shaktikanta Das on Friday announced that retail investors can open gilt accounts with the banking and monetary policy regulator, giving direct access to them to invest in the primary and secondary government bond market. He also announced the launch of 'Retail Direct,' a platform to allow retail investors direct access to the government securities market.

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The major structural reform announced by RBI Governor Shaktikanta Das puts India among a select group of countries offering such a facility to investors.

Sharing his views on the RBI announcement and monetary policy, Taimur Baig, Managing Director and Chief Economist at DBS Group Research said, “Dovish as expected, but I think that the announcements related to retail investors being able to set up an account directly with the RBI is almost revolutionary. So this is a huge measure, this is allowing a regular person to access the window directly through RBI and it is not just a question of financing the government deficit it is the digital angle that how this will set up an account have access directly to the central bank. It is an issue that global central bankers are grappling with, India takes a giant step.”

Chipping in with his take, HDFC Bank Chief Economist Abheek Barua said, “As expected the focus of the policy was on managing the government borrowing program. We have got a very large borrowing program, an unanticipatedly large borrowing program. So perhaps that is why perhaps yields have moved up.”

He further added, “The retail participation is a big deal but I think we need to educate retail investors considerably about the vagaries of the government bond market because otherwise they might be taken by surprise.”

A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with an original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

The RBI Monetary Policy Committee (MPC) has decided to keep policy rates unchanged. The repo rate is maintained at 4 percent and reverse repo rate at 3.35 percent, and the accommodative policy stance will continue.

The benchmark 10-year bond yield was at 6.09 percent.

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First Published:Feb 5, 2021 10:45 AM IST