Many buyers and sellers have not joined the app due to lack of awareness
Not enough buyers and sellers have joined the Retail Direct Scheme launched by the Reserve bank of India (RBI). Experts say the lack of awareness among investors about the scheme, hinders the liquidity. Hence, ability of an investor to sell and buy will remain low, until enough buyers and sellers join the portal.
Mandeep Jain, a Microsoft Exchange Engineer at WIPRO Ltd. and a retail investor said that he was not aware of the scheme. “I am a small investor and wanted to play it safe by investing in government securities rather than investing my whole fund in the stock market. I wanted to diversify my portfolio because these days share market has become extremely volatile, and I lost almost Rs 2, 00,000 from the crash in stock prices of Adani Enterprises. If I was aware of the RBI Retail Direct Scheme, I would have immediately applied to invest in government securities because I do not want to lose all my savings in the share market.”
He added that he would have saved brokerage fees; around five percent of the total trade value through the scheme.. Individual investors could so far only invest in government securities through brokers or mutual funds. Further he said, “If I was aware about the scheme, I would have also invested in Treasury Bills (T-Bills). I started a business of growing organic vegetables two years ago. The working capital requirements of the business were huge because I needed to pay farmers, had to buy fertilisers, and to install irrigation facilities among other things. For this, I had to take out a loan along with investments in government securities. However, it did not help much because government securities have a long gestation period and due to this, I wanted to invest in T-bills.”
He added that T-Bills are highly liquid and the tenor is very less. Also, they can be sold at a discount rate which gives a return of nine percent at least.
The Retail Direct Scheme launched by the RBI in 2021 allows an individual investor to buy and sell government securities, T-Bills issued by the government, sovereign gold bonds and state development loans. Payments can be made through net banking and Unified Payment Interface (UPI) facilities from their mobile number linked bank accounts. Further, registered investors can access the secondary market link on the online portal to buy or sell government securities through the Negotiated Dealing System – Order Matching (NDS- OM) system.
Since its inception in 2021, only 75,000 accounts have been opened even though there are around 10 million retail investors currently in India. The scheme has reached only 0.75 percent of the total Indian retail investors. The benefits of the scheme are: the investors can place non competitive bids in primary issuance of all the central government securities, the individual can access the secondary market through NDS-OM, tax benefits and it offers 47 to 178 basis points higher interest rates than other small savings instruments.
RBI in its press release said that the scheme is a significant milestone in the development of the Government securities market. The scheme will bring G-secs within easy reach of the common man by simplifying the investment process.
Chirag Shah, a retail investor who works in Amazon said that in his 10 year career as a retail investor, he has invested only once in government securities (G-sec) because unlike the share market, proper information about government securities is not available. Retail investors have to rely on brokers or mutual funds and they do not share much information on G-secs because the brokerage rate is almost three percent lower than for the share market. And, he added, “Amidst market uncertainties, if I was aware of the portal, I would have completely eliminated brokers and directly invested in the G-sec securities.”
Ashish for RR Investors, a broker and consulting firm in Bengaluru said that they inform their customers about the scheme and its benefits, but customers themselves do not opt for the RBI Retail Direct Scheme. Generally, traditional customers prefer to invest in stock market because it gives higher returns than investments in the government securities.
Divya Mishra, Professor of Macroeconomics, Sophia Girls College in Ajmer said, “RBI should do good marketing of the scheme because it is really the need of the hour. Stock market is now highly volatile because of the SVB collapse and Credit Sussie crisis and other uncertainties. Whereas, G-sec securities are risk-free because it is backed by sovereign guarantee.” She said that the scheme is a good option for those who want to invest in short-term securities like the T-Bills. If the government is able to generate awareness among investors about the scheme, it will help the government in lowering the fiscal deficit as well.
