RBI to give small investors direct access to Government Securities

RBI to give small investors direct access to Government Securities

Part of: GS Prelims and GS- III – Economy

In news 

• The RBI has informed that it will give small investors direct access to its government securities (G-sec) trading platform.

Key takeaways 

• Retail investors can directly open their gilt accounts with RBI, and trade in government securities. 
• It is being described as a major structural reform. 
• The two key categories are:

1. treasury bills – short-term instruments that mature in 91 days, 182 days, or 364 days, and
2. dated securities – long-term instruments, which mature anywhere between 5 years and 40 years. 

Do you know? 

• A “Gilt Account” means an account opened and maintained for holding Government securities, by an entity or a person including a person resident outside India’ with a “Custodian” permitted by the RBI. 
• G-secs are debt instruments issued by the government to borrow money.

Important value additions 

• Like bank fixed deposits, g-secs are not tax-free.
• They are generally considered the safest form of investment because they are backed by the government. 
• So, the risk of default is almost nil.
• However, they are subject to fluctuations in interest rates. So, they are not completely risk-free.