India becomes the First Asian Country to Allow Small Investors to Directly Invest in Govt Securities

In a landmark move, the Reserve Bank of India today said that retail investors in India will be given online access to invest in government securities. Right now, there is a way for small investors to buy government bonds via the goBID platform on the National Stock Exchange.

However, with the latest announcement from RBI, small investors who do not like the risk of stock markets will have a new platform, just like the trading platforms for stocks, which will be directly under the central bank.

With this, India has become the first Asian country to allow small investors a direct window to lend to the government. There are very few countries namely the United Kingdom, Brazil and Hungary with similar options for small investors, the RBI spokesperson told Business Insider.

The RBI has opened a new tap — and arguably an endless source⁠— for the government⁠ to borrow from. Until now, the government was reliant on banks, insurance companies, and foreign investors to borrow money from. “For retail investors, this is relatively trouble free way otherwise they would have to go through mutual funds to invest in government securities. It’s a convenient way for them to diversify their portfolio,” said Saugata Bhattacharya, Senior Vice President at Axis Bank in a conversation with Business Insider

However, there is a catch. “The investors also have access to small savings instruments — unless the rates on small saving instruments are rationalised and brought in line with the government securities the interest to invest in government securities would be relatively moderate,” Bhattacharya added.

Source: Business Insider