Individual investors can now invest directly in G-Secs from the comfort of your homes
On November 23rd 2017, the Reserve Bank of India issued a notification permitting Indian stock exchanges to facilitate retail investors to participate in Government securities, a primary market offering, by placing non-competitive bids in Government of India Securities (G-Sec) and Treasury bills (T-bills) which the Central Bank auctions from time to time. T-bills are generally auctioned every Wednesday while the auction for GoI dated securities take place on Friday’s.
In line with the Central Bank’s guidelines, NSE had introduced an online bid collection facility called “e-Gsec,” an online platform which permits members of the exchange to place bids on behalf of their clients. In November this year, the Exchange went a step further and introduced NSE goBID (Government Bond Investment Destination), comprising of an online web platform and a mobile APP to enable retail clients of members to directly participate in the non-competitive bidding process from the comfort of their homes. According to NSE, the mobile APP supports Android version 4.4 and above.
Before we go into the advantages for retail investors investing in G-Secs, a quick understanding of the two types of bidding process and how they are different-
One way in which the Government of India borrows money from the markets is by issuing securities to investors by calling for an auction. On confirming the date and the amount they wish to borrow, the securities are then issued by the RBI in an auction which is either yield-based in price-based.
In the event of a new security, investors bid in terms of the rate of interest (coupon) for the security. If the auction is for an existing security that’s being reissued, the bidders will focus on the price of the security issued. This bidding process is typically carried out by banks, primary dealers, financial institutions, mutual funds, insurance companies and so on and is called Competitive Bidding.
In the Non-Competitive Bidding process, participants broadly consist of individuals, HUFs, firms, companies, corporate bodies, institutions, provident funds, trusts and other entities prescribed by the RBI. Here, the bidders participating in the auction will not be able to quote the yield or place a bid. They will only be permitted to buy securities based on the existing bids.
Additional information on the non-competitive bidding process and FAQ’s can be found HERE.
Registration & Bidding Process-
Eligible retail investors are required to undergo a simple one-time registration process. Prerequisites for registration include PAN and DEMAT ACCOUNT.
During the bidding period, bids are accepted by NSE from 10.00 AM- 5:00 PM with the minimum and maximum bid amount per security per auction currently placed at ₹10,000 and ₹2 crores correspondingly. To streamline the bidding process, NSE has undertaken to provide information on the upfront amount to be paid by investors for each security on its website.
To start placing bids,
- View the list of securities listed on the dashboard along with the bidding and price info.
- Select the security and enter the investment value.
- NSE validates the bid along with the key security parameters of the bidder and confirms.
- The amount payable is then displayed as a pop-up.
- Select the online payment method and proceed to complete the payment.
- On successful subscription, securities will be credited to your demat account within 5-days from the date of auction.
To take a look at the ongoing Government Securities available for non-competitive bidding, click HERE.
Advantages of investing in Government Securities-
Following are some of the key benefits for retail investors investing in G-Secs
- G-Secs are issued by the Reserve Bank of India on behalf of the Government of India. Since these are sovereign funds, interest and principal payments are guaranteed by the Government, making them an extremely safe investment avenue.
- Most G-Secs provide secure, regular income in the form of interest unlike some of the other risky asset classes like equities and commodities.
- These securities have maturities ranging from 14-days in the case of T-bills to 40-years, giving investors ample opportunities to plan their investments based on future commitments.
- One of the key advantages of investing in G-Secs is the affordability. Retail investors can subscribe to these securities with investments as small as ₹10,000.
- G-Secs typically carry interest rate risk which can be evaded by either holding the security until maturity or investing when interest rates look to have peaked.
- Low expense ratio, TDS and tax benefits are some of the other key advantages of investing in G-Secs.
As a Trading Member on NSE, Compositedge is a participant in NSE’s e-GSec program. Investors holding a demat account with us can now bid in Government Securities from the NSE e-GSec platform.