Budget Provisions May Rekindle Retail Investor Interest In G-Secs And T-Bills

Surabhi The Budget has proposed to make it easier for retail investors to invest in government securities (G-Secs) and treasury bills (T-Bills). Till now, this avenue for investments has not been very attractive to small investors as it could be a tedious process.

“It is important to get retail investors to invest in treasury bills and securities issued by the government. Efforts made by the Reserve Bank of India will need to be supplemented with further institutional development using stock exchanges,” Finance Minister Nirmala Sitharaman said in her Budget speech on Friday.

At present, G-Secs cannot be directly deposited in a retail investor’s demat account and the transfer process takes time.

To this end, the government plans to bring in inter-operability of RBI depositories and SEBI depositories to ensure seamless transfer of T-Bills and G-Secs between RBI and depository ledgers.

“The government will take up necessary measures in this regard in consultation with RBI and SEBI,” Sitharaman said.

Rollout time

Sources said the issue has been discussed at the level of the Financial Stability and Development Council with the two regulators and it would take about six months for roll-out.

Experts said the proposal could channelise more savings towards financial assets, but there are also factors such as exit and liquidity that have to be tailored for retail investors.

“Retail participation in government securities has been allowed since ages but there has hardly been any volume. The process of buying and selling and the lack of familiarity with such investments will also have to be addressed,” said Alok Singh, Chief Investment Officer, BOI AXA.

Easier access

“This brings an end to the handicap faced by retail investors in India’s debt markets due to their lack of direct access to the safest bonds in the market — the T-bills and G-Secs. Inter-operability of RBI depositories and SEBI depositories would enable easier access of debt markets to retail investors and they would no longer be restricted to relatively low-yielding long-term deposit avenues like bank deposits for their long-term fixed-income allocations,” said Arun Thukral, MD and CEO, Axis Securities.

“There is clearly an appetite for low-risk investment options among certain classes of investors, and this will provide a good avenue for those investors as an alternative to other debt funds,” said Sai Venkateshwaran, Partner and Head, CFO Advisory, KPMG in India.