Government bonds are a subcategory of government securities with a long-term maturity ranging from 5 to 40 years. They are issued by the central government or state governments. Until a few years ago, institutional investors were the primary investors in the government bond market, until a few years ago. In recent years, the government and the RBI have taken steps to boost retail participation and enhance the flow of funds in the market.
Retail investors today have several avenues to invest in government bonds in India. Those avenues fall under the direct route and indirect routes.
How to invest in government bonds in India?
Direct route
The direct route consists of a direct investment in government bonds through brokers (offline/online). Retail investors can open a Demat and trading account with brokers and directly invest in the primary issuance of government bonds through the non-competitive bidding route. Trading in the secondary market is also an option for retail investors. Furthermore, retail investors can invest in government bonds through bond platforms like Bonds India. Bond platforms like Bonds India are full-service platforms where investors can invest in several types of bonds and get handpicked advice on the best bonds to buy in India.
Indirect route
Retail investors can invest in government bonds indirectly by investing in mutual funds or exchange-traded funds (ETFs) that invest in government securities.
RBI retail direct scheme
The RBI launched the RBI retail direct scheme to boost retail investor participation. Retail investors can buy and sell government bonds online on this platform, both in the primary and secondary markets.
Investors are required to open a retail direct gilt (RDG) account to buy/sell government bonds on the platform.
Who can open an RDG account?
An Indian citizen with;
- Rupee savings account
- PAN card
- Official documents like Aadhar, Voter Id, etc.
- Registered email id and mobile number.
How to buy government bonds in the primary market on the platform?
Retail investors can place their bids for government bonds as per the non-competitive bidding scheme on the platform. Only one bid per investor is allowed. Payment towards the purchase on an allotment can be made easily using net banking or UPI.
Buying government bonds in the secondary market
Retail investors can trade government bonds in the secondary through the NDS-OM facility available on the RBI retail direct portal.
Other features of the portal
- The balance position and the transaction history can be viewed on the platform. Moreover, every transaction alert is sent via SMS and email.
- Investors can include two nominees who meet the eligibility criteria for opening an RDG account.
- Investors can take loans against the securities held in the RDG account.
Conclusion
Today, retail investors are no longer pained by the question of “where to buy government bonds.” The multiple online avenues have made investing in government bonds extremely straightforward. Investors can choose bond platforms to invest in a wide range of bonds (government to corporate) or the RBI direct portal to invest solely in government bonds.
