Context:
A group of stock brokers has approached the Reserve Bank of India (RBI), requesting a detailed procedural framework for retail participation in government securities (G-Secs) trading on the NDS-OM (Negotiated Dealing System-Order Matching) platform.
Key Issues Raised by Brokers
- Implementation Guidelines Pending:
Although the RBI announced access to NDS-OM for non-bank brokers in its February monetary policy, no implementation timelines or draft regulations have been issued yet. - Operational Clarifications Needed:
Brokers are seeking clarity on:- Whether retail participation would use the same demat account or require a separate SGL account.
- If the same unique client code (UCC) can be used for both equity and G-Sec transactions.
- The integration costs and operational requirements, as brokers’ back-office systems are not yet integrated with NDS-OM.
Challenges in Driving Retail Participation
- Lack of Awareness:
Brokers note that retail demand for G-Secs is currently low due to limited public understanding of yields, price movements, and the secondary G-Sec market. - Competition with FDs:
- Retail investors tend to prefer fixed deposits (FDs), which are simpler, more familiar, and easily accessible.
- Nikhil Agarwal, CEO, Grip Invest: “From the user’s perspective, FDs are accessible, understood, and familiar, making them a more comfortable choice.”
- Need for Education:
- Satish Menon, Executive Director, Geojit Financial Services, emphasized: “A nationwide education campaign is required for retail investment in G-Secs to pick up.”
RBI’s Efforts So Far
- The RBI has been making efforts to promote retail participation by:
- Launching a mobile app for G-Sec investment.
- Reducing the minimum investment amount to ₹10,000 last year to make G-Secs more accessible.
Summary Table
| Issue | Concern/Requirement |
|---|---|
| Procedural clarity | Implementation details, account structure (Demat or SGL), and UCC usage needed |
| Technology integration | Brokers need time and resources to integrate back offices with NDS-OM |
| Retail investor education | Awareness about yields, price movement, and secondary markets is lacking |
| Competition with FDs | FDs remain simpler and more familiar for retail investors |
| Minimum investment threshold | Lowered to ₹10,000 by RBI to attract retail investors |
For the RBI’s vision of democratizing federal debt ownership to succeed, the regulator needs to:
- Issue clear implementation guidelines and operational frameworks for brokers.
- Launch nationwide education and awareness campaigns.
- Support brokers in technology integration to make retail G-Sec trading smooth and accessible.
Source: The Economic Times
