Move to help revive bond market; Das rules out any threat to bank FDs
The Reserve Bank on Friday breathed fresh life into the bond market by allowing retail investors to diversify their portfolio and buy Government Securities (G-Sec). The move is expected to deepen the country’s bond market and may also change the saving habit of the nation.
“The retail investors can take positions both in primary and secondary markets,” affirms RBI Governor Shaktikanta Das.
This will be a game-changer as far as retail participation in the bond market is concerned. Major efforts in the past have failed to persuade retail investors to take positions in government debt papers. Retail investors could take exposure to such instruments only through banks and mutual funds (MFs) or via various indices and funds dedicated to G-Secs through the debt fund route.
Bond market experts have long been suggesting that if the gilt accounts are opened with the RBI and positions are taken directly in the market, retail investors will flock to the route. The participation of retail investors will help RBI in its target of managing Rs 12 lakh crore of government borrowing next fiscal in its bid to widen the investor base for government bonds.
The move, which makes India the first Asian country to allow direct entry of small investors in the government debt market, will also help expand the savings base in the country.
Das rules out any threat to fixed deposit products offered by banks from the entry of small investors into the government bond market, saying the size of the pie is big enough to be pooled. “I don’t feel that it (allowing retail investors direct entry into the gilt market) will in any manner cut into bank deposits. I think the size of the pie is too large to support,” he says.