“Never test the depth of the river with both feet .”-Warren Buffet.
Reserve Bank launched a ‘Retail Direct’ platform for individual investors to ensure the safety of investment with handsome returns. It opens a new window of funds for the government to invest in the infrastructure needs. Individual investors can now invest in government securities (G-sec) with RBI without fees. No fund manager is required to monitor the investments, which are secure due to sovereign guarantees.
Retail Direct is a customer-centric initiative of the RBI to provide opportunities for individuals to participate in the securities market and contribute towards nation-building. The step promotes financial inclusion; The commoner can now invest in securities, treasury bills, sovereign gold bonds, and state development loans through a portal. He can access the online portal to open securities accounts with the RBI, bid in primary auctions, and buy and sell the shares and bonds. The service would be free. The transactions happen through internet banking and the UPI. The investor support facility through telephone, email, and online is available. The nomination and pledge/lien facility to borrow is available. Retail Direct Gilt (RDG) Account allows investors to buy and sell G-secs online in the primary and secondary markets.
RDG account shall be relished mainly by the patient investor. Said Paul Getty, once the richest man in the world, “It is possible to make money in the Stock Exchange, and a great deal of money, But it can’t be done overnight by impulsive buying and selling.” The intelligent, careful, and patient investor gets the profit, not the reckless speculator.G-sec is a long-term investment at a pre-defined interest rate without upside.Big money was made in the waiting. Aspirants for a long-term success can’t afford the luxury of impatience. The stock market transfers money from the impatient to the patient. Better to buy an excellent company at a fair price than a fair company at an excellent price.
The spiraling Sensex has caught the imagination of new investors like a wildfire and pulled homemakers, elders, and youngsters alike to invest in mega IPOs. People are falling over each other to invest savings with superficial knowledge of the issuer Corporates. Ignoring the maxim,”When you learn a little, you feel you know a lot. When you learn a lot, you realize you know very little.” They forget that Success is not the result of making Money, Money is the result of Success. Rightly said, money is a good servant but a bad master. To protect ignorant investors from this hysteria, the Retail Direct is a long-awaited step by the RBI.Holding cash and Investment in gold have attendant problems concerning security and appraising its purity, valuation, warehousing, and safe custody. Investing in G-Secs has the following advantages:
1. G-Secs provide handsome interest and safety as they carry a Sovereign’s commitment for payment of interest and principal.
2. Can be held in Demat form, obviating the need for safekeeping. Investors can also hold securities in physical form.
3. G-Secs are available in maturities from 91 days to 40 years to suit the duration of varied liability structures of various institutions.
4. G-Secs can be sold quickly in the secondary market.
5. G-Secs can be used as collateral to borrow funds in the repo market.
6. The settlement system ensures the transfer of securities simultaneously with the transfer of funds from the buyers.
7. G-Sec prices are visible on mobile phones due to a liquid and active secondary market and a transparent price dissemination mechanism
Investors can open the RDG account singly or jointly with another retail investor who meets the eligibility criteria. The government securities can be bought in the primary market, where government bonds are issued first, or buy/sell the existing government bonds in the secondary market. Allotment of securities is done as per the non-competitive scheme for participation in the primary auction of government securities.Only one bid per security is permitted. On submission of the bid, the total amount payable is displayed. Investors pay through the linked SB account through the net banking/UPI.RBI’s RDG account is the need of hour.
Rightly said, “Do not save what is left after spending, but spend what is left after saving. If you don not know how to care for money, money will stay away fo you.”
hargovindsachdev@gmail.com
About author
Mr. Hargovind Sachdev is an Ex-Banker, GM(Retd) of State Bank of India. Has over 39 years of experience in banking, having occupied senior positions in UCO Bank, United Bank of India,State Bank of Patiala, State Bank of Travancore & State Bank of India where he headed the Central European Credit Desk at Frankfurt,Germany from 2006 to 2011 covering 15 countries of Central Europe.Has undergone International Banking Training from Asian Institute of Management, Manila, Philippines in the Year 2003 and a Multi-currency lending-technique training at the Euro Money Institute, London in 2009.
He has specialisation in Credit, Foreign Exchange,Vigilance, Monitoring & appraisal of Corporate Loans, MSME Credit,Gold Loans, Agricultural Loans & NRI Business Management in assets & liabilities. As a Forensic Auditor, he has conducted various Transaction Audits allotted by Banks.
He was felicitated by the Central Vigilance Commissioner , Sh. C.V Chowdhry for winning first prize for best article on Preventive Vigilance in 2015. He is also an accomplished Public Speaker hav-ing conducted multiple Motivational Seminars for institutions like ONGC, National Housing Bank & Bank of Baroda. He is an Inde-pendent Director & consultant to various big entities in corporate sector at present.
