Retail investors can soon buy gilts, both in the primary and secondary markets, by opening accounts with Reserve Bank of India (RBI).
While the move is reformist, experts noted the initial response may be lukewarm, given gilt funds offer reasonably good returns with indexation benefits if held for over three years. “Unless primary dealers offer liquidity or the trading volumes on the stock exchanges go up meaningfully, savers may not want to lock themselves into the product for long tenures,”they said.
The experts added that this is one reason fixed deposits are popular.
The total AUM in gilt funds is just about Rs 20,000 crore.
At the same time, PF professionals observed, gilt funds are actively managed in terms of duration and savers who want to buy and hold for a fixed period may want to buy gilts directly. Currently, the process of buying gilts is cumbersome since these are issued via the Securities General Ledger.
However,a direct account with the central bank would make the process easier.