The bond market has to make it easier for retail investors for protecting the interests of investors
After 25 years of brainstorming, small investors are finally allowed to invest directly in government securities. But the question is whether the interests of investors will be protected under the current regulatory system. Also, the ease with which a common investor can buy and sell shares, will he be able to buy government bonds easily or not.
The question is also whether there has been coordination between the country’s regulatory agencies to monitor the situation arising out of direct access to common investors in government securities? Finance Ministry officials say that the solution to all these problems will be revealed within the next few months.
RBI made a big announcement this week that small and retail investors will be allowed to buy government bonds directly. The RBI Governor has just said that retail investors will be able to open gilt accounts (accounts investing in government securities or bonds) with RBI. This account can be used to buy or sell bonds directly from the issuers of the bonds or even from the secondary market. It is considered to be a major reform of the financial sector as it is still available only in a few countries.
India is the first country to offer this facility to general investors in Asia. After the economic reforms were released in 1991, for the first time in 1996, it was considered to open directly to general investors in government securities. After that, after its recommendation in several RBI committees and economic surveys, it has now reached near a final decision. The last time in 2011, a high-level consultancy group formed by the Ministry of Finance issued a roadmap to expand corporate bonds in the country and ensure large participation of small investors in it.
Officials of the Finance Ministry said that the government has been taking steps slowly in this regard for the last two-three years. The decision regarding regulation will also be taken at the appropriate time. Right now it will be regulated by RBI. If the participation of retail investors increases rapidly, then it may also clear the way for financial market regulatory agency SEBI to be fully regulated.
Anyway, in the General Budget 2021-22, the Finance Minister has announced to create a single securities market code for all types of financial investors. For this, they have proposed amendments in the SEBI Act, Depositories Act, Securities Partnership (Regulation) Act and Government Securities Act. It is clear that the government intends to bring the retail investors of the bond market also under SEBI.