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Tag: RBI G-secs

  • RBI to kickstart e-rupee pilot in G-Secs at present

    The Reserve Bank of India (RBI) on Monday introduced that the primary pilot within the Digital Rupee, or e-rupee, within the wholesale phase (e?-W) will begin in authorities securities from November 1, 2022.

    Nine banks — State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC — have been recognized for participation within the pilot, the RBI stated.

    According to the RBI, the use case for this pilot is settlement of secondary market transactions in authorities securities. “Use of e?-W is expected to make the inter-bank market more efficient. Settlement in central bank money would reduce transaction costs by pre-empting the need for settlement guarantee infrastructure or for collateral to mitigate settlement risk,” the RBI stated.

    “Going forward, other wholesale transactions, and cross-border payments will be the focus of future pilots, based on the learnings from this pilot,” the central financial institution stated.

    The first pilot in Digital Rupee – Retail phase (e?-R) is deliberate for launch inside a month in choose areas in closed person teams comprising prospects and retailers. The particulars relating to operationalisation of e?-R pilot shall be communicated sooner or later, it stated. On October 7, 2022, the RBI had introduced that it’ll quickly begin pilot launches of Digital Rupee (e?) for particular use instances.

    The central financial institution says e-rupee, or CBDC, will be structured as token-based or account-based. A token-based CBDC can be a bearer instrument like banknotes, which means whosoever holds the tokens at a given cut-off date can be presumed to personal them. In a token-based CBDC, the particular person receiving a token will confirm that his possession of the token is real. A token-based CBDC is considered as a most well-liked mode for CBDC-R as it will be nearer to bodily money.

    An account-based system would require upkeep of document of balances and transactions of all holders of the CBDC and point out the possession of the financial balances. In this case, an middleman will confirm the id of an account holder. This system will be thought-about for CBDC-W, the RBI stated.

    There are two fashions for issuance and administration of CBDCs beneath the RBI’s consideration — direct mannequin (single tier mannequin) and oblique mannequin (two-tier mannequin). In the direct mannequin, the central financial institution shall be answerable for managing all elements of the digital rupee system akin to issuance, account-keeping and transaction verification.

    An oblique mannequin can be one the place the central financial institution and different intermediaries (banks and every other service suppliers), every play their respective function. In this mannequin, the central financial institution will challenge CBDC to customers not directly via intermediaries and any declare by customers shall be managed by the middleman. E-rupee is identical as a fiat forex and is exchangeable one-to-one with the fiat forex. Only its kind is completely different. It will be accepted as a medium of cost, authorized tender and a secure retailer of worth. The digital rupee would seem as legal responsibility on a central financial institution’s stability sheet.

  • G-Sec Retail Direct: Mkt gamers search simple KYC, interoperability

    For efficient implementation of the RBI Retail Direct platform for Government Securities (G-secs), market contributors are pushing for tweaks within the guidelines, searching for leisure in KYC norms, interoperability for patrons and a readability on whether or not bonds purchased by way of the retail direct platform should be held in demat kind. Investments achieved immediately by retail traders in G-sec might also not replicate within the single file of all monetary property, as being envisaged below the account aggregator pointers, sources mentioned.
    The Reserve Bank of India in July unveiled a scheme permitting retail traders to immediately take part within the G-sec market. They can open and preserve a ‘Retail Direct Gilt Account’ (RDG Account) with the RBI by way of a portal, which will even present entry to major issuance of G-Secs and the secondary market as effectively. G-Secs held in demat mode are mirrored within the CSGL or Constituent Subsidiary General Ledger (SGL) account of the depositories.
    “If a demat account holder in CDSL sells the G-Sec to a buyer whose demat account is with NSDL, then transfer between these accounts is not online; it entails pre approval from the Public Debt Office (of the RBI) and hence not seamless. This is in sharp contrast to the transfer of other securities between these two Depositories, whose systems are interoperable…The PDO is the depository for G-Secs and is outside the ambit of the Depositories Act,” a supply within the debt market mentioned.
    Sources mentioned this lack of interoperability could create liquidity points for buying and selling within the secondary market in a inventory change, as settlement needs to be achieved on T+2 (transaction plus two days) foundation.
    In 2005, RBI created its on-line platform, Negotiated Dealing System (NDS-OM), operated by the Clearing Corporation and Indian Ltd (CCIL), for difficulty of G-Secs. At current, the RBI’s Core Banking Solution (E-Kuber), buying and selling platform (NDS-OM), depository system (PDO/SGL) and clearing and settlement by CCIL, collectively present a complete, seamless and end-to-end platform for buying and selling and settlement of G-Secs for banks and choose institutional traders on T+1 foundation with settlement assure.
    The current scheme introduced by RBI allows particular person traders to immediately open on-line Retail Direct Gilts account (account) with the central financial institution. Now, a retail investor can place a direct bid on NDS-OM in addition to commerce within the secondary market. So far, solely institutional gamers like banks, major sellers, insurance coverage firms, mutual funds, overseas portfolio traders and excessive internet value people had direct entry to this platform. Gilts are usually traded on NDS-OM in a number of Rs 5 crore every, however retail traders have been allowed to commerce with a minimal funding of Rs 10,000.
    Sources mentioned recent mandate on KYC with the RBI shouldn’t be necessary as financial institution have already got KYC on the traders and may use the widespread KYC mechanism getting used throughout monetary service suppliers. “The scheme is also silent on whether G-Secs held in this retail account in SGL mode can be demated. Moreover, as RBI is not a Financial Information Provider under its Account Aggregator Directions, the investment held in this account will not reflect in the single record of all financial assets. These issues need to be addressed,” a market participant mentioned.
    Some trade executives really feel that G-secs needs to be held ideally on the inventory market’s depository platform as an alternative of the SGL system for comfort of traders. “Slightly over 50 per cent of Sovereign Gold Bonds (SGB) are held in demat mode. Although SGBs are available for subscription in SGL mode also, retail investors prefer demat mode. We believe this can be made the preferred mode for G-secs also,” they mentioned.

  • RBI Retail Direct scheme to woo particular person traders for G-secs

    The Reserve Bank of India (RBI) on Monday introduced the ‘RBI Retail Direct’ scheme, a one-stop resolution to facilitate funding in authorities securities (G-secs) by particular person traders.
    As per the central financial institution, below the ‘RBI Retail Direct’ scheme, retail traders (people) may have the ability to open and preserve the ‘Retail Direct Gilt Account’ (RDG Account) with the RBI. “RDG account can be opened through an online portal provided for the purpose of the scheme,” it mentioned.
    The on-line portal will give registered customers entry to major issuance of G-secs and entry to NDS-OM. The date of graduation of the scheme can be introduced later. “Encouraging retail participation in the Government securities market has been the focus area of the government of India and the RBI,” the RBI mentioned.

    ExplainedPrevious attemptsregulators earlier tried to popularise G-secs amongst retail traders by the NSE GoBid app or retail debt market (RDM) section of the change. But these didn’t have the specified end result as a consequence of lack of liquidity. The RBI’s intention now could be to make the method of G-sec buying and selling smoother for small traders.

    Accordingly, initiatives viz. introducing non-competitive bidding in major auctions, allowing bourses to behave as aggregators or facilitators for retail traders and permitting odd-lot section in NDS-OM secondary market have been taken prior to now.
    As a part of persevering with efforts to boost retail participation in G-secs and to enhance ease of entry, the RBI determined to maneuver past aggregator mannequin and supply retail traders on-line entry to the
    G-sec market — each major and secondary — together with the ability to open their gilt securities account (retail direct) with the RBI.
    The G-sec market is dominated by institutional traders corresponding to banks, mutual funds and insurance coverage corporations. These entities commerce in lot sizes of Rs 5 crore or extra. So, there isn’t any liquidity within the secondary marketplace for small traders who would need to commerce in smaller lot sizes. In different phrases, there isn’t any simple method for them to exit their investments. Thus, at the moment, direct G-secs buying and selling is just not well-liked amongst retail traders.