Even if you have a high risk appetite, you should not neglect wealth preservation or capital protection.

Many of us associate investment with capital appreciation or wealth growth. We don’t pay much attention to the preservation of wealth. As we all know, asset allocation is the cornerstone of investment.

Currently, the stock market is nearing its lifetime high. Even if you have a high risk appetite, you should not neglect wealth preservation or capital protection. This is especially true when the margin of safety in the stock market decreases.

Suppose you have made a good return (that is, the wealth generated) from the stock, and you are less than three years away from achieving your financial goals. Then it is best to transfer your asset allocation to debt instruments and focus on wealth preservation.

If the stock market fluctuates or falls from current highs (which is very likely), doing so will ensure that your wealth is properly preserved.

In another situation, for example, your risk appetite has weakened (for whatever reason), you have turned to risk aversion, are in the protection and protection stage of life, and are about to retire or have already retired.

You want to get a stable return with lower risk. Then your main concern should be wealth preservation.

You might say that some traditional investments have very low interest rates, and they don’t seem to be suitable for investment at the moment.”

Yes, of course, interest rates have been drastically reduced.

But investing in government securities can provide you with considerable returns and has a high degree of credit risk security.

You see, government securities (G-secs) include central government bonds, state government bonds, treasury bills and other tools.

Recently, the Reserve Bank of India has opened up a new investment opportunity for retail investors through its “Retail Direct Program.” They can now directly invest in G-secs through a “retail direct Phnom Penh account” to achieve wealth preservation.

Let us understand the functions, advantages and functions of the RBI retail direct Gilt account.

RBI retail direct gold-plated account

To take advantage of the “RBI Direct Plan” and invest directly in G-sec, you need to open and maintain a “Retail Direct Gilt Account” (RDG account) at RBI.

Through an RDG account, you can enter the primary market (buy G-sec directly from RBI) and the secondary market (buy from other investors at the current market price).

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RDG accounts can be opened through the “Online Portal” created specifically for the “RBI Retail Direct Sales” program.
After successful registration, you can visit:

-First issue of G-secs

-Negotiate the transaction system-order matching system (NDS-OM) through the online portal.

NDS-OM is a screen-based electronic anonymous order matching system used for government securities secondary market transactions owned by RBI.

Therefore, as a retail investor, you will be able to invest in GOI Treasury bonds, central government bonds, state government bonds, state development loans (SDL) and sovereign gold bonds (SGB).

There is no charge for opening and maintaining an RDG account at RBI. When trading in G seconds, you only need to pay a nominal payment gateway fee.

Who is eligible to open an RDG account?

Any individual can open a direct retail Gilt account, provided that he/she has an official savings bank account
Verified documents for KYC (ie PAN, Aadhaar, Passport, etc.), valid email ID and registered phone number.

Non-resident retail investors who are eligible to invest in government securities under the Foreign Exchange Administration Act of 1999 (FEMA) are also eligible to open RDG accounts.

Is joint holding allowed?

Yes. An RDG account can be held by you and other individuals who meet the eligibility criteria for opening an RDG account.

What is the procedure for opening an RDG account?

This is a very simple process.

Register on the online portal by filling out the online form.

Use the OTP received on the registered phone number and email ID for identity verification and submit the form.

During this process, you must follow the KYC (Know Your Customer) guidelines. After successful registration, your RDG account will open, which contains detailed information to access the account shared via /email.

Operation of RDG account

RDG accounts can participate in the main issuance of G-sec in small batches (for example, 10,000 rupees) (that is, G-sec can be purchased directly from RBI).

The participation and allotment of securities in the primary market shall be in accordance with the non-competitive plan for participation in the primary auction of government securities and the procedural guidelines for the issuance of SGB.

Only one bid is allowed for each security. After the bid is submitted, the total amount payable will be displayed. The aggregator does not charge fees for submitting bids in the primary auction.

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For purchased securities only, payment will be made to the receiving office or aggregator through the online banking or UPI facility associated with the bank account.

At the time of distribution, the securities will be reflected in the RDG account on the settlement date. In the case of a refund, the money will be deposited into your bank account.

To trade in the secondary market, you need to place an order on NDS-OM. NDS-OM currently has RFQ or odd lot shares as a trading mode that can be used for secondary market transactions.

Before the start of the transaction time or during the day, you need to use Internet Banking/UPI to transfer funds from the linked bank account to the designated account of CCIL (Clearing Corporation of India).

For a buy order, a capital limit (buy limit) is set. At the end of the trading session, any excess funds in your account will be refunded. The securities you purchase will be credited to your RDG account on the settlement date.

Similarly, when you sell, the securities identified as sold will be frozen when the order is placed until the transaction is settled. On the day of settlement, the sales funds will be deposited into your linked bank account.

Remember, as an investor, when you use your RDG account for G-sec transactions, you will have to bear a nominal payment gateway fee.

Here are the seven main advantages of RBI retail direct Gilt accounts:

1) The RDG account provides the convenience of trading in G seconds, and its default/credit risk is almost zero.

2) You can conduct small-volume transactions and cross-term (i.e. 91 days to as long as 40 years) securities transactions.

3) Help you create and manage your own G-sec investment portfolio, and diversify sovereign bonds according to your liquidity needs.

4) The securities in the RDG account can even be pledged to obtain a loan when needed.

5) You can also present government securities to other retail investors online.

6) You can track your G-sec investment portfolio by accessing your account statement.

7) If you have any questions or dissatisfaction, you can raise them on the portal, and these issues will be resolved by the Public Debt Office (PDO) of the Reserve Bank of India in Mumbai.

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Tax impact of RBI retail direct sales plan

Capital gains from the sale of G-sec and sovereign bonds in the secondary market (prior to maturity) will be subject to capital gains tax and indexed gains (if applicable). And the periodic interest income received from G-secs will be based on your income tax characterization tax.

In the case of direct investment in G-secs, capital gains will be calculated based on the securities you (the investor) traded in a fiscal year.

In the case of Gilt mutual funds, capital gains are calculated for the holding period of mutual fund units, regardless of the number of transactions performed by the fund manager when managing the plan.


If you are a savvy investor and want to invest directly in G-secs and can manage your investment portfolio well, then the RBI retail direct Gilt account is for you.

However, please make sure that you fully understand the Indian debt market and the macroeconomic factors that affect it. The Reserve Bank of India’s direct retail program is suitable for well-informed investors.

Although G-sec has no credit/default risk, they may be prone to interest rate risk, especially if interest rates rise. Note that interest rates are negatively related to bond prices, while yields are positively related to interest rates.

When constructing an investment portfolio, you need to actively track the direction of interest rates and decide the period of time to purchase G-secs accordingly.

Ideally, the maturity period of the securities should be selected based on its cash flow requirements and coupon expectations.

If you feel that you lack the skills and time to invest directly in G-secs, then please consider your risk appetite and investment time frame and choose a debt mutual fund plan.

Mutual funds provide different types of Phnom Penh funds, such as medium and short-term Phnom Penh funds, fixed-term Phnom Penh funds, and target-term Phnom Penh funds.

Under Gilt Funds, professional fund managers can actively select securities based on their professional knowledge and macroeconomic prospects. Nevertheless, please pay attention to choosing the best Gilt fund that will stand the test of time. Remember, investing in debt funds is not without risk or safety.


(This article is from Equitymaster.com)

(This story has not been edited by NDTV staff, it was automatically generated from the joint feed.)