Last year, the Government of India (GoI) launched the RBI's ambitious scheme and portal for the retail investor in G-Secs, the RBI Retail Direct Scheme. The scheme and the portal were activated on the same day of its launch. The portal allows retail investors to invest in G-Secs directly without any interference from the middle man. The scheme's goal is to increase retail engagement in gilts. Prior to this change, ordinary investors may engage in gilts through a debt mutual fund, which needed three years of ownership to qualify for 20% capital gains with indexation. Any retail investor who wishes to invest in the G-Secs could open a Retail Direct Gilt (RDG) account with RBI on the Retail Direct Scheme's portal and start investing in G-Secs.
Here, we are exploring the 3 alternatives of the RBI Retail Direct Scheme that are available in India for retail investors. These schemes are as follows:
Gilt funds are one of the most popular ways to invest in G-secs. When you buy a gilt fund, you only have to pay tax when you sell it. Until then, your earnings will continue to grow. According to Sebi regulations, gilt funds must invest at least 80% of their assets in government securities. Gilt funds are classified into two types. One type is gilt funds, which invest primarily in government securities with varying maturities. Second, gilt funds with a continuous maturity of ten years - these funds must invest at least 80% of their assets in G-Secs with a ten-year maturity.
Target Maturity Fund
Target Maturity Fund (TMF) investments are passive bond investments based on the composition of the underlying index. Target Maturity Funds have a set maturity date, which is mentioned in the scheme name and practice. These funds invest in a portfolio of bonds that are components of the index they follow and have comparable maturity dates. These bonds are typically held until maturity. In terms of taxation, they outperform direct ownership of bonds since they are taxed in the same way as normal debt funds. Their expense ratios are also relatively low.
For G-Secs investments, Retail Direct is a great offer up a new path for retail investors, it is completely optional. It also necessitates a greater level of digital competence. If you want to invest in G-secs, you can also consider small-savings plans, other than the above-mentioned Retail Direct Scheme alternatives, gilt funds, and target-maturity funds. These two alternatives have their own benefits and come with their terms and conditions. Investors, who wish to diversify their investments can look up to these alternatives. Also, Investors should keep in mind that these also have their risks along with a set of benefits.