With reference to India, consider the following statements: 1. Retail investors through demat account can invest in 'Treasury Bills' and 'Government of India Debt Bonds' in primary market. 2. The 'Negotiated Dealing System-Order Matching' is a government securities trading platform of the Reserve Bank of India. 3. The 'Central Depository Services Ltd' is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange. Which of the statements given above is/are correct?
Contents15
- A1 only
- B1 and 2
- C3 only
- D2 and 3
Show answer
Answer: (B) 1 and 2
Statement 1 is correct:
In February 2021, RBI launched the 'RBI Retail Direct' scheme, allowing retail investors to open gilt accounts directly with RBI.
Through this, they can invest in Treasury Bills and Government of India Debt Bonds in both primary and secondary markets using their demat accounts.
Statement 2 is correct:
NDS-OM (Negotiated Dealing System - Order Matching) is an electronic, anonymous order-matching system owned by RBI for secondary market trading in government securities.
Membership is open to entities that maintain SGL (Subsidiary General Ledger) accounts with RBI — such as banks, primary dealers, insurance companies, and mutual funds.
Statement 3 is wrong:
CDSL (Central Depository Services Ltd) was promoted by BSE (Bombay Stock Exchange), not by the Reserve Bank of India.
It was set up jointly by BSE with banks like SBI, Bank of India, HDFC Bank, etc.
Statements 1 and 2 are correct.
Answer: (b).
In February 2021, RBI launched the 'RBI Retail Direct' scheme allowing individual investors to directly buy government securities, making retail participation in government bond markets much easier.
The question tests whether students know the difference between RBI's role in government securities trading platforms versus private depository services like CDSL.
RBI Retail Direct Scheme
Indian Economy Retail investors demat account Treasury Bills Government of India Debt Bonds primary market
RBI Retail Direct Scheme: Retail Access to Government Securities
RBI Retail Direct launched in February 2021 allows retail investors direct access to government securities
Retail investors can invest in Treasury Bills and Government Bonds in both primary and secondary markets
Investment possible through demat accounts with gilt account facility
Previously, retail investors could only access government securities through mutual funds or secondary market
The RBI Retail Direct scheme democratized access to government securities by allowing individual investors to participate directly in the government bond market, bypassing traditional intermediaries.
Investment Access Comparison
Aspect | Before Feb 2021 | After RBI Retail Direct |
|---|---|---|
Primary Market Access | Only through intermediaries | Direct access via gilt account |
Secondary Market | Limited access | Full access through NDS-OM |
Account Requirement | Regular demat only | Demat + Gilt account |
Minimum Investment | Varies by intermediary | As low as ₹10,000 |
Key Features
Gilt Account: Special account maintained with RBI for government securities transactions
Online Platform: Complete digital process for account opening and trading
No Brokerage: Direct investment eliminates intermediary costs
SGL Facility: Investors get Subsidiary General Ledger accounts with RBI
Mobile App: 'RBI Retail Direct' mobile application for easy access
Statement 1 trap: Many assume retail investors cannot access primary market directly - RBI Retail Direct changed this in 2021
Don't confuse with mutual fund investments in government securities - this is direct investment
Demat account alone is not sufficient - requires additional gilt account facility
NDS-OM Trading Platform
Indian Economy Negotiated Dealing System-Order Matching government securities trading platform Reserve Bank of India
NDS-OM: RBI's Government Securities Trading Platform
NDS-OM is RBI's electronic platform for secondary market trading in government securities
Stands for Negotiated Dealing System - Order Matching
Anonymous order matching system owned and operated by RBI
Membership requires SGL account with RBI
NDS-OM is RBI's flagship electronic trading platform that revolutionized the government securities market by providing transparent, anonymous order matching for secondary market transactions.
NDS-OM Membership & Access
Entity Type | Access Requirement | Trading Capacity |
|---|---|---|
Banks | SGL Account with RBI | Full trading rights |
Primary Dealers | SGL Account with RBI | Market making obligations |
Insurance Companies | SGL Account with RBI | Investment purposes |
Mutual Funds | SGL Account with RBI | Portfolio management |
Retail Investors | Gilt Account via RBI Retail Direct | Limited access since 2021 |
Platform Features
Anonymous Trading: Order matching without revealing counterparty identity
Real-time Settlement: Integration with RBI's settlement systems
Price Discovery: Transparent price formation through order book
Risk Management: Built-in exposure and settlement risk controls
Trading Process Flow
%%{init: {"flowchart": {"wrappingWidth": 460}}}%%
flowchart TD
s1["`**Order Placement**
Members place buy/sell orders on NDS-OM platform`"]
s2["`**Order Matching**
System automatically matches compatible orders anonymously`"]
s3["`**Trade Confirmation**
Matched trades confirmed to both parties`"]
s4["`**Settlement**
Securities and funds settled through RBI systems`"]
s1 --> s2
s2 --> s3
s3 --> s4Statement 2 confirmation: NDS-OM is indeed owned by RBI, not a private exchange
Don't confuse NDS-OM (secondary market) with primary auction system
SGL account is mandatory - not just any bank account works for membership
CDSL Depository System
Indian Economy Central Depository Services Ltd Reserve Bank of India Bombay Stock Exchange
CDSL: India's Second Largest Depository
CDSL promoted by BSE (Bombay Stock Exchange), not RBI
India's second largest depository after NSDL
Joint promotion by BSE with major banks like SBI, Bank of India, HDFC Bank
Established in 1999 to provide depository services
CDSL was created as India's second depository to break NSDL's monopoly and provide competitive depository services for dematerialization of securities.
CDSL vs NSDL Comparison
Aspect | NSDL | CDSL |
|---|---|---|
Promoters | UTI, NSE, SBI | BSE + Banks (SBI, BOI, HDFC) |
Established | 1996 | 1999 |
Market Share | Larger (~60%) | Smaller (~40%) |
RBI Role | No direct promotion | No direct promotion |
Primary Focus | Institutional investors | Retail investors |
CDSL Ownership Structure
# CDSL Promoters
## Stock Exchange
- **BSE** (Primary promoter)
## Public Sector Banks
- **SBI**
- **Bank of India**
## Private Banks
- **HDFC Bank**
- Other private banks
## Financial Institutions
- Insurance companies
- Other FIsCDSL Services
Dematerialization: Converting physical securities into electronic form
Settlement Services: T+2 rolling settlement for stock exchanges
Corporate Actions: Dividend distribution, bonus issues, rights offerings
Pledge Services: Securities lending and borrowing arrangements
Statement 3 trap: CDSL is NOT promoted by RBI - it's promoted by BSE with banks
Don't confuse depository services (CDSL/NSDL) with payment systems (RBI domain)
RBI regulates depositories but doesn't promote them - different roles
Government Securities Market Structure
Indian Economy Treasury Bills Government of India Debt Bonds
Government Securities Market: Structure & Participants
Government securities are risk-free debt instruments issued by central government
Treasury Bills are short-term (up to 1 year), Government Bonds are long-term
Primary market involves fresh issuance, secondary market involves trading existing securities
RBI acts as issuer's agent and market regulator
Types of Government Securities
Security Type | Maturity | Interest Payment | Typical Denominations |
|---|---|---|---|
Treasury Bills | 91, 182, 364 days | Zero coupon (discount) | ₹25,000 and multiples |
Government Bonds | 2-40 years | Fixed/Floating coupon | ₹10,000 and multiples |
Cash Management Bills | Less than 91 days | Zero coupon | ₹1 crore and multiples |
Inflation Indexed Bonds | 10+ years | Inflation adjusted | ₹10,000 and multiples |
Market Participants
# G-Sec Market
## Primary Market
- **RBI** (auctioneer)
- **Primary Dealers**
- Banks
- Institutions
- **Retail** (since 2021)
## Secondary Market
- **NDS-OM platform**
- OTC trading
- Retail participation
- Foreign investors
## Regulators
- **RBI** (market operations)
- **SEBI** (depositories)
- Government (fiscal policy)Primary Market Process
%%{init: {"flowchart": {"wrappingWidth": 460}}}%%
flowchart TD
s1["`**Announcement**
Government announces borrowing calendar and specific auction dates`"]
s2["`**Auction**
RBI conducts competitive bidding through primary dealers and banks`"]
s3["`**Allocation**
Securities allotted based on auction results and cut-off prices`"]
s4["`**Settlement**
Payment and securities delivery through RBI's systems`"]
s1 --> s2
s2 --> s3
s3 --> s4Primary vs Secondary: Statement 1 specifically mentions primary market access for retail - this was the 2021 game-changer
Don't assume all bonds are government securities - corporate bonds are different
RBI's dual role: Issues T-Bills but acts as agent for government bonds