The Reserve Bank of India’s retail direct gilt (RDG) account, launched in 2021, changes this equation. More importantly, it has democratized access to the Indian government securities (G-sec) market for individual investors and provides retail investors an opportunity to rethink how debt fits into their personal financial portfolio.
What RDG account really enables for retail investors
The RDG platform enables individuals to invest directly in government securities, including treasury bills (T-bills), dated government bonds, state development loans (SDLs), and sovereign gold bonds, without the need for intermediaries. Investors can participate in both primary auctions and secondary market trading through an RBI-facilitated platform.
While this is often described as a democratization of the bond market, the more relevant question for retail investors is simpler: Where does this fit in my financial plan?
Government securities are not designed to deliver high returns. Their primary role is capital protection and predictable cash flows. Backed by the sovereign, they carry negligible default risk and therefore serve as a strong anchor in a diversified portfolio.
To illustrate the point: T-bills, with maturities of up to one year, are suitable for parking short-term surplus funds. Coupon-paying government bonds can generate regular income, making them particularly relevant for retirees or those nearing retirement. Long-term G-secs, when held to maturity, offer visibility on returns and remove reinvestment uncertainty.
Unlike debt mutual funds (MFs), where portfolio churn and mark-to-market movements affect returns, RDG allows investors to hold securities till maturity and receive the contracted cash flows—provided they do not exit early.
RDG vs fixed deposits and debt MFs
From a personal finance perspective, RDG Instruments may offer higher return than debt MFs and fixed deposits.
Fixed deposits offer certainty but often deliver modest post-tax returns. Debt MFs provide liquidity and professional management but expose investors to interest rate volatility and expense ratios. RDG offers sovereign safety, zero intermediary costs, and control over maturity, but requires investors to understand bond pricing and interest rate movements.
The FD investor receives a fixed return but the effective gain reduces after TDS and post-tax adjustment, whereas a G-Sec/SGS purchased through RDG has zero intermediary cost and pays the entire coupons with full sovereign guarantee and full maturity value if held till maturity with price volatility relevant only on early sale, and a debt mutual fund with a comparable portfolio yield remains
TER and mark-to-market sensitive, so rising yields can lower NAV and realised returns. While the realised yield on G-Secs, SGS and debt funds depends on entry and exit timing, if yields harden at the time of maturity G-Secs and SGS are less impacted than debt mutual funds since the bond holder receives par value, which can leave the investor with a higher post-expense and post-tax outcome than a similar FD or a comparable debt fund.
Kindly note that under the RDG platform, the reference is to both G-Secs as well as state government securities, and both instruments carry sovereign guarantee.
In short, RDG rewards informed, patient investors, rather than those seeking convenience or short-term gains.
Risks retail investors must understand
While government securities are credit-safe, they are not risk-free. The key risk is interest rate risk. Bond prices move inversely to interest rates, and investors selling before maturity may incur losses if rates rise.
Liquidity can also be uneven in the secondary market, particularly for longer-dated securities. Therefore, RDG is best suited for investors with a buy-and-hold approach, who can align bond maturities with their financial goals.
How retail investors can practically use RDG
A sensible way to utilise RDG is through goal-based investing: first, match bond maturities with future expenses, such as children’s education or retirement needs. Second, use laddering strategies—investing across multiple maturities—to manage reinvestment risk; third combine RDG holdings with equity investments to stabilise overall portfolio volatility.
Adoption is growing, but awareness remains low
Since its launch, RDG has seen steady growth. According to RBI data, around 2.75 lakh accounts have been opened so far, with a CAGR of 69% over the past three years. Primary market subscriptions have crossed Rs. 6,752 crore, with a compound annual growth rate (CAGR) of 115%, while secondary market transactions stand at Rs. 3,754 crore, growing at an impressive 200% CAGR. The total holding of all G-sec through RDG has reached Rs. 3,054 crore, with a 51% CAGR.
Yet, retail participation remains a fraction of the overall government securities market. The primary challenge is awareness and familiarity. Concepts such as yield, duration, and price sensitivity remain unfamiliar to many investors. Moreover, the absence of intermediaries means there is little commercial incentive for distributors to actively promote RDG. Greater investor education—through banks, financial literacy initiatives, and public awareness campaigns—will be critical to unlocking RDG’s full potential.
A useful addition to the retail investor’s toolkit
With G-secs offering yields of around 5.5-7.6%, the RDG account offers a compelling option for conservative investors seeking safety, transparency, and predictable income. It is not a replacement for equities or mutual funds, but a valuable complement—particularly for long-term savers and retirees.
For investors willing to move beyond fixed deposits and understand how bonds work, RDG provides a direct, low-cost way to participate in India’s sovereign debt market—while bringing greater balance and resilience to their personal portfolios.
T. Panda is general manager, treasury, at IDBI Bank. P. Panda is assistant professor at IIM Raipur, and Kohli is senior AGM at the National Institute of Securities Markets. Views are personal.
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