IDBI Bank launches retail G-Sec portal

IDBI Bank has launched India’s first online Government-Security (G-sec) Portal. The move will help retail investors to participate in govt. securities like bonds that will issued by the Central and state govts. The bank has enabled trading in govt. bonds through the 'IDBI Samriddhi G-Sec Portal', which will be operational starting Jan 17, 2012. We believe the move is a step ahead by the bank to build the bond market and to attract retail participation. Their safety and stability make investing in G-Secs extremely attractive especially for risk-averse investors.

At present, the portal is ready only for the purchase of G-Secs, though investors can contact the bank's representatives if they wish to sell. The management is working on the selling side portal, which is expected to be ready in about a month's time.

The minimum investment amount is Rs 10,000, and the maximum is Rs 2.5 lakh. Trade is open between 9 am to 2 pm. Settlement will be on a T+1 basis, i.e. retail investors need to make the payment on the day the G-Sec is bought, while the bond will be credited in their demat account on the next trading day. Retail investors will trade with the bank itself. So, if an investor buys the bond, the bank will sell the same and vice-versa. For the rates at which one can trade, the bank will revise the rates at least 3 times a day – at 9 am, 11.30 am and 1 pm. There would be no short selling of the bond. If an investor holds the G-Sec, then only he/she can sell the same.

The bank has also kept the process flexible, so that investors can participate easily. It is not necessary to have an IDBI Bank account to carry on trade. However, individuals must have a demat account, internet facility and an email id for transactions. Also, investors are further benefitted by the fact that there are no hidden charges (brokerage, fees etc).

N.S.Venkatesh, Chief General Manager and Treasury Head of IDBI Bank, stated that a bank usually holds G-Secs as a part of its investments. Banks have to maintain the Statutory Liquidity Ratio (SLR), which includes govt. bonds. Banks can easily trade on these bonds with retail investors. As yet, the bank used to trade in wholesale lots of bonds, and now it will trade on a retail basis.

In India, retail investment in govt. bonds directly or indirectly (through Mutual Funds) is less than 1%, which indicates that there is very low participation from the retail category. In the US, the retail participation is approximately 6% of the total govt. borrowing.

This move will definitely help retail investors, who now have an extra asset class to invest in that is also safe and stable. Previously, retail investors would not go for G-Secs due to an inadequate process, but with the online portal coming in, investments can be made very quickly. From the initial discussions with the management, it emerged that the trading would usually not be speculative or heavy on arbitrage, as people who invest in such securities tend to have a long-term horizon. Given the current interest rate regime, which is at its peak, one could lock in at higher interest rates, which are available for a long-term horizon.