Government bonds open to individual buyers

Mumbai: India has opened its $1 trillion government bond market to individual investors as it seeks help from the public to fund its ambitious spending plans. The government targets to borrow $161.87 billion (Rs 12.05 trillion) via bonds this financial year, ending March 2022, as it embarks on huge investment plans to boost growth in the coronavirus-battered country. Prime Minister Narendra Modi, while launching two customer-centric initiatives of the RBI on Friday, said the initiatives – retail direct scheme and integrated ombudsman scheme – would expand the scope for investment and improve customer grievance redressal mechanism.

The Prime Minister said the schemes "allow smallest investors to participate in the country's economic progress".

"Small investors will be assured of good returns on a secure investment and the government will get the resources it needs for infrastructure development and building a new India," he said. In fact, governments in developed economies have long allowed individuals to invest in bonds, which usually offer smaller returns than other investments, but are seen as safer. India now follows other emerging market countries like Brazil, the Philippines and Bangladesh in easing public access to its sovereign bond market.

Earlier, individual investors in India could only buy government bonds through mutual funds and other indirect facilities. Now they can invest as little as Rs 10,000 in them directly through accounts with the central bank. Bond experts see this as a crucial step ahead of India's expected inclusion in global bond market indices early next year, which should help the government raise more money from foreign investors. "If we are going to allow a lot of foreign investments into the bond market, we should also balance it with domestic investors, so that we get more stability," Srinivasan M V from Mecklai Financial said.