Your father has retired and keeps a large part of his savings in fixed deposits. A friend tells him he can lend money straight to the Government of India, without a broker or a mutual fund in between, and earn interest twice a year. That is exactly what RBI Retail Direct allows. It is a free online account with the Reserve Bank of India through which individuals can buy government bonds and treasury bills at auctions and trade them later.
This guide explains how the scheme works, who can open an account, the instruments on offer (central government securities, treasury bills, State Development Loans and the RBI Floating Rate Savings Bonds), how bond prices and yields move, and how the income is taxed. All rules come from RBI’s FAQs, press releases and directions.
What RBI Retail Direct is
The Retail Direct Scheme was launched by the Prime Minister on 12 November 2021. RBI calls it a one-stop facility for individuals to invest in government securities. You open a Retail Direct Gilt (RDG) account with RBI through the online portal at rbiretaildirect.org.in, and use it to buy securities in primary auctions and to buy and sell them in the secondary market.
Three features stand out. First, there is no fee: RBI says the account can be opened and maintained free of cost, and it charges nothing when you bid in an auction. You only bear payment gateway charges, if any, when funding a purchase. Second, there is no intermediary, because the account sits in RBI’s own books. Third, you get the same price as the big institutions, because your auction bids are filled at the weighted average price of successful competitive bids.
Who can open an account and what you need
Individuals can open an RDG account if they have:
- a rupee savings bank account maintained in India;
- a PAN;
- an officially valid document for KYC;
- a valid email ID and a registered mobile number.
Non-resident retail investors who are eligible to invest in government securities under the Foreign Exchange Management Act, 1999 can also open one. Each person can have only one RDG account, held singly or jointly with another eligible investor. KYC is done either through the central KYC records or by video KYC. Nomination is compulsory when you open the account, and you can name up to two nominees, who need not be blood relatives. Your linked savings account receives interest and maturity proceeds, and RBI verifies it by sending a token amount.
What you can buy
RBI’s FAQ lists four kinds of securities on the portal. Here is how they compare.
| Security | Issued by | How it pays | Minimum through the portal | Usual auction day |
|---|---|---|---|---|
| Treasury bills (91, 182, 364 days) | Government of India | Issued at a discount, repaid at face value | ₹10,000 | Wednesday |
| Dated G-secs (generally 5 to 40 years) | Government of India | Coupon every six months | ₹10,000 | Friday |
| State Development Loans | State governments | Coupon every six months | ₹10,000 | Tuesday |
| Sovereign Gold Bonds | Government of India | As per each issue | One gram of gold | No new tranche since February 2024 |
RBI explains the T-bill arithmetic with an example: a 91-day bill with a face value of ₹100 may be issued at ₹98.20 and repaid at ₹100, so your return is the ₹1.80 difference. A dated G-sec instead pays a fixed coupon on its face value every six months and returns the face value at maturity. SDLs work the same way and are issued by states through similar auctions. RBI describes G-secs as carrying practically no risk of default, which is why they are called gilt-edged.
How buying in an auction works
Individuals bid in the non-competitive segment. You enter only the amount you want, not a price. RBI’s direction on non-competitive bidding sets the minimum at ₹10,000 of face value, in multiples of ₹10,000, and the maximum single bid in a central government dated security at ₹2 crore of face value per security per auction. For SDLs, the RBI FAQ caps an individual at 1% of the notified amount per auction.
- Log in, open the primary market section and pick a security from the auction list.
- Enter the amount. You can place only one final bid per security in each auction.
- Pay before bidding closes using UPI or net banking. Unfunded bids are cancelled.
- You pay the indicative price, accrued interest and a small markup, because the final price is known only after the auction.
- Securities are allotted at the weighted average price and credited on the settlement date, typically one working day after the auction.
- Any excess markup is refunded to your bank account within two business days of the auction.
RBI is clear that the markup is not a fee. It only covers the risk that the average price comes out higher than the indicative one. If total non-competitive demand is very large, RBI may allot on a pro-rata basis, giving you part of what you asked for.
Selling before maturity
You do not have to hold a G-sec to maturity. Through the secondary market section of the portal you can place buy and sell orders, and RBI notes that G-secs have reasonable liquidity on its NDS-OM trading system. You must have the security in your account before you sell it.
The catch is price risk. RBI’s FAQ points out that G-secs are free of credit risk but carry market risk if you sell before maturity. That brings us to the most important idea for any bond investor.
Why bond prices fall when yields rise
RBI’s G-sec FAQ puts it simply: when interest rates or market yields rise, the price of a bond falls, and when yields fall, the price rises. Yield and price move in opposite directions.
Here is an illustration with round numbers. Say you buy a 10-year G-sec with a 7% coupon at its face value of ₹100. It pays ₹7 a year. A year later, new bonds of similar length are being issued at 8%. Nobody will pay you ₹100 for a bond paying ₹7 when a new one pays ₹8, so the price of your bond drops until its yield to a buyer is close to 8%. If instead new bonds yield 6%, your 7% bond becomes more attractive and its price rises above ₹100.
Two practical points follow. If you hold to maturity, these price swings do not matter, because you receive the full face value at the end. And the longer the remaining life of a bond, the bigger the price change for the same change in yield, so long bonds suit only money you will not need for years. RBI also explains that when a bond trades below face value its yield to maturity is higher than the coupon, and when it trades above face value the yield is lower. Our compound interest calculator helps you compare a bond’s coupon with a deposit.
RBI Floating Rate Savings Bonds
Not every investor wants price risk. The Floating Rate Savings Bonds, 2020 (Taxable) are a simpler option, and since October 2023 you can subscribe through RBI Retail Direct as well as through designated bank branches. Their key features, from RBI’s press release and circular:
- Who can invest: resident individuals, including joint holders and minors through a guardian, and Hindu Undivided Families. NRIs are not eligible.
- Tenure: repayable after seven years. Premature redemption is allowed only for specified categories of senior citizens.
- Interest: paid every six months, on 1 January and 1 July. There is no cumulative option.
- Rate: reset every six months at 0.35 percentage points above the prevailing National Savings Certificate rate.
- Limits: no maximum investment.
- Restrictions: not tradable and not accepted as collateral for loans, so your money is locked in.
Because the rate follows the NSC rate, which the government reviews every quarter, check RBI’s latest press release on the FRSB coupon before investing rather than relying on an old figure. If you are comparing it with a bank deposit, our FD calculator helps you set the numbers side by side.
How the income is taxed
There is no special tax break on these securities. RBI’s notices state that interest on the Floating Rate Savings Bonds is taxable as per your tax status, and the same principle applies to coupons on G-secs and SDLs: interest is added to your income and taxed at your slab rate. The Income Tax Department’s TDS chart lists 10% TDS on interest on the Floating Rate Savings Bonds, and since 1 October 2024 it applies once that interest exceeds ₹10,000 in a year. Coupons on ordinary dated G-secs and SDLs are generally paid without TDS, so set aside the tax yourself.
If you sell a listed G-sec or SDL before maturity, the gain is a capital gain. Under the July 2024 changes explained in the CBDT’s FAQs, listed securities held for more than one year are long-term and taxed at 12.5% without indexation. Held for a year or less, the gain is short-term and taxed at your slab rate. For a T-bill held to maturity, the gain is the difference between the issue price and the face value, which in practice is taxed at your slab rate. Use our income tax calculator to see the effect on your return.
Is RBI Retail Direct right for you?
Government securities are not a replacement for every deposit, but they fill some gaps well. Match the instrument to when you will need the money:
- Money needed within a year: T-bills mature in 91, 182 or 364 days, so you know your return on the day you buy.
- A fixed income for many years: a dated G-sec or SDL held to maturity pays the same coupon every six months, which suits retirees planning regular expenses.
- Locked-in savings with a rate that adjusts: Floating Rate Savings Bonds move with the NSC rate, but you cannot sell them early unless you fall in a specified senior citizen category.
- Money you may need suddenly: keep it in a savings account or a deposit you can break, because selling a long bond in a hurry may mean selling at a loss.
As an illustration, a retired couple might keep one year of expenses in savings and T-bills, and spread the rest across G-secs maturing in different years so that some money falls due every few years. That way no single change in rates affects all of their savings at once.
Key takeaways
- RBI Retail Direct lets individuals hold government securities in a free account with RBI.
- You need an Indian savings account, PAN, KYC, email and mobile number; eligible NRIs can join too.
- T-bills, dated G-secs and SDLs start at ₹10,000, bought at the auction’s weighted average price.
- Prices fall when yields rise; holding to maturity removes that risk.
- Floating Rate Savings Bonds pay NSC rate plus 0.35 points, for seven years, with no trading.
- Interest is taxed at your slab rate; long-term gains on listed bonds at 12.5%.
This guide is general information, not investment advice. Check the current auction calendar and coupon announcements on RBI’s website before you invest.
