How RBI's new schemes will boost bond markets

Two innovative, customer-centric schemes launched by Prime Minister Narendra Modi on Friday will result in deepening the bond market by broadening the base of investors, experts said.

The launch of schemes -- Reserve Bank's Retail Direct Scheme and Integrated Ombudsman Scheme -- will expand investment opportunities in the country and ensure easier access to capital markets with simple and secure mechanism. Similarly, the One Nation-One Ombudsman system has taken shape in the banking sector with the Integrated Ombudsman Scheme.

What are these schemes?

Retail Direct Scheme

Individuals can now directly purchase treasury bills, dated securities, sovereign gold bonds (SGB) and state development loans (SDLs) from primary as well as secondary markets, thanks to the RBI Retail Direct Scheme launched by Prime Minister Narendra Modi on Friday.

As per the scheme, retail investors (individuals) will have the facility to open an online Retail Direct Gilt Account (RDG Account) with the Reserve Bank of India (RBI). These accounts can be linked to their savings bank accounts.

The RDG Accounts of individuals can be used to participate in the issuance of government securities and secondary market operations through the screen-based NDS-OM.

NDS-OM, a screen-based electronic anonymous order matching system for secondary market trading in government securities owned by RBI, is currently open only to institutions like banks, primary dealers, insurance companies and mutual funds.

Integrated Ombudsman Scheme

The Integrated Ombudsman Scheme, 2021, will provide cost-free redress of customer complaints involving deficiency in services rendered by entities regulated by the RBI, if not resolved to the satisfaction of the customers within 30 days by banks, NBFCs, and payment system operators.

The Scheme integrates the existing three Ombudsman schemes of RBI -- the Banking Ombudsman Scheme, 2006; the Ombudsman Scheme for Non-Banking Financial Companies, 2018; and the Ombudsman Scheme for Digital Transactions, 2019. In addition to integrating the three existing schemes, it also includes non-scheduled primary cooperative banks with a deposit size of Rs 50 crore and above.

A centralised receipt and processing centre has been set up at RBI, Chandigarh for receipt and initial processing of physical and email complaints in any language. The Scheme adopts 'One Nation One Ombudsman' approach by making the RBI Ombudsman mechanism jurisdiction neutral, the RBI said in a statement

How these will deepen bond markets

The announcement made by the prime minister will result in deepening the bond market by broadening the base of the investors, industry chamber CII Director-General Chandrajit Banerjee said.

"The schemes will not only allow retail and small investors to have easy access to capital markets, including government securities, but also ensure the availability of grievance redressal mechanism to them for effective resolution of customer complaints related to regulated entities," he said.

Also read: India opens government bonds to individual buyers

Improving the regulatory grievance redressal mechanism, while the banking ombudsman has been in place since 1995, the system was always viewed askance by consumers, said Anjana Potti, partner at J Sagar Associates (JSA).

"One of the primary concerns was the lack of maintainable grounds on which the consumer could challenge the actions of a regulated entity at the ombudsman or a rejection of the complaint on technical grounds, resulting in a preference for the consumer court notwithstanding the extended timelines for redressal.

"The move to integrate the systems and expand the grounds for complaints may see a positive response from consumer," she said.

Commenting on the schemes, Resurgent India Managing Director Jyoti Prakash Gadia said that with the entry of small retail investors in government securities, the market will get broad-based and volumes will increase with more opportunities and the ease of investments.

PayNearby CEO Anand Kumar Bajaj said the Ombudsman scheme will go a long way in enhancing customer confidence as it will effectively address grievances on fraud and failure of payment related to prepaid instruments, including cards and digital wallets.

With the growing prominence of digital payments, there is a rapid growth of high-volume, low-value transactions, especially on platforms such as UPI and AePS, Bajaj said.

He added that while the pandemic brought about a huge shift towards digitisation, technical declines and transactional failures have also become rampant and can be as high as 40 per cent.

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