NSDL COO Prashant Vagal for tax-free bonds to boost retail participation

Issuing tax-free bonds could help boost retail participation in the bond market, said Prashant Vagal, chief operating officer (COO) of National Securities Depository Limited (NSDL), on Tuesday. The government has not issued any new tax-free bonds since 2016.

 

“India has seen national savings schemes, small savings schemes, ELSS of mutual funds, pension schemes. There used to be tax saving bonds, people used to jump into that. So, why not we have something like tax saving scheme, where tax saving bonds offer an interest to be non-taxable but the investment is not… we can see the jump happening at the beginning only, because we are looking for the retail investor to participate,” said Vagal speaking at the 25th Global Fintech Fest on Tuesday.

 

]He added that the bond market is witnessing retail investment concentrated in the age group of over 41 years, reflecting fewer investments from youngsters.

 

“Out of this 1.5 or 1.6 million DMAT accounts, 1 million are of those above the age of 41. Two third of the population investing in the bond is moving towards their retirement age.  For those less than 30 years, it is hardly 200,000 to 300,000,” he said.

 

The Reserve Bank of India recently introduced systematic investment plans (SIPs) facility for Treasury Bills in RBI Retail-Direct platform.

 

The Retail Direct portal was launched in November 2021 to facilitate retail investors to open their Gilt accounts with the RBI under the Retail Direct Scheme. The scheme allows retail investors to buy Government Securities (G-Secs) in primary auctions as well as buy and sell G-Secs in the secondary market. According to RBI’s recent data, the retail investors continue to invest more in treasury bills as compared to instruments like state and central government securities, and sovereign gold bonds through the scheme.