 "Bonds, Govt bond")
Retail investors are increasingly favouring treasury bills (T-bills) through the Reserve Bank of India's Retail Direct platform over other instruments like central and state government securities and sovereign gold bonds. As of September 18, T-bills accounted for 67 per cent of total subscriptions, compared to 18 per cent for central government dated securities. State government securities and sovereign gold bonds made up 10 per cent and 5 per cent of subscriptions, respectively.
Total subscriptions in the primary market surged to Rs 2,736 crore on September 18, from Rs 1,809 crore on April 3. Specifically, investment in T-bills rose to Rs 1,839 crore, marking a 65 per cent growth, outpacing the 51 per cent growth in overall subscription during the April-September period.
Market experts attribute this trend to the attractive higher interest rates offered by sovereign debt instruments, considered safe investments. Ajay Manglunia, managing director at JM Financial, noted that T-bills are currently providing better returns and assured safety. "The yield curve is flat; people are getting good returns for shorter tenure papers," he said.
Three-month T-bills are offering significantly higher returns than one-year fixed deposits. Major banks offer returns between 5.75 and 6.70 per cent on one-year fixed deposits, while returns on one-year T-bills stood at 7.09 per cent. For three-month and six-month T-bills, returns were 6.85 per cent and 7.07 per cent, respectively.
Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, stated that T-bills offer much more attractive rates than fixed deposits for short-term investments. "The market for government securities is still emerging, but there's a huge appetite for T-bills among retail investors," he added.
The demand for sovereign debt instruments is expected to remain strong as market rates are anticipated to stay higher due to liquidity tightening. The banking system's liquidity has re-entered deficit mode, influenced by tax outflows and ahead of the second tranche of Incremental Cash Reserve Ratio disbursement on September 23. This is the first liquidity deficit in the banking system in the current financial year.
