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RBI’s customer-centric initiatives

Posted on November 13, 2021 by admin1  27

In News

  • Prime Minister launched two customer-centric initiatives of the Reserve Bank of India (RBI)
    • The RBI Retail Direct Scheme and
    • The Reserve Bank – Integrated Ombudsman Scheme. 

About

  • February 2021: RBI made the proposal to allow retail investors to open gilt accounts to invest in G-secs directly.
  • Retail Investors: An individual or non-professional investor who buys and sells securities through brokerage firms or savings accounts.

RBI Retail Direct Scheme

  • It is aimed at enhancing access to the government securities market for retail investors. 
    • This scheme offers a new avenue for directly investing in government securities issued by both Centre and state governments. 
  • Investors will be able to easily open and maintain their government securities account online with the RBI, free of cost.

Significance of RBI Retail Direct Scheme

  • Improved Ease of Access:
    • Will make the process of G-sec trading smoother for small investors.
    • Small investors in the country will get a safe medium of investment in government securities.
    • Raising retail participation in G-secs and will improve ease of access.
  • Facilitate Borrowings:
    • The scheme will facilitate the smooth completion of the government borrowing programme in 2021-22.
    • Government can raise more money from the Domestic market itself.
  • Financialise Domestic Savings:
    • The scheme will promote the financialisation of a vast pool of domestic savings and could be a game-changer in India’s investment market.
    • It may also reduce the government External Borrowings which are generally accompanied by currency fluctuation risks.

Government Security (G-Sec)

  • It is a tradable instrument issued by the Central Government or the State Governments.
  • It acknowledges the Government’s debt obligation. 
  • It practically carries no risk of default and, hence, are called risk-free gilt-edged instruments.
    • Gilt-edged securities are high-grade investment bonds offered by governments and large corporations as a means of borrowing funds.
  • Such securities are of two types:
    • Treasury Bills:
      • They are short term instruments.
      • With original maturities of less than one year- presently issued in three tenors, namely, 91 days, 182 days and 364 days.
    • Government bonds or dated securities: 
      • They are Long term instruments.
      • With original maturity of one year or more.
  • In India, the Central Government issues both treasury bills and bonds or dated securities 
    • while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs).

G-Sec Market

  • Earlier before the scheme was launched the G-sec market was dominated by institutional investors 
    • Which are large market actors such as banks, mutual funds and insurance companies.
    • These entities trade in lot sizes of Rs 5 crore or more.
  • So, there was less liquidity in the secondary market for small investors who wanted to trade in smaller lot sizes.
    • The primary market is where securities are created, while 
    • The secondary market is where those securities are traded by investors.
  • There was no easy way for them to exit their investments. 
  • Thus, direct G-secs trading was not a popular option among retail investors.

RBI Integrated Ombudsman Scheme

  • This will help in improving the grievance redress mechanism for resolving customer complaints against RBI’s regulated entities. 
  • It will do away with the jurisdictional limitations as well as limited grounds for complaints. 
  • The scheme is based on ‘One Nation-One Ombudsman’ with one portal, one email, and one address for the customers to lodge their complaints.
    • The bank customers will be able to file complaints, submit documents, track status, and give feedback through a single email address. 
    • The mechanism will cater to all the customers from banks, NBFCs and the non-bank issuers of prepaid payment instruments.
  • There will also be a multilingual toll-free number that will provide all relevant information on grievance redress.
  • The complaints that are not covered under the ombudsman scheme will continue to be attended to by 
    • The Customer Education and Protection Cells (CEPCs) are located in the 30 regional offices of RBI.

Significance of RBI Integrated Ombudsman Scheme

  • Uniformity and streamlined user-friendly mechanism:
    • The single national-level integrated digital portal for the RBI ombudsman scheme.
    • It will add value to the scheme and bring customer delight and financial inclusion.
  • Consumer Friendly:
    • There will be a single point of reference for customers to file their complaints, submit the documents, track status, and provide feedback.  
    • The multilingual toll-free number will provide all relevant information on grievance redress and assistance for filing complaints. 
    • The redressal will continue to be cost-free for customers of banks and members of the public.

Way Forward and Conclusion

  • Access to the Capital:
    • RBI’s two innovative customer-centric initiatives will increase investment avenues, make accessing the capital market easier, safer.
  • Safer Investments:
    • The schemes while expanding the scope of investment will also make access to capital markets easier and more secure for investors.
  • Technology: 
    • RBI has been leveraging technology & innovation for enhancing the efficiency of its services. 
    • RBI’s developmental role is focused on further deepening financial inclusion and undertaking people-centric initiatives

 Source: LM

 
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