Retail Direct Scheme

• Small investors can now buy or sell government

securities (G-Secs), or bonds, directly without
having to go through an intermediary like a
mutual fund.

• Investors wishing to open a Retail Direct Gilt

account directly with the RBI can do so through
an online portal set up for the purpose of the
scheme.

• The minimum amount for a bid is ₹10,000 and in

multiples of ₹10,000 thereafter.
• The ‘Online portal’ will also give the registered
users the following facilities:
– Access to primary issuance of Government securities
– Access to NDS-OM.

• NDS-OM means RBI’s screen based, anonymous

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• Earlier, retail investors could access the NDS-OM
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(Negotiated Dealing System-Order Matching)

through stock exchanges, which would aggregate
the demand for gilts and place it to RBI in NDS-
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• There are two ways to buy Government
securities through Retail Direct platform:

– By placing a bid in the primary auctions of dated

G-Sec, T-Bills and SDLs (Non-competitive segment
only, i.e., by only entering the desired amount of
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– By placing a buy quote in the secondary market

portal.
• G-Sec attracts tax on both interest income and
capital gains if the papers are traded in the
market before maturity.

• G-Secs don’t attract capital gains tax if the

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• SOFR is the main replacement for Libor in the
United States. This benchmark is based on the
rates U.S. financial institutions pay each other
for overnight loans.
• These transactions take the form of Treasury
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known as repos agreements. They allow banks
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using Treasurys as collateral. SOFR comprises

the weighted averages of the rates charged in
these repo transactions.
• Ameribor- The American Interbank Offered
Rate (Ameribor) is a benchmark interest rate
that reflects the true cost of short-term
interbank borrowing.

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• €STR- €STR stands for the Euro Short-Term 1 5@
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European banks engage in unsecured euro-
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denominated short-term lending.

• SONIA- The Sterling Overnight Index Average
(SONIA) is the effective overnight interest rate
paid by banks for unsecured transactions in
the British sterling market. It is used for
overnight funding for trades that occur in off-
hours and represents the depth of overnight il.c
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• The objective of the Fund is to support the corporate debt market
during the market dislocation (stress times) with liquidity. SEBI
Board would be the authority to decide whether there is a liquidity
stress in the market and would communicate market dislocation to
the IM accordingly.

• No leverage /credit facility is required and the capital of Rs. 3088 crs
mentioned above would remain invested in liquid and low-risk debt
instruments such as
• Low duration Government Securities (“G-Sec”) ail.c
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• Treasury bills (“T-bills”) rga
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• Tri-party Repo on G-sec in cyb
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• Guaranteed corporate bond repo
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(seven) days etc.
• Further, the Fund may also be permitted to undertake various
activities related to the corporate debt market including repo,
Securities Lending and Borrowing Mechanism (“SLBM”), AAA debt
securities etc., as may be permitted by SEBI from time to time,
subject to suitable risk management measures.
 Alternate Investment Fund

• Alternative investment funds are privately pooled

investment vehicles that operate outside of traditional
investment opportunities.
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• Managed by professional fund managers ma
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investment firms, these funds baim h a rga to generate income
v1
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by investing in non-traditional
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asset classes such as
private equity, hedge funds,
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real estate, infrastructure,
commodities and venture capital.

• They are not open to the public at large, and minimum

investment amount is mandated at Rs 1 crore.
• Category I AIF:

• Category I alternative investment funds are

close-ended funds with a lock-in period of
three years. These funds invest in start-ups,
social ventures, small and medium-sized il.c
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enterprises (SMEs), or other sectors that have av
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high growth potential and are of economic
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importance to the country.
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• Venture Capital/Angel Funds/Infrastructure

Funds/Social Venture Funds
• Category II AIF
• Category II alternative investment funds are
funds that invest in a variety of stocks and
bonds. SEBI defines Category II AIFs as the
funds that do not fall under Category I and III
and which do not undertake leverage or ma
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operational requirements.
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• These can be close-ended only with a lock-in

period of three years.
• Category III AIF
• Category III alternative investment funds are
proprietary private funds that use complex
and diverse trading strategies such as
arbitrage trading, margin trading, futures and
derivatives trading to achieve the goal of gma
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generating short-term profits. These funds h arg

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aim to provide investors with short-term
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returns.

Category III alternative investment funds can

be both open and close-ended.
• Alternative investment funds investment option is
open for foreigners and NRIs.

• The minimum corpus requirement for each scheme is

Rs 20 Crore and Rs 10 crore for angel funds.

• The minimum amount of investmentil.by co

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Rs 1 crore. However, in case the investor a v1
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an employee, director, or fund r inc
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he/she can invest a minimum
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• The maximum number of investors allowed to invest

under the Category I Alternative investment funds is
1,000 and in angel funds is 49.
• AIF Taxation Rules
• Following are the taxation rules of AIFs for each
category.

• Category I and Category II are pass-through vehicles.

The fund doesn’t have to pay any tax on its earnings.
However, the investors have to pay the il.c
tax at their
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gm

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stocks, then the investors have in cyb to pay 15% or 10%
h a

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depending on the holding On
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• Category III AIFs are taxable at the highest income tax

slab level (42.7%) at the fund level. The returns given
to investors are after deducting the tax.
• CDMDF, an alternative investment fund, will act as a
backstop for purchase of investment-grade corporate
debt securities. It will enhance secondary market
liquidity by creating a permanent institutional
framework for activation in times of market stress.

• During normal times, CDMDF will deal in low duration

government securities (G-sec), treasury . c om
bills, tri-party
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with maturity not exceeding seven
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• Corporate debt securities to be bought by CDMDF
during market dislocation include listed money market
instruments, for which the long-term rating of issuers
will be considered,
• Once the market dislocation is declared by the regulator,
the IM would liquidate CDMDF’s existing portfolio created
during the normal times. The credit facility from the banks
would be used, and the overall cash available (capital from
units’ holders plus credit from banks) can be deployed in
the corporate bond market.

• Only investment grade credit instruments including listed

money market instruments to be boughtl.by c om the Fund from
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the specified open- ended debt schemes 5 @
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where there is liquidity stress inbthe h a rga market, but the credit
quality is good. o r ipr
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• There are also prudential norms prescribed by the
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regulator which the Fund would follow in terms of buying

of debt securities i.e., not more than 5% of the amount
available (Fund Capital i.e., corpus plus maximum
permissible leverage) with single issuer and not more than
7.5% with issuers from the same group.
• CDMDF will buy only investment-grade
securities from secondary markets, listed and
having residual maturity of up to five years.

• It will not buy any unlisted, below-investment-

grade or defaulted debt securities or securities il.c
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in respect of which there is a material av
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possibility of default or adverse credit news or
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• It will buy at a fair price (adjusted for liquidity

risk, interest rate risk and credit risk) but not
at distress price.
• The units of CDMDF will be subscribed by AMCs of mutual funds
and specified debt-oriented MF schemes – open-ended debt
oriented mutual fund schemes excluding overnight funds and gilt
funds and including conservative hybrid funds.

• Specified debt-oriented mutual fund schemes will invest 25 basis

points (bps) of their assets under management (AUM) in the units
of CDMDF.

• AMCs will make a one-time contribution equivalent il.c

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the AUM of specified debt-oriented mutual 5 @ fund schemes
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• AMCs of new mutual funds will also make a one-time contribution
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equivalent to two bps of their specified debt-oriented MF

schemes, based on the AUM at the end of the financial year
following the one in which the specified schemes are launched.
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FTAs under Negotiation

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