Last Updated on May 2, 2022 at 7:48 pm
In this article, Anand Vaidya shares his experience of using the RBI Retail Direct portal to buy govt. bonds (gilts) and create an income source.
About the author: Anand studied E&C Engg, worked at Wipro and then left for a job in Singapore. He started his own IT consultancy in Singapore. After 15 years, he returned to India in 2011 and continued the same IT services co. He forced himself to retire in 2022 (hopefully, the corpus accumulated is good enough 🙂 ) and is now planning to focus on other interests in life (Travelling, Gardening, reading books, investing etc)
WARNING! This is post is written by a retiree who wants a source of income. Do not buy these bonds looking at the int rate if you don’t want an income.
Liquidity is low for these bonds and you will not be able to sell them in the secondary market! CONTEXT MATTERS!
I have been thinking of creating a “base income” (call it a pension, if you will) that will yield a fixed “reasonable” income for decades. I am interested in 7%-8% range products lasting at least 2 decades
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
It MUST be secure. That leaves only Central Gov bonds. Until now, I have only purchased NCDs or Tax-free bonds as a long term fixed income alternative to FDs. (Most are in the 8.8%-9.9% range with Gov, AAA, AA)
Recently the government has opened up the Government Securities for purchase directly from RBI/Gov to ordinary citizens. Until now only institutions were allowed to buy such gov bonds.
This is my experience of selecting and buying one such issue. First a few basic things.
- Should you buy such bonds in the first place?
- Create an RBI Retail Direct account first. This is very well explained in this freefincal article: RBI Retail Direct: A look inside – how to register and what you can buy/sell
Please add a joint E or S holder, and/or at least a nominee without fail.
Note that the following types of bonds are available:
Central Gov bonds (CG)
State Gov bonds (SG)
Central Gov Treasury Bills (T-BILL)
Sovereign Gold Bond (SGB)
Each category may offer multiple bonds with varying duration (a few days to few decades), varying interest rates from floating rate to 6%+
Select the bond to purchase. Ensure you have enough balance in your SB A/C.
Fill in the Bid Entry form, and continue to payment. Pay the amount as indicated via net banking. A bank account with a high net banking transaction limit is good to have (10-20 lakhs per day).
The bid is immediately shown in the My Bids Tab.
I had selected 6.99% Gov Security maturing in 2051, I wished to buy maximum of Rs 5L or 5000 bonds of Rs 100 face value each.
I Applied and paid Rs 516511.67 on 6/Apr/2022. The Allotment date was set as 8/Apr/2022. The additional 16511.67 was displayed as “Clean Consideration + AI + Markup. AI here stands for accrued interest which has to be paid by the buyer when we buy the bond mid-term.
On the 8th evening, CCIL informed me via SMS that my bid was successful. However, the purchase price was Rs 95.28 instead of Rs 100 per bond and hence I was charged only Rs 4,76,400 (5000*95.28). They also indicated Rs 11261.67 as Accrued interest.
Hence an amount equal to 516511.67 – 4,76,400 – 11261.67 = Rs 28850 was refunded by 6 pm!
The yield to maturity= 7.38% which is not bad, compared to bank FD at 5%-5.5%
The details are available in the “My Allotments” tab.
| Maturity | ’12/2051 |
| Coupon Rate | 6.99% |
| Applied | 06-04-2022 |
| Allotted | 08-04-2022 |
| Listed BSE | 11-04-2022 |
| Bonds Applied (A) | 5,000.00 |
| Face value (B) | 100 |
| Cost (C= A*B) | 5,00,000.00 |
| AI+Markup (D) | 16,511.67 |
| Total Paid,pre-allotment (E= C+D) | 5,16,511.67 |
- Summary:
A very easy, straightforward method to buy gov bonds. Really well implemented. The only quibble is the bad fonts they have selected for the website and the excessive L-R scrolling - It all “just works” including refunds. Unexpected surprise for a gov agency
- I was lucky enough to get a 7.38% RoI for the next few decades.
- I will try to buy more bonds in future with higher net RoI, if possible to build a very secure “base income” layer.
- Can I park some money that I leave around unused in SB and move it to T-Bills? Eg: a 182-day T-bill gives 4.45%! Need to check.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 7000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 2,500 investors and advisors use this!
Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join 32,000+ readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email! (Link takes you to our email sign-up form)
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our YouTube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)