The Reserve Bank of India (RBI) has released draft master directions on secondary market transactions in government securities and invited comments from market participants until July 17. According to reports from The Economic Times, the draft directions consolidate the existing rules governing secondary market transactions in government securities into a single framework. The central bank has introduced 'when issued' transactions for new and reissued government securities, allowing trading between the time a G-Sec is announced for issuance/re-issuance and the time it is actually issued/re-issued. Eligible participants will be allowed to maintain short positions in government securities, with banks and standalone primary dealers permitted to take both long and short positions of up to 25% of the notified auction amount, while all other eligible participants will be subject to a 10% limit. For other illiquid government bonds, the limit for short positions has been set at 1% of the outstanding stock or ₹250 crore, whichever is higher. Short selling allows traders to sell bonds they do not currently own, with the expectation of buying them back later at a lower price, and positions must be covered within three months through outright purchases in the secondary market, primary auctions or the when-issued market.
The draft directions explicitly cover a wider set of market participants, including retail investors, demat account holders and investors transacting through recognised stock exchanges, as reported by Business Standard. Currently, retail investors participate in the G-Sec market by opening and maintaining the "Retail Direct Gilt (RDG) Account" with RBI, as reported by The Hindu BusinessLine. As on June 22, the number of RDG accounts stood at 3,71,439. In sharp contrast, as of April-end 2026, the number of demat accounts stood at 22.7 crore. The draft proposes that direct members of NDS-OM provide web-based access to constituent gilt account holders for undertaking transactions in government securities, with individual constituent gilt account holders and eligible demat account holders provided such access on request.
The draft further states that transactions in government securities may be executed on either a price or yield basis, with a minimum transaction size of ₹10,000. According to Business Standard, market timings for transactions in government securities have been proposed from 9:00 AM to 5:00 PM. The draft consolidates provisions relating to the reporting, settlement and trading of government securities that are currently spread across multiple regulations and circulars. Transactions undertaken outside NDS-OM would continue to be reported to the platform within 15 minutes of execution, while transactions would be settled on a delivery-versus-payment basis through the Clearing Corporation of India Ltd (CCIL) or any other clearing agency approved by the RBI. The RBI has stipulated that such positions must be covered within three months through outright purchases in the secondary market, primary auctions or the when-issued market.
The RBI has introduced 'when issued' transactions for new and reissued government securities issued by the Central government, as specified in the auction notification. 'When issued' trading takes place between the time a G-Sec is announced for issuance/re-issuance and the time it is actually issued/re-issued, helping price discovery. Additionally, an individual participant maintaining a demat account with a SEBI-registered depository may undertake transactions on NDS-OM through the stock broker connect facility. The proposed directions also bring together the existing framework for when-issued transactions and short sales. Scheduled commercial banks, standalone primary dealers, urban cooperative banks and other regulated entities permitted by their respective financial sector regulators would continue to be eligible to undertake short-sale transactions in central government securities, excluding Treasury Bills. Market participants are required to send their inputs by July 17, with the RBI stating that these measures aim to boost market liquidity and price discovery.
