The Reserve Bank of India (RBI) has released a draft Master Direction on Secondary Market Transactions in Government Securities, 2026, proposing to consolidate more than two decades of regulations into a single rulebook. The draft aims to simplify trading, improve market transparency and make it easier for retail investors to participate in India's government bond market. 

Here are the key changes proposed by the RBI.

1. Single rulebook replaces multiple circulars

The draft Master Direction consolidates regulations governing secondary market transactions, "When Issued" trading and short-selling of government securities. It will supersede numerous RBI circulars issued since 2000, creating a unified regulatory framework. 

2. Easier access for retail investors

Retail investors will have multiple ways to access the government securities market. Individuals can invest through the RBI Retail Direct Scheme, eligible bank demat accounts or SEBI-registered depositories using the Stock Broker Connect facility. 

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3. Greater digital access through NDS-OM

The RBI has proposed that direct members of the Negotiated Dealing System-Order Matching (NDS-OM) provide web-based access to constituent gilt account holders. Individual investors can also access the platform through eligible depository participant banks upon request. 

4. Minimum investment remains ₹10,000

Government securities can continue to be traded for a minimum face value of ₹10,000, with subsequent investments in multiples of ₹10,000. Trading can take place on either a price or yield basis. 

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5. T+1 settlement to continue

The draft mandates that all secondary market transactions in government securities settle on a T+1 basis through a Delivery versus Payment (DvP) mechanism, reducing settlement risks. FPIs may continue to settle certain transactions on a T+2 basis where permitted. 

6. Faster reporting of OTC trades

Transactions executed outside the NDS-OM platform must be reported within 15 minutes of execution. The proposal aims to improve transparency and strengthen market surveillance. 

7. Clear framework for 'When Issued' trading

The draft lays down detailed eligibility criteria, position limits and operational rules for "When Issued" trading, allowing investors to trade eligible government securities before they are officially issued. Resident individuals can hold only long positions, while banks and primary dealers can take both long and short positions within prescribed limits. 

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8. Revised short-selling norms

The RBI has prescribed detailed exposure limits for short-selling government securities. Eligible entities, including banks and primary dealers, must cover short positions within three months and comply with reporting and audit requirements. Treasury Bills remain outside the scope of short selling. 

9. Stronger compliance and audits

Both "When Issued" and short-sale transactions will be subject to concurrent audits. The RBI has also retained powers to seek information from market participants and impose restrictions for regulatory violations. 

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10. Public comments invited

The draft has been released for public consultation before being finalised. Once notified, it is expected to streamline compliance, deepen the government securities market and improve access for retail investors while strengthening market integrity.

Published on: Jun 25, 2026 8:15 PM IST