RBI issues draft rulebook for government bond trading; key changes explained
The Reserve Bank of India (RBI) has unveiled a draft rulebook for secondary market trading in government securities, proposing a unified framework that simplifies regulations and expands retail investor access. The draft also introduces clearer rules for settlement, short selling, reporting and digital trading through the NDS-OM platform.
- Jun 25, 2026,
- Updated Jun 25, 2026 8:18 PM IST
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.
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.
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.
MUST READ: SEBI clears green channel for AIFs, cuts red tape for deceased investors' heirs
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.
MUST READ: Can Gold EGRs challenge Gold ETFs and sovereign gold bonds?
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.
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.
MUST READ: BT Explainer: How FII tax relief and RBI reforms could bring ₹3.81 lakh crore to India
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.