Guide · Fixed income · Updated 2026-09-23

A retail bid for a government bond pays the auction's average price, not its cut-off, and settles into a gilt account at the RBI

Most explanations of retail access to government bonds stop at one sentence: open a Retail Direct account, bid non-competitively and receive the auction's weighted average price. The sentence is correct, and it leaves out everything that decides what the investor actually gets: where that average sits against the cut-off, whether the bid is filled in full, who else is in the same queue, and what the bond fetches from anyone else the next morning.

This page follows one auction, the RBI's re-issue of a 15-year central government bond on 18 September 2026, from the notice to the final repayment. It then measures the rest of the route on the RBI's own tables for every auction from April to September 2026, the platform's published statistics and the exchange's daily files. The bond is identified by its terms rather than its name, because nothing here turns on which bond it is.

A gilt account in the RBI's ledger, not a demat account at a broker

The RBI notified the Retail Direct scheme on 12 July 2021 and opened its portal on 12 November 2021, the day its notification RBI/2021-22/124 let holders of a Retail Direct Gilt account bid in auctions without an aggregator. An individual with a rupee savings bank account, PAN, KYC documents, an email address and a mobile number can open one, and so can a non-resident eligible to invest in government securities under the Foreign Exchange Management Act, 1999. The RBI's FAQ on the scheme allows one account per person, held singly or with one other eligible individual, with up to two nominees, and states the cost plainly: the account is opened and maintained free, no fee is charged on bids, and payment gateway charges fall on the investor.

What makes it different is where the bond is recorded. A government security exists as an entry in the RBI's Subsidiary General Ledger, and a Retail Direct account is one of those entries in your own name: bonds are credited to it on the settlement day, and coupons and redemption money go to the linked bank account. In the demat route the depository holds the ledger account (CDSL's investor FAQ says in terms that it is an SGL account holder), and your holding is a line in its books kept through a participant. A bank or primary dealer holding bonds for a client keeps them in a constituents' account at the RBI in its own name. Holdings move between the routes by a value-free transfer, which the portal accepts as a request.

Through the platform an investor can bid for treasury bills, dated central government securities and state government securities, subscribe to the government's floating rate savings bonds, and hold and trade sovereign gold bonds from earlier tranches; there has been no fresh tranche since February 2024, as the guide to sovereign gold bonds explains. A mobile app followed on 28 May 2024, and the RBI's policy statement of 6 August 2025 announced standing instructions to bid automatically in treasury bill auctions. The platform's statistics as on 31 August 2026 count 3,84,362 accounts from 6,73,146 registrations and ₹4,288.79 crore of holdings. Of that, ₹2,439.49 crore, 56.9 per cent, is floating rate savings bonds, which cannot be traded at all, and ₹884.44 crore, 20.6 per cent, is dated central government bonds. Since November 2021 the platform has put ₹826.17 crore into dated-bond auctions in total: 2.95 per cent of the ₹28,000 crore the government sold in the single week this page follows.

The auction prices the bond; the retail bid takes delivery

The government borrows through weekly auctions on the RBI's core banking system, e-Kuber, to a calendar published for each half year; the one for April to September 2026 went out on 27 March 2026. On 10 September 2026 the RBI announced (press release 2026-2027/1089) the re-issue of two existing bonds on Friday 18 September: ₹17,000 crore of a 15-year bond with a 7.06 per cent coupon, first issued on 27 July 2026 and due on 27 July 2041, and ₹11,000 crore of a 50-year bond. Non-competitive bids were taken from 10:30 to 11:00 a.m. and competitive bids until 11:30 a.m.; results came the same day and payment on Monday 21 September.

A re-issue is auctioned on price and a new bond on yield, whose cut-off then becomes its coupon. Competitive bidders, meaning banks, primary dealers, insurers and funds, each quote a price and an amount. The RBI sets the non-competitive total aside, ranks the competitive bids from the highest price down and accepts them until the notified amount is filled, though it may take less: on 11 September 2026 it accepted ₹4,500 crore of competitive bids against ₹11,000 crore offered in a three-year bond. The last price accepted is the cut-off; bids exactly at it share what is left pro rata; bids below it get nothing. Under the multiple-price method every winner pays the price it bid, and the notice's annex puts the non-competitive allotment at "the weighted average rate of yield/price of the successful bids".

Retail bids reach the RBI already bundled. Each bank or primary dealer submits one consolidated non-competitive bid for its clients, and the Clearing Corporation of India does the same for every Retail Direct bid, so the RBI's table counts consolidated bids, not investors: four of them, for ₹55.739 crore, in the 15-year bond. The competitive and non-competitive allotments add up to the notified amount exactly: ₹16,944.261 crore plus ₹55.739 crore.

Why the retail price sits above the cut-off

The cut-off is the lowest price the RBI accepted, so the average of the accepted prices can only equal it or exceed it. On 18 September the average was 98.48 against a cut-off of 98.45: three paise per 100 of face value, ₹30 on ₹1,00,000, and 0.34 basis points of yield. The non-competitive bidder paid more than the marginal institution and less than those that bid high to be sure of an allotment, without forecasting anything.

Across the half year the pattern holds. For the 53 securities sold at 25 auctions from 2 April to 18 September 2026, every one of them by the multiple-price method, the average was above the cut-off 52 times and equal to it once; the median gap was 0.05 per 100, or 0.61 basis points. The largest price gap, 0.22, came on the 50-year bond and the largest yield gap, 4.24 basis points, on a bond with 2.6 years to run, because the shorter the bond, the more yield a paisa of price carries. A new bond adds a twist. Its cut-off yield becomes the coupon, so the cut-off price is 100 and the average sits above par: when the 15-year bond was first sold on 24 July 2026 at a cut-off of 7.06 per cent, non-competitive bidders paid 100.05 and bought a yield of 7.054 per cent, a shade under the coupon they will be paid. The cut-off version of the story is true only of a uniform-price auction, where every accepted bid pays the cut-off.

The table below prices four ways into the same auction. A re-issue is bid in price, so the stated yields are converted on the RBI's own convention, which reproduces all 90 cut-off and average yields the RBI published for the half year's 45 re-issues. Retail Direct takes non-competitive bids only; the competitive rows show what an institution, or a client bidding through one, would have received.

On the portal the price is unknown when the bid goes in, so the platform collects an indicative amount with a markup and, according to the RBI's FAQ, refunds the excess to the linked bank account within two business days of the auction; payment runs through net banking or UPI. The bonds arrive in the gilt account on the settlement day, here 21 September, with 54 days of interest already accrued since the bond's first issue on 27 July: ₹1,059 on ₹1,00,000, which the buyer pays and the first coupon returns.

The limit that binds is yours, not the reserve's

The scheme's limits are few and hard. A bid is at least ₹10,000 of face value, in multiples of ₹10,000, and in a dated-bond auction at most ₹2 crore per security per auction. Each investor makes one bid per auction, through one channel, and an aggregator must hold an undertaking to that effect. Retail allotments are capped at 5 per cent of the notified amount, inside it, and bids beyond the cap are filled pro rata. Retail is wider than it sounds: the RBI's 2021 notification defines a retail investor as any person, including firms, companies, corporate bodies, institutions, provident funds and trusts, that does not hold a current or SGL account with the RBI, and regional rural and co-operative banks may also bid non-competitively in bond auctions.

Measured over the half year, the cap never came near binding in a bond auction. Across the 53 securities, non-competitive bids totalled ₹1,011.82 crore against ₹39,300 crore reserved, 2.57 per cent of it; the median auction used 2.06 per cent of its reserve and the fullest 8.70 per cent, and every non-competitive bid was filled in full. For an individual buying a bond at auction, the limit that binds is the ₹2 crore per bid.

Treasury bills are the opposite. There, State Governments, eligible provident funds and designated foreign central banks bid non-competitively outside the notified amount, and retail bids are capped at 5 per cent of it (the RBI's bill notice of 18 September 2026, press release 2026-2027/1148; the guide to treasury bill yields covers the price arithmetic). Read that way, the retail allotment in a bill auction is the notified amount less the competitive allotment, and that single assumption reproduces all 58 partial-allotment percentages the RBI published between 8 April and 23 September 2026 to four decimal places. The cap was reached in 58 of 73 tenor auctions. Each time, retail bids exceeded it by 2 to 15 per cent and every retail bid was filled at 86.6 to 98.3 per cent of its amount; in the weeks it was not reached, retail bids came to at most 74 per cent of the cap.

Most of that money does not come through Retail Direct. Between the platform's statistics of 1 June and 31 August 2026 its dated-bond subscriptions rose ₹17.96 crore, while the bond auctions of those three months allotted ₹495.54 crore non-competitively: about 3.6 per cent. Its bill subscriptions rose ₹233.48 crore against ₹11,533.54 crore of retail bill allotments, about 2.0 per cent. The rest arrives through banks and primary dealers; through the stock exchanges, which have aggregated non-competitive bids since the RBI's circular of 23 November 2017 and credit allotted bonds to a demat account; and from the firms, trusts and funds the scheme counts as retail.

Held to maturity: thirty coupons and a refund of interest

The cash flows of the holding were fixed on the settlement day. Bought non-competitively on 18 September, ₹1,00,000 of face value cost ₹99,539 on 21 September 2026: ₹98,480 for the bond at 98.48 and ₹1,059 for 54 days of accrued interest. It pays ₹3,530 on every 27 January and 27 July, 30 payments from 27 January 2027 to 27 July 2041, and ₹1,00,000 on the last of those dates: ₹2,05,900 in all. Because the count is 30/360, every coupon is exactly half of 7.06 per cent of the face value whatever the calendar does, and the first is not all income: ₹1,059 of it returns the interest paid at purchase.

Discounted at a rate compounded half-yearly, those flows are worth ₹99,539 at 7.2271 per cent a year, the RBI's published average yield, and the build that produced this page refuses to write it unless the two agree. That yield is realised only if every coupon is reinvested at the same rate, as the guide to bond price and yield works through; a sale before July 2041 realises the market price of the day instead. Undiscounted, the coupons alone pass the ₹99,539 outlay only with the 29th payment, in January 2041.

Selling early: three order books, none of them deep

A Retail Direct holder sells on NDS-OM, the RBI's anonymous order-matching system, in two segments built for small trades: the odd-lot book, for orders below the ₹5 crore standard lot and down to ₹10,000, and a request-for-quote screen. Primary dealers are the designated liquidity. Under the RBI's market-making arrangement of 4 January 2022 (RBI/2021-22/147) they may quote to buy and sell liquid securities through market hours and respond to requests from gilt account holders, with turnover on a best-effort basis. Bonds offered for sale are blocked when the order goes in, and trades settle the next working day through the clearing corporation. The platform's cumulative traded volume in dated central government bonds rose ₹6,868.34 crore in the year to 31 August 2026, against ₹5,082.13 crore for the exchange's entire government series over the same twelve months, each on its own measure.

A demat holder can sell on the stock exchange instead, where central government bonds trade in the GS series of the cash segment beside shares, in units of 100 rupees of face value, at a price that already contains accrued interest. The exchange's own files measure how thin that book is. Over the 246 sessions from 19 September 2025 to 18 September 2026, 118 securities in the series traded at least once, a median of 50 on any day, and only 18 traded on nine sessions in ten. The median bond that traded did so 4 times in the session; 58.1 per cent of bond-sessions had five trades or fewer and 21.7 per cent exactly one. The whole series turned over a median ₹16.46 crore a session. In November 2024, when CCIL's research department put the government securities market's daily turnover at ₹1.34 lakh crore, the exchange's series averaged ₹14.68 crore a session: about one part in 9,100.

The thin book shows in the price. On each of the 43 occasions from 2 April to 18 September 2026 when the RBI re-issued an ordinary bond, the same bond's exchange trades that day can be set against the auction: same bond, same day, same settlement date, accrued interest removed. On 10 of them the bond did not trade on the exchange at all. On the other 33 the exchange's average clean price ran from 1.57 below the auction's average to 5.24 above it, per 100 of face value; the median was 0.31 above, and the middle half ran from 0.48 below to 1.05 above. The widest gap came on 2 April, when the auction sold the 50-year bond at an average yield of 7.87 per cent and seven exchange trades still priced it near 7.45. Where the day had ten or more trades, 10 of 12 were above, by a median 0.82. On 18 September the 15-year bond traded 4 times on the exchange for ₹500 of face value in total, at a clean equivalent of 100.15: 1.67 above what non-competitive bidders paid that day.

The third order book is the newest, and most guides to retail bonds predate it. The RBI's Master Direction on access criteria for NDS-OM of 7 February 2025 (RBI/FMRD/2024-25/127) created a Stock Broker Connect route, and SEBI's circular of 11 February 2025 lets registered stock brokers offer it through a separate business unit. Under the Clearing Corporation's operational guidelines, a broker admitted as an NDS-OM trading member, with a CCIL clearing member settling for its clients, lets an individual with a demat account order on the RBI's own screen, through one broker at a time and with no algorithmic trading. It sits beside an older route through depository participant banks that are NDS-OM members. The RBI's draft consolidated directions on secondary market transactions, released on 25 June 2026 (press release 2026-2027/541) with comments due by 17 July, carry all three retail channels; this guide found no final version as at 23 September 2026.

Funds hold the same bonds and change the tax

The other retail route is a fund: a gilt fund or constant-duration gilt fund, or an index fund or exchange traded fund that tracks a government bond index. Access, cost and exit are in the table below; the difference that matters most is tax. A fund that invests more than 65 per cent of its proceeds in debt and money market instruments is a specified mutual fund under section 50AA, in the definition section 21 of the Finance (No. 2) Act 2024 substituted from assessment year 2026-27, and a gain on units bought on or after 1 April 2023 is short-term however long the units are held. A bond held directly turns long-term after 12 months.

Tax: the coupon is income every year, the price change a capital gain

For an investor a coupon is interest, taxed at the slab rate in the year it is received. No tax is deducted at source on interest from central or state government securities under the proviso to section 193; since 1 October 2024, when the Finance (No. 2) Act 2024 amended it, interest above ₹10,000 a year on the government's floating rate savings bonds, and on any security the government notifies, is no longer covered. No deduction is not no tax: the interest belongs in the advance tax computation for the year.

A sale before maturity is a transfer of a capital asset. A government security counts as listed for the holding-period test, so it turns long-term after 12 months, and a long-term gain on a transfer on or after 23 July 2024 is taxed at 12.5 per cent without indexation under section 112; a short-term gain is taxed at slab rates. Redemption at 100 of a bond bought at 98.48 produces a gain of ₹1,520 on ₹1,00,000, and a bond bought above 100 produces a loss. Two points could not be verified against a primary source for this page: how the ₹1,059 of accrued interest paid at purchase is treated against the first coupon, and how the redemption difference is characterised. The discount on a treasury bill held to maturity meets the slab rate however it is characterised, because a gain inside a year is short-term.

Against a fund the trade runs both ways. The direct holding is taxed on each coupon as it arrives and at 12.5 per cent on a long-term gain; the fund is taxed on nothing until units are sold, and then on the whole gain, interest included, at the slab rate. One defers tax, the other takes part of the return at a lower rate, and which matters more is arithmetic on the holding period and the slab.

Where the route fails, and what each route is for

One bid, no second look. A non-competitive bid is one per security per auction, the window closes at 11:00 a.m., and the price is set after the bid is in. The bidder accepts whatever average the institutions produce.

The average, and the pro rata. A plan built on the cut-off yield overstates what a multiple-price auction delivers, and a treasury bill ladder planned to the rupee arrives short in most weeks, cut back by 1.7 to 13.4 per cent.

An exchange price is the book's price. The quote carries interest inside it, most bonds trade a handful of times a day, and on auction days the book's average sat from 1.57 below to 5.24 above the institutional price. A limit order is the only protection a thin book offers.

A sale is a market price. The cash flows are fixed only for a holder who waits until maturity; anyone who sells takes the yield of the day, and a long bond's price moves most for a given change in yield.

Not everything on the platform can be sold. Floating rate savings bonds, the largest holding on Retail Direct, are not tradable, and sovereign gold bonds have had no fresh tranche since February 2024.

Each route answers a different question. Retail Direct takes delivery at the institutional average, with no RBI fee, and holds the bond in your own name. The exchange suits small tickets and exits, at a price you set with a limit. A fund buys convenience and tax deferral at the cost of an expense ratio and the slab rate. Reading an auction table, pricing a bond from its terms and checking a screen price against the auction are one piece of arithmetic, and it is taught here as something to rebuild from the RBI's own figures rather than take on trust.