With reference to India, consider the following statements :

1. Retail investors through demat account can invest in ‘Treasury Bills’ and ‘Government of India Debt Bonds’ in primary market.

2. The Negotiated Dealing System Order Matching’ is a government securities trading platform of the Reserve Bank of India.

3. The ‘Central Depository Services Ltd.’ is jointly promoted by the Reserve Bank of India and the Bombay Stock Exchange.

Which of the statements given above is/are correct?

1. 1 only
2. 1 and 2
3. 3 only
4. 2 and 3

The correct answer is 1 and 2.

• The Reserve Bank of India recently announced that retail investors can now invest directly in the government's primary and secondary bond market by opening gilt accounts with the national banks and monetary policy regulators. This structural reform will deepen the bond market in  India. 
• In August 2005, RBI introduced an anonymous screen-based order matching module called Negotiated Dealing System-Order Matching (NDS-OM). Hence, statement 2 is correct.
• This is an order-driven electronic system, where the participants can trade anonymously by placing their orders on the system or accepting the orders already placed by other participants. 
• Access to NDS-OM by the retail segment, comprising of individual investors having Demat account with depositories viz. NSDL and/or CDSL, desirous of participating in the G-Sec market is facilitated by allowing them to use their Demat accounts for their transactions and holdings in G-Sec. Hence, statement 1 is correct.
• This access would be facilitated through any of the existing NDS-OM primary members, who also act as Depository Participants for NSDL and/or CDSL.
• The scheme seeks to facilitate efficient access to the retail individual investor to the same G-Sec market being used by the large institutional investor in a seamless manner.

• Central Depository Services (India) Ltd (CDSL), is the first listed Indian central securities depository based in Mumbai. Central Depository Services (India) Limited (CDSL) was initially promoted by BSE Ltd. which thereafter divested its stake to leading banks.
• CDSL received the certificate of commencement of business from the Securities and Exchange Board of India (SEBI) in February 1999. Hence, statement 3 is incorrect.
• Government of India securities (G-sec), State Development Loans (SDL) and Treasury Bills (T-Bills are issued in the primary market through auctions conducted by the Reserve Bank of India (RBI).
• An investor, depending upon eligibility, may bid in an auction under Competitive Bidding or Non-Competitive Bidding.
• To encourage retail investors in G-sec, SDL and T-Bills, the facility of non-competitive bidding (NCB) has been introduced.
• Under the scheme, eligible retail investors apply for a certain amount of securities in an auction without mentioning price/yield.
• Such bidders are allotted securities at the weighted average price/yield of the auction.
  RBI conducts an auction usually every week to issue G-sec, SDL and T-Bills