The finance ministry is hopeful that the poor response of retail investors to government securities will be reversed after the promulgation of the Government Securities Act.
The Bill has received the consent of all states except Jammu and Kashmir. It has been referred to the law ministry.
Even though the Reserve Bank of India (RBI) had decided to set aside 5 per cent in all auctions of government papers for non-competitive bidding, the response had not been encouraging, officials said.
For instance, in the Rs 4,000-crore auction on Tuesday, the total investment by retail investors was only Rs 46 crore against Rs 200 crore earmarked for them.
While the non-subscription does not affect the government borrowing programme the government plan to deepen the bond market has not been successful.
According to data, of the total subscription to government borrowings only 1.3 per cent were by the retail segment in the last fiscal.
However, the RBI had not decided to reserve 5 per cent for retail subscription in all auctions unlike 2002-03.
Officials said it was surprising considering the interest shown for the RBI relief bonds and even the 7 per cent bond, which had been recently introduced. While the former had tax reliefs the latter was more stark.
They said retail interest in secondary debt market would improve with the new Act because it would simplify procedures for transactions in government securities, and allow lien or pledging of these securities to make them more attractive options to park funds.
Besides, the provisions also allow for nomination facility for individual and joint account forms along with larger scope for dematerialised holding of securities in the form of a bond ledger account with banks.
These facilities are not available in the current Public Debt Act, which is of 1944 vintage.
Thes finance ministry is pressing for the introduction of the Bill in the next session of Parliament.
The former finance minister Yashwant Sinha had announced in the 2000-01 Budget that the new Bill would be introduced.
