NDS-OM: G-Sec Trading Platform

Background: The Indian Government Securities Market Before NDS-OM

To appreciate what NDS-OM represents, it is worth understanding the market it replaced. Before the late 1990s, trades in dated Government Securities and Treasury Bills in India were conducted almost entirely over the telephone. Two dealers - typically sitting in the treasury departments of two different banks - would call each other, agree on a price and quantity, and then submit physical or telex-based settlement instructions to the RBI. There was no central price feed, no public order book, and no systematic way for an outsider to know what the prevailing market price of a G-Sec actually was.

This system had several serious problems. First, price discovery was fragmented - the same security could be trading at different yields at different institutions simultaneously, and without a consolidated view, neither party could be confident they were getting a fair deal. Second, counterparty risk was significant. If one party agreed to sell a security and the buyer subsequently failed to deliver funds, the seller bore the loss. Settlement failures, though not common, were not unheard of. Third, the market was almost entirely closed to retail investors. Without direct access to the network of treasury dealers and the SGL account infrastructure, individuals simply could not participate.

The first major step toward modernisation came with the establishment of the Negotiated Dealing System (NDS) in February 2002. NDS was an electronic platform that allowed participants to electronically submit bids in primary auctions conducted by the RBI and to report over-the-counter secondary market transactions. This was a significant improvement: primary market auctions became faster and more efficient, and all secondary market trades had to be reported to a central system, creating a consolidated record for the first time.

However, NDS in its original form was still essentially a reporting and auction system, not a live trading platform. Secondary market transactions were still largely negotiated bilaterally between counterparties; they were just reported to NDS after the fact. Actual anonymous order matching - the feature that makes equity markets so efficient - was missing. That gap was filled when NDS-OM went live in August 2005, adding a real-time, anonymous order book to the existing NDS infrastructure. From that point on, participants could post live bids and offers, and the system would automatically match them on price and time priority - the same first-in-first-matched rule that governs equity order books on the NSE.

Architecture and Technical Structure of NDS-OM

NDS-OM is owned and operated by the Reserve Bank of India and is hosted at the RBI's data centres, with appropriate redundancy and business continuity arrangements mandated by the central bank's own technology guidelines. The platform connects participants through a private, secured network - the Indian Financial Network (INFINET) - managed by the Institute for Development and Research in Banking Technology (IDRBT), a subsidiary of the RBI. This means that unlike a public internet-based system, NDS-OM transactions travel over a dedicated, regulated network, adding a layer of security that is critical for a market handling sovereign debt instruments worth crores of rupees per transaction.

The system follows a price-time priority order matching mechanism. When a participant enters a buy order (a bid) at a specified yield or price, the system checks whether any matching sell order (an offer) already exists in the order book. If yes, the trade executes immediately. If no match exists, the order rests in the book waiting for a counterparty. The participant who entered the order first - at the same price - gets priority over a later entrant at the same price. This is identical in principle to how limit orders work on the NSE's equity segment.

The platform supports two fundamental order types. Limit orders specify the exact price (or yield) at which the participant is willing to trade and will wait in the order book until matched or cancelled. Market orders are executed at the best available price in the book at the moment of entry. For G-Secs, because prices are quoted as a percentage of face value (and yields are derived from those prices), a participant bidding for a 10-year Government of India bond might enter a limit order at, say, ₹98.50 per ₹100 of face value, implying a yield of around 7.2% - the system handles the arithmetic internally.

An important feature of NDS-OM is its anonymity. Unlike the old telephone-based market, where you knew exactly which institution you were dealing with, NDS-OM does not reveal the identity of the counterparty until after the trade is matched and confirmed. This anonymity reduces the potential for information leakage and large-player dominance - smaller institutions can post orders without the fear that a larger bank will game the market by detecting their presence. Post-trade, however, settlement instructions are exchanged with full counterparty identification, as required for regulatory and risk management purposes.

NDS-OM is integrated with the Clearing Corporation of India Limited (CCIL), which acts as the Central Counterparty (CCP) for all trades executed on the platform. This is a critical piece of market infrastructure: once a trade is matched on NDS-OM, CCIL interposes itself as the buyer to every seller and the seller to every buyer. This novation eliminates bilateral counterparty risk entirely. Even if one party defaults, CCIL's guarantee fund and risk management framework ensure that the other party is protected. This central clearing arrangement is one of the main reasons why NDS-OM enjoys very low settlement failure rates - a stark contrast to the pre-reform era.

Trade-level data from NDS-OM - including prices, volumes, yield curves, and order book snapshots - is disseminated in real time to a wide range of financial data vendors and published on the RBI's website, contributing to the overall transparency and efficiency of Indian bond markets.

Market Segments: Institutional, Odd-Lot, and Retail Direct

NDS-OM is not a one-size-fits-all platform. It operates through distinct market segments designed to cater to different types of participants with different account structures, lot sizes, and access requirements. Understanding these segments is essential for anyone looking to participate in or analyse the secondary G-Sec market.

The Main (Institutional) Segment is where the bulk of volume happens. Participants in this segment are entities that hold Subsidiary General Ledger (SGL) accounts or Constituent SGL (CSGL) accounts with the RBI. SGL accounts are dematerialised repositories for G-Secs, maintained directly on the RBI's books. Eligible entities include scheduled commercial banks (public sector and private), primary dealers, insurance companies, mutual funds (through their custodians), foreign portfolio investors (FPIs) who have been granted SGL access, and certain other regulated financial entities. The minimum trade size in the institutional segment is ₹5 crore face value, which immediately rules out individual retail investors. Transactions here are typically in multiples of ₹5 crore, and large institutional trades often run into hundreds of crores. Liquidity in this segment is deep for on-the-run (recently issued) securities, though off-the-run (older) bonds can be thinly traded.

The Odd-Lot Segment was introduced by the RBI in 2013 specifically to broaden access to NDS-OM. The minimum trade size here is ₹10,000 face value, with trades permissible in multiples of ₹10,000 up to ₹2 crore. This segment is open to individuals, Hindu Undivided Families (HUFs), firms, companies, corporate bodies, institutions, provident funds, and trusts - essentially anyone who holds a Gilt account with a custodian (such as a bank or primary dealer) that maintains a CSGL account. An individual investor who opens a Gilt account with a scheduled commercial bank can access the Odd-Lot segment through that bank's interface. The Odd-Lot Segment trades the same instruments as the main segment - dated Government of India securities, State Development Loans (SDLs), Treasury Bills, and so on - but in smaller quantities suitable for non-institutional portfolios.

The RBI Retail Direct Scheme, launched in November 2021, took retail access a step further. Under this scheme, eligible individual investors (Indian residents and NRIs) can open a Retail Direct Gilt (RDG) account directly with the RBI through the Retail Direct portal (rbiretaildirect.org.in). The RDG account is essentially a CSGL account held directly with the RBI, eliminating the need for an intermediary bank or primary dealer. Through this account, investors can participate in primary auctions of G-Secs, Treasury Bills, SDLs, and Sovereign Gold Bonds. They can also access NDS-OM's secondary market through the Retail Direct portal, buying and selling previously issued securities at live market prices. The minimum investment under Retail Direct is ₹10,000 face value for most instruments. This was a landmark development - for the first time, an ordinary salaried individual in India could access the same sovereign bond market that pension funds and insurance companies use, without going through a mutual fund or a broker.

Each segment has its own trading hours. The institutional and Odd-Lot segments of NDS-OM typically operate on weekdays (excluding RBI and public holidays) from 9:00 AM to 5:00 PM IST, though the exact schedule is determined by the RBI and can be updated. Treasury Bill and SDL trading hours may differ slightly from dated G-Sec hours; always verify the current schedule on the RBI or CCIL website.

Instruments Traded on NDS-OM

NDS-OM is not limited to a single type of instrument. It provides a secondary market trading platform for the full range of Central Government and State Government debt instruments issued in India. Understanding each instrument category helps investors select the right security for their risk appetite, investment horizon, and tax planning needs.

Dated Government Securities (G-Secs) are the flagship instruments on NDS-OM. These are fixed-income or floating-rate bonds issued by the Central Government of India with tenors ranging from two years to 40 years (and, in some cases, beyond). The Central Government issues both fixed-coupon bonds (paying a specified rate semi-annually) and floating-rate bonds (whose coupon resets periodically based on a benchmark, typically the 182-day Treasury Bill yield). Inflation-Indexed Bonds (IIBs) - where both principal and coupon are linked to the Consumer Price Index - are also issued and traded on NDS-OM. Dated G-Secs carry zero credit risk from the Indian government's perspective (they are direct obligations of the sovereign), making them the benchmark against which all other domestic fixed-income instruments are priced.

Treasury Bills (T-Bills) are short-term Government of India instruments issued at a discount to face value and redeemed at par. They come in three tenors: 91-day, 182-day, and 364-day. Since they do not pay periodic coupons, their return is the difference between the purchase price and the face value. T-Bills are heavily used by banks for short-term liquidity management and by money market funds. On NDS-OM, T-Bills are quoted in yield terms, and the system calculates prices accordingly. Their short duration makes them less sensitive to interest rate movements than longer-dated bonds, making them attractive when interest rate uncertainty is high.

State Development Loans (SDLs) are bonds issued by India's state governments to fund their fiscal deficits. They are similar to dated G-Secs in structure - fixed coupon, semi-annual interest payments, maturity periods typically between 5 and 40 years - but they are issued by state entities rather than the Centre. SDLs carry a small yield premium over comparable Central Government bonds (the SDL spread), reflecting marginally higher risk perceptions and liquidity differences. Major states like Maharashtra, Tamil Nadu, Uttar Pradesh, and Karnataka are among the most frequent issuers. SDLs are traded on NDS-OM but are generally less liquid than Central Government bonds, particularly for older issuances.

Cash Management Bills (CMBs) are non-standard, short-duration instruments issued by the Central Government on an ad hoc basis to meet temporary mismatches in government cash flows. They function similarly to T-Bills but can have tenors shorter than 91 days - sometimes as short as a few days or weeks. CMBs are occasionally traded on NDS-OM when they are issued in sufficient volume.

Sovereign Gold Bonds (SGBs) and some other special-category securities are also eligible for trading on NDS-OM, though their secondary market liquidity can vary significantly by series and tenor. The RBI periodically updates the list of eligible instruments; participants should refer to current RBI circulars for the latest position.

Across all these instrument types, NDS-OM provides a single, integrated trading interface, enabling participants to view live market prices and trade seamlessly across the full maturity spectrum of sovereign debt - from overnight T-Bills to 40-year bonds.

Price Discovery, Yield Quotation, and the G-Sec Price-Yield Relationship

One of the most important things to understand when engaging with NDS-OM is that G-Secs are quoted and traded differently from equities. Equity shares are quoted directly in rupees per share. Government Securities are quoted as a price per ₹100 of face value, and that price has a direct mathematical relationship with the yield to maturity (YTM) - the annualised return an investor would earn if they bought the bond at the current market price and held it to redemption.

The relationship between price and yield is inverse: when yields rise (i.e., interest rates in the economy go up), existing bond prices fall, because a new investor can get a higher return from newly issued bonds, making the older bond worth less. Conversely, when yields fall, existing bond prices rise. This inverse relationship is the single most important concept in fixed-income investing and is at the heart of how NDS-OM price discovery works.

On NDS-OM, participants can enter orders either in price terms (specifying ₹X per ₹100 face value) or in yield terms (specifying Y% YTM). The system automatically converts between the two using the standard bond pricing formula, which discounts all future cash flows (coupon payments and principal repayment) at the specified yield rate, compounded on a semi-annual basis in line with Indian Government Securities market conventions. The day-count convention used for Indian G-Secs is Actual/Actual, meaning the accrued interest calculation uses the actual number of days elapsed and the actual number of days in the coupon period - a specific technical detail that matters for settlement amount calculations.

When a trade is executed, the settlement amount consists of two components. The first is the clean price - the quoted market price that excludes accrued interest. The second is accrued interest - the fraction of the next coupon that has already been "earned" by the seller but will be paid to the buyer (since the buyer receives the next full coupon). The total amount the buyer pays is called the dirty price or full price: Clean Price + Accrued Interest = Dirty Price. This is an important distinction because the clean price is what is quoted on NDS-OM screens and reported in the media, while the dirty price is the actual cash amount that changes hands at settlement.

Price discovery on NDS-OM works through continuous matching of orders. At any given moment, the order book shows the best bid (the highest price at which someone is willing to buy) and the best offer (the lowest price at which someone is willing to sell). The difference between these two is the bid-ask spread - a direct measure of market liquidity. For benchmark 10-year Government of India bonds, the bid-ask spread on NDS-OM can be as tight as 1-2 paise per ₹100 during normal market hours, reflecting very high liquidity. For off-the-run bonds or SDLs, the spread may be 10-50 paise or wider. Retail investors in the Odd-Lot segment may experience somewhat wider effective spreads due to lower liquidity in that segment.

The CCIL publishes a daily F-TRAC (Financial Transaction Reporting and Confirmation) data set and also disseminates NDS-OM price and yield data in real time. This publicly available data forms the basis for the RBI's benchmark G-Sec yield publications, which in turn influence pricing across the broader Indian fixed-income market - including corporate bond spreads, home loan benchmarks (G-Sec linked external benchmarks have been explored by the RBI from time to time), and insurance company reserving rates.

Settlement Process: T+1 and the Role of CCIL

Trade settlement in NDS-OM follows a well-defined process that is materially different from what equity investors experience on the NSE or BSE. Understanding settlement is critical because errors or misunderstandings at the settlement stage can result in failed trades or unexpected cash flow timing.

The standard settlement cycle for most G-Sec transactions on NDS-OM is T+1, meaning that if a trade is executed on a given date (Trade Date, or T), the exchange of securities and funds takes place on the next business day (T+1). This is actually a faster settlement cycle than the T+2 cycle that equity shares follow in India (though the equity market is transitioning). Some categories of transactions, particularly repo trades (which are governed by a separate set of rules), may have different settlement conventions.

The critical intermediary in the settlement process is the Clearing Corporation of India Limited (CCIL). As mentioned earlier, CCIL acts as the Central Counterparty (CCP) for all NDS-OM trades. Here is how the process flows step by step:

First, when a trade is matched on NDS-OM, both legs of the transaction - the security leg and the funds leg - are immediately confirmed by CCIL. CCIL becomes the buyer to the seller and the seller to the buyer, a process called novation. From this point, neither party needs to worry about whether the other party will default; CCIL bears and manages that risk.

Second, on the settlement date (T+1), CCIL nets the obligations of each participant across all the trades they have done during the day. This multilateral netting is a significant operational efficiency: instead of settling each trade individually with each counterparty, a bank with ten buy trades and eight sell trades in the same security would settle a single net position with CCIL. This reduces the gross settlement burden and conserves liquidity for all participants.

Third, the actual settlement happens across two infrastructure rails simultaneously. For the securities leg, G-Secs are transferred between SGL accounts (or CSGL accounts) at the RBI's Depositories, ensuring that legal ownership of the bond changes instantaneously and irrevocably. For the funds leg, payments are settled through the RBI's Real Time Gross Settlement (RTGS) system, ensuring that cash moves in central bank money - the safest and most final form of payment. The combination of simultaneous securities and funds transfer is called Delivery versus Payment (DvP) settlement, which eliminates the risk that one party delivers securities but does not receive payment, or vice versa.

For retail participants accessing NDS-OM through the Odd-Lot segment via a bank or the RBI Retail Direct scheme, the settlement mechanics work through a custodian layer. The bank or CCIL-member intermediary handles the SGL/CSGL movements on the investor's behalf, and the cash is debited or credited to the investor's linked bank account. The investor does not interact directly with the RBI's settlement systems but benefits from the same DvP finality through the chain of custodian arrangements.

Failed trades - where a participant cannot deliver securities or funds on the settlement date - are handled by CCIL through a defined auction process. CCIL may purchase the securities in the market to fulfil the failed seller's obligation, recovering the cost from the defaulting party along with penalties. This robust default management framework is a key reason why settlement failure rates on NDS-OM are extremely low by international standards.

Participant Categories, Access Requirements, and Account Structures

NDS-OM is a regulated, access-controlled platform. Not everyone can simply sign up and start trading; each participant category has specific eligibility criteria, account requirements, and regulatory obligations governed by RBI directions and applicable SEBI regulations where they intersect.

Scheduled Commercial Banks are the dominant participants in the main institutional segment. They are required by the RBI to maintain a certain portion of their deposits in G-Secs as part of the Statutory Liquidity Ratio (SLR) requirement. This mandatory holding creates a structural, high-volume presence in the market. Banks trade on NDS-OM both for their own account (proprietary trading) and on behalf of clients through custodian or broking arrangements. Both public sector banks (State Bank of India, Bank of Baroda, Canara Bank, etc.) and private sector banks (HDFC Bank, ICICI Bank, Axis Bank, etc.) are active participants.

Primary Dealers (PDs) are specialised non-bank entities authorised by the RBI to underwrite G-Sec auctions and maintain an active secondary market in G-Secs. As of the latest RBI list, there are around a dozen primary dealers in India, including both standalone PDs and bank-PDs (commercial banks with a PD division). PDs are arguably the most active traders on NDS-OM on a per-entity basis; they are obligated to provide two-way bid-ask quotes in G-Secs as a condition of their PD licence, which means they must be active price makers in the market. The PD community is essential for liquidity on NDS-OM.

Insurance Companies - both life and general insurers - are mandated by the Insurance Regulatory and Development Authority of India (IRDAI) to hold a significant portion of their investible assets in G-Secs. Given the large long-term liabilities that life insurers manage, they are particularly active buyers of long-dated bonds (20-year and 40-year G-Secs), which help match the duration of their assets to their liabilities.

Provident Funds and Pension Funds, including the Employees' Provident Fund Organisation (EPFO) and various government and private pension schemes, are significant holders of G-Secs. They generally follow a buy-and-hold strategy and are less active secondary market traders, but they do participate in NDS-OM for rebalancing and rollover purposes.

Mutual Funds participate in NDS-OM through their custodians for the Gilt funds and debt fund categories they manage. SEBI's Mutual Fund regulations specify the portfolio composition rules for various fund categories; Gilt funds, for example, must invest predominantly in G-Secs. Fund managers use NDS-OM to buy and sell G-Secs in response to fund inflows, outflows, and portfolio rebalancing needs.

Foreign Portfolio Investors (FPIs) who are registered with SEBI and have obtained the necessary RBI approvals can participate in the Indian G-Sec market through designated custodians. The RBI periodically sets limits on aggregate FPI investment in G-Secs (expressed as a percentage of the outstanding stock), and participation in NDS-OM by FPIs is subject to these limits.

Retail and Other Non-Institutional Investors can access NDS-OM through the Odd-Lot segment (via a bank or custodian with CSGL access) or through the RBI Retail Direct scheme. The eligibility criteria are broad - Indian residents, NRIs meeting certain conditions, and entities such as trusts and corporates - but the access infrastructure (Gilt account, KYC completion, bank account linkage) must be in place before trading can begin.

All participants are subject to NDS-OM's risk management framework, which includes position limits, margin requirements (for certain transaction types), and the overall CCIL guarantee structure. The RBI and SEBI coordinate on regulatory oversight, particularly for cross-market participants such as FPIs and mutual funds.

Taxation of G-Sec Gains and Income for Indian Investors

Taxation is a practical concern that every investor in G-Secs must understand, because the after-tax return on a bond may differ significantly from its pre-tax yield. Indian tax law treats income and gains from G-Secs in a specific way, and the rules can change with each Union Budget. Always refer to the latest Finance Act and consult a qualified tax advisor for personalised guidance.

Interest Income: The coupon (interest) received on G-Secs and SDLs is fully taxable in the hands of the investor at the applicable marginal income tax rate for individuals, or at the corporate tax rate for companies. For a high-income individual in the 30% tax bracket, a 7.2% G-Sec yields only around 5% after tax - an important consideration when comparing G-Sec returns to instruments that may have tax exemptions or lower effective tax rates. Tax is not deducted at source (TDS) by the Government on interest paid on G-Secs to resident investors, but investors must include this income in their annual tax return and pay advance tax as applicable.

Capital Gains: Profits from buying and selling G-Secs in the secondary market on NDS-OM are treated as capital gains. The classification into short-term capital gains (STCG) or long-term capital gains (LTCG) depends on the holding period. For listed securities (which G-Secs are, since they are listed on the NSE and BSE debt market segments), the holding period threshold and applicable tax rates are specified under the Income Tax Act as amended by the most recent Finance Act. Tax rates and holding period thresholds for debt securities have been revised in recent Budgets; refer the latest Finance Act for current rates. Capital losses from G-Sec sales can be set off against capital gains as per the normal set-off and carry-forward rules.

Accrued Interest: When an investor buys a G-Sec between coupon dates, they pay the seller the accrued interest as part of the dirty price. This accrued interest is deductible from the investor's interest income in the year it is received (since the investor effectively paid for it upfront). This creates a timing difference that can be used for legitimate tax planning purposes, though the rules are complex and professional advice is recommended.

Indexation: Unlike certain other asset classes, G-Secs do not currently benefit from indexation-based cost adjustments for capital gains purposes for most investor categories, though the exact position should be verified with reference to the current Finance Act. Investors in Inflation-Indexed Bonds (IIBs) may have additional nuances related to the principal adjustment component.

Sovereign Gold Bonds (SGBs), which are also traded on NDS-OM, have a distinct tax treatment: the capital gains arising on redemption at maturity are exempt from tax for individual investors. However, gains on secondary market sales before maturity are taxed as capital gains. Interest (coupon) on SGBs is taxable as income.

For NRIs investing through the RBI Retail Direct or other approved channels, withholding tax (TDS) requirements, treaty benefits under Double Tax Avoidance Agreements (DTAAs), and repatriation rules under FEMA add further complexity. Again, professional tax and legal advice is essential.

The key takeaway is that G-Secs, while free of credit risk, are not free of tax complexity. Understanding the after-tax yield is as important as understanding the pre-tax yield when making investment decisions.

How Retail Investors Can Access NDS-OM via RBI Retail Direct

The RBI Retail Direct scheme, operationalised in late 2021, was a paradigm shift for individual investors in India. For the first time, a retail investor could hold G-Secs directly with the RBI - without a mutual fund NAV layer, without credit risk of an intermediary, and without the relatively high minimum investments that were previously needed to participate meaningfully in the G-Sec market. Here is a practical walkthrough of how an individual investor can access NDS-OM through this route.

Step 1: Registration on the Retail Direct Portal. Investors visit the official RBI Retail Direct portal and complete the online registration process. The requirements include a valid PAN card, an Aadhaar number (for KYC purposes), a bank account with a designated bank, a mobile number linked to Aadhaar, and a valid email address. NRI investors must additionally meet the FEMA-compliant conditions specified by the RBI.

Step 2: KYC Completion. Know Your Customer (KYC) verification is completed digitally. The system typically uses Aadhaar-based e-KYC for resident individuals. Once KYC is cleared, the investor's Retail Direct Gilt (RDG) account is activated. This account is a CSGL account with the RBI - the same basic account type used by institutional investors, though with retail-appropriate features.

Step 3: Linking a Savings Account. The investor links a savings account at a scheduled commercial bank to the RDG account. This is the account from which funds are debited for purchases and to which funds are credited on sales or at maturity.

Step 4: Primary Market Participation. Once the RDG account is active, the investor can participate in primary auctions of G-Secs, Treasury Bills, SDLs, and Sovereign Gold Bonds. In a primary auction, the Government offers new securities for sale, and investors can bid at a specific yield (competitive bidding) or simply accept the weighted average yield determined by the auction (non-competitive bidding). The RBI reserves a portion of each auction (currently 5% for dated G-Secs) for non-competitive bids, ensuring that retail investors are allotted securities without having to compete on yield against institutional bidders.

Step 5: Secondary Market Trading on NDS-OM. For buying or selling previously issued G-Secs, the investor accesses the NDS-OM interface through the Retail Direct portal. They can view the live order book for the instruments available in the Odd-Lot segment, place limit or market orders, and monitor their portfolio. Executed trades are settled on T+1, with the securities appearing in the RDG account and the corresponding funds debited or credited from the linked savings account.

Step 6: Holding and Maturity. Securities held in the RDG account receive coupon payments directly to the linked bank account on the coupon payment dates. At maturity, the principal is also credited to the linked account. The RDG account statement is accessible online at any time.

It is important to understand the limitations of the Retail Direct route: not all G-Secs may be available for trading through the Odd-Lot/Retail Direct interface at all times; liquidity in the Odd-Lot segment is lower than in the institutional segment; bid-ask spreads may be wider; and there is no tax advisory or financial planning support built into the platform. Investors must take responsibility for their own investment decisions and tax planning. As with all market-linked instruments, the price of G-Secs fluctuates with interest rates, and selling before maturity may result in a capital loss if rates have risen.

NDS-OM in the Broader Indian Financial Market Ecosystem

NDS-OM does not operate in isolation. It is deeply embedded in the broader Indian financial market infrastructure, and developments on NDS-OM have ripple effects across many other market segments. Understanding these interconnections provides a more complete picture of the platform's importance.

The G-Sec yield curve - the graphical representation of yields across different maturities of Government Securities - is effectively constructed from NDS-OM transaction data. The CCIL and the Fixed Income Money Market and Derivatives Association of India (FIMMDA) publish official G-Sec yield curves daily, derived from actual traded prices on NDS-OM. This yield curve is used as the risk-free benchmark in India for pricing corporate bonds, bank loans with external benchmarks, derivatives contracts, and even equity valuations (through the discount rate used in Discounted Cash Flow models). A 25-basis-point movement in the 10-year G-Sec yield on NDS-OM can therefore affect the pricing of tens of thousands of financial products across the economy.

Repo and Reverse Repo transactions - where G-Secs are used as collateral for short-term borrowing and lending - are also reported through and linked to the NDS-OM infrastructure. The RBI's Liquidity Adjustment Facility (LAF) operates through repo and reverse repo auctions, and the market repo transactions between banks and non-bank financial institutions rely on the same G-Sec collateral that is traded on NDS-OM. The CCIL operates the Tri-Party Repo (TREP) system, which uses NDS-OM-registered securities as collateral. Thus, liquidity conditions in the money market and G-Sec market are closely interlinked.

Foreign investment in Indian G-Secs through the Fully Accessible Route (FAR) - which allows eligible foreign investors to invest in certain G-Secs without limit - is another dimension that makes NDS-OM a platform with global significance. India's inclusion in major global bond indices (such as the JPMorgan Government Bond Index - Emerging Markets) has driven significant FPI flows into Indian G-Secs through NDS-OM, and further index inclusions could increase these flows substantially.

The NDS-OM data also feeds into monetary policy transmission analysis. The RBI monitors secondary market G-Sec yields closely as an indicator of how policy rate changes are being transmitted to broader financial market conditions. When the RBI raises or cuts the repo rate, the immediate market response is visible in NDS-OM prices within minutes, and the central bank uses this data to assess whether its communication and policy actions are being understood and priced in correctly by markets.

Finally, NDS-OM's price transparency supports the development of the corporate bond market in India. Corporate bond issuers and investors routinely reference G-Sec yields as the risk-free base rate and add a credit spread on top. A transparent, efficiently priced G-Sec benchmark on NDS-OM means that corporate bond spreads are also more accurately priced, contributing to the overall efficiency of India's capital markets. SEBI has been encouraging deeper development of the corporate bond market, and the quality of the G-Sec benchmark available through NDS-OM is a foundational building block for that initiative.

Example

Key benefits

How it works

1. 1
   Participant Onboarding and Account Setup

   An eligible participant - whether a bank, primary dealer, or retail investor via RBI Retail Direct - completes the KYC process and opens the appropriate account (SGL, CSGL, or Retail Direct Gilt account) to gain access to NDS-OM.

2. 2
   Order Entry

   The participant logs into the NDS-OM trading interface (or the Retail Direct portal for retail investors) and enters a buy or sell order for a specified G-Sec, stating the quantity (face value) and either the price per ₹100 or the yield percentage.

3. 3
   Order Matching

   The NDS-OM system scans the order book and matches the incoming order against resting orders on the opposite side, following strict price-time priority. If no match exists, the order rests in the book until matched, cancelled, or expired.

4. 4
   Trade Confirmation and CCIL Novation

   On trade execution, both counterparties receive an immediate electronic confirmation. CCIL novates the trade - becoming the buyer to the seller and the seller to the buyer - eliminating bilateral counterparty risk from this point forward.

5. 5
   Multilateral Netting by CCIL

   CCIL nets each participant's obligations across all trades in each security during the day, producing a single net deliverable position per participant, reducing the gross settlement burden significantly.

6. 6
   T+1 Settlement: DvP across RTGS and SGL

   On the next business day (T+1), the securities leg is settled through transfers in RBI SGL or CSGL accounts, while the funds leg is simultaneously settled through RTGS in central bank money - true Delivery versus Payment finality.

7. 7
   Post-Settlement Portfolio Update

   The investor's account (RDG account for retail; SGL/CSGL for institutions) reflects the updated G-Sec holdings, and coupons are credited automatically to the linked bank account on each coupon payment date.

Formula

Dirty Price (Full Price) = Clean Price + Accrued Interest
Accrued Interest per ₹100 = (Annual Coupon Rate / 2) × (Days since last coupon / Days in coupon period)

Key takeaways

Frequently asked questions

Related terms