RGESS Is Gone — But the Lesson It Teaches Is Permanent

Last Updated on April 22, 2026 by teamtfl

“The investor’s chief problem — and even his worst enemy — is likely to be himself.”
– Benjamin Graham

In January 2013, a scheme called the Rajiv Gandhi Equity Savings Scheme (RGESS) was launched with much fanfare. It offered first-time equity investors a Section 80CCG tax deduction if they invested Rs 50,000 in specified securities. The industry rushed to launch RGESS-compliant mutual funds. Investors rushed to evaluate them.

The scheme was abolished in Budget 2017-18 — less than five years after launch. Section 80CCG no longer exists. The RGESS mutual funds were wound up or merged. Investors who had structured their tax planning around RGESS had to restructure entirely.

But the deeper lesson from RGESS has nothing to do with the scheme itself. It is about the pattern it represents — a pattern that repeats every year in Indian personal finance, every time a new government scheme or new product is launched.

The Tail Wagging the Dog

When RGESS launched in 2013, my colleague Manshu wrote in the original version of this post: “As soon as a new product is launched — news stories start appearing about it, people start inquiring about it, bloggers start blogging about it, and very soon the focus is on the product instead of your financial need.”

He was right. And he would be right today, writing the same observation about any number of newer products and schemes.

In 2021-22, it was Sovereign Gold Bonds — everyone suddenly needed to decide about SGBs because they were in the news. In 2022-23, it was I-Bonds and inflation-indexed instruments. In 2023-24, it was the new tax regime versus old tax regime — a valid decision, but one that consumed disproportionate mental bandwidth relative to more impactful financial choices. In 2024-25, it was passive index funds and factor funds, which dominated personal finance discourse while most investors still had inadequate term insurance and outdated beneficiary nominations.

The product becomes the conversation. Your financial need gets forgotten.

Why We Chase New Products

The psychology is straightforward. New products offer the hope of a better solution than what you currently have. The marketing around a new scheme is fresh and enthusiastic — it presents the product in its best light, in the context of current market conditions, with testimonials from early adopters and analysis from experts who have already positioned themselves as authorities on it.

Your existing portfolio, by contrast, is familiar and therefore somewhat boring. No one is marketing it to you. No one is writing excited analysis about your existing PPF account or your 5-year-old diversified equity fund. The new thing has a narrative. The old thing just sits there working quietly.

This is what the original RGESS post called “the tail wagging the dog.” The tail — the new product — is driving the dog — your financial planning. You start with the product and work backwards to justify why you need it, instead of starting with your financial need and working forwards to find the right instrument.

The Pattern in 2026: Three Current Examples

New Fund Offerings (NFOs): In every bull market phase, mutual fund companies launch NFOs targeting hot sectors. Defence funds. Green energy funds. AI and technology funds. The marketing is compelling. The track record is zero. The investors who rushed into infrastructure NFOs in 2007 spent years underwater. The investors who rushed into FMCG and pharma NFOs in various cycles have had similar experiences. The thousands of existing schemes — with actual track records — receive none of this excitement.

The question to ask before any NFO: does any existing fund not already serve this need? In most cases, the answer is yes. A diversified equity fund already has exposure to whatever sector the NFO is targeting. The NFO offers concentration, not diversification.

Small Finance Bank FDs at 9%+: When new small finance banks launch or raise FD rates above the market, there is often a rush to deposit. The DICGC insurance covers only Rs 5 lakh per bank per depositor. Investors who concentrated large deposits at smaller institutions have occasionally found themselves in uncomfortable situations when those institutions faced stress. The high rate is the product. Your financial safety is the need. They are not always the same thing.

NPS (National Pension System) every January-March: NPS gets intense discussion every tax-saving season. Section 80CCD(1B) allows an additional Rs 50,000 deduction. That is a real and valuable benefit. But investors often evaluate NPS entirely through the tax-saving lens — without examining the lock-in until age 60, the mandatory annuity requirement at retirement, the equity allocation restrictions, or how it fits into their overall retirement architecture. The tax benefit is the tail. The retirement plan is the dog.

What the RGESS Story Actually Teaches

RGESS was abolished five years after it was launched. Investors who had planned around it had to replan. The scheme existed for a short window, served a limited purpose, and vanished.

This is the nature of government schemes: they are policy instruments, not permanent financial infrastructure. They can be modified, restructured, or withdrawn based on political and fiscal considerations that have nothing to do with your financial plan. PMVVY closed in 2023. SGBs have not had new tranches since February 2024. Tax treatment of debt funds changed in 2023. Each of these required investors to adjust.

The investors who had to adjust the least were those whose plans were built around permanent principles — asset allocation, diversification, insurance adequacy, consistent savings — rather than around specific scheme features. The principles don’t get abolished in a Budget. The scheme can be.

Benjamin Graham’s insight about the investor being their own worst enemy was written in the 1940s. It applies perfectly to a 2013 Indian government scheme that no longer exists — and to whatever new scheme or product will dominate personal finance headlines in the year this is being read.

The RGESS no longer exists. The lesson it teaches is permanent. Start with your financial need. Let the product follow — not the other way around.

Don’t let the tail wag the dog.