1. Presented by,
Siju P Oommen
Syed Faheem

2. PRIMARY DEALER
 A primary dealer is a firm that buys government
securities directly from a government.
 The intention is to resell the securities to others.
 Act as a market maker of government securities.
 The government may regulate the behavior and numbers
of its primary dealers and impose conditions of entry.

3. Continued…
 Some governments sell their securities only to primary
dealers.
 Governments that use primary dealers include
Canada, France, Italy, Spain, the United Kingdom, and
the United States

4. History
 The current system of primary dealers was set up in
1960 with 18 dealers.
 The number of primary dealers grew to 46 in
1988, declined to 21 by 2007 and stands at 21 in
October 2011.
 The most recent additions to the list of primary dealers
were Bank of Nova Scotia, New York Agency and BMO
Capital Markets Corp., both named on October 4, 2011.

5. List of Primary Dealers in Government Securities
Market (As on December 10, 2013)
STANDALONE PRIMARY DEALERS
 Deutsche Securities (India) Pvt. Ltd
 ICICI Securities Primary Dealership Nomura Fixed
Income Securities Pvt. Ltd.
 PNB Gilts Ltd.
 SBI DFHI Ltd
 Limited Morgan Stanley India Primary Dealer Pvt. Ltd.
 STCI Primary Dealer Limited.

6. List of Primary Dealers in Government Securities
Market (As on December 10, 2013)
BANK PRIMARY DEALERS
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Bank of America
Bank Of Baroda
Canara Bank
Citibank N.A
Corporation Bank
HDFC Bank Ltd.
Hongkong and Shanghai Banking Corpn. Ltd.(HSBC)
J P Morgan Chase Bank N.A, Mumbai Branch
Standard Chartered Bank
Axis Bank Ltd.
IDBI Bank Limited
Kotak Mahindra Bank Ltd.

7. Primary Dealership System
 In 1995, the Reserve Bank of India (RBI) introduced the
system of Primary Dealers (PDs) in the Government
Securities Market which comprised independent entities
undertaking Primary Dealer activity.
 In order to broad base the Primary Dealership system,
banks were permitted to undertake Primary Dealership
business departmentally in 2006-07.
 Further, the standalone PDs were permitted to diversify into
business activities, other than the core PD business, in
2006-07, subject to certain conditions.
 As on June 30, 2009, there are six standalone PDs and
eleven banks authorized to undertake PD business
departmentally.

8. The objectives of Primary Dealer
System
 To strengthen the infrastructure in the government
securities market in order to make it vibrant, liquid and
broad based.
 To ensure development of underwriting and market
making capabilities for government securities outside
the RBI so that the latter will gradually shed these
functions.
 To improve secondary market trading system, which
would contribute to price discovery, enhance liquidity
and turnover and encourage voluntary holding of
government securities amongst a wider investor base.
 To make PDs an effective conduit for conducting open
market operations (OMO).

9. Roles and Obligations of PDs
 PDs are required to support the primary markets
like support auctions for issue of Government
dated securities and Treasury Bills as per the
minimum
norms
for
underwriting
commitment, bidding commitment and success
ratio as prescribed by RBI from time to time.
 PDs should offer two-way prices in Government
securities, through the Negotiated Dealing SystemOrder Matching (NDS-OM), over-the-counter
market and recognized Stock Exchanges in India
and take principal positions in the secondary
market for Government securities.

10. Continued…
 PDs should maintain adequate physical infrastructure
and skilled manpower for efficient participation in
primary issues, trading in the secondary market, and to
advise and educate investors.
 A Primary Dealer shall have an efficient internal control
system for fair conduct of business, settlement of trades
and maintenance of accounts.

11. Continued…
 A Primary Dealer will provide access to RBI to all
records, books, information and documents as and
when required.
 PDs’ investment in Government Securities and Treasury
Bills on a daily basis should be at least equal to its net
call/notice/repo (including CBLO) borrowing plus net
RBI borrowing (through LAF/ Intra-Day Liquidity/
Liquidity Support) plus the minimum prescribed NOF.

12. Continued…
 PDs should annually achieve a minimum turnover ratio
of 5 times for Government dated securities and 10 times
for Treasury Bills of the average month-end stocks. The
turnover ratio in respect of outright transactions should
not be less than 3 times in government dated securities
and 6 times in Treasury Bills (Turnover ratio is computed
as the ratio of total purchase and sales during the year in
the secondary market to average month-end stocks).
 A PD should submit periodic returns as prescribed by
RBI from time to time.
 PDs’ operations are subject to prudential and regulatory
guidelines issued by RBI from time to time.

13. Facilities from RBI to Primary Dealers
The Reserve Bank currently extends the following facilities
to PDs to enable them to effectively fulfill their obligations:
 Access to Current Account facility with RBI.
 Access to Subsidiary General Ledger (SGL) Account
facility (for Government securities) with RBI.
 Permission to borrow and lend in the money market
including call money market and to trade in all money
market instruments.

14. Continued…
 Memberships of electronic dealing, trading and settlement
systems (NDS platforms/INFINET/RTGS/CCIL).
 Access to the Liquidity Adjustment Facility (LAF) of RBI.
 Access to liquidity support from RBI under a scheme
separately notified for standalone PDs.
 Favoured access to open market operations by Reserve Bank
of India.