As announced in the Annual Policy Statement
for the year 2005-06, it has now been decided that permitted structure of PD
business will be expanded to include banks, which fulfill certain minimum criteria
subject to safeguards. Accordingly, banks are eligible to apply for Primary
Dealership, subject to the following guidelines.
2. The following categories of
banks would be eligible to apply for PD license. (RBI's approval would be
subject to compliance with all other relevant laws).
(i) Banks which do not at present have
a partly or wholly owned subsidiary and fulfill the following criteria :
a. Minimum net owned funds (NOF) of Rs.1,
b. Minimum CRAR of 9 per cent
c. The net NPA of the bank should be less
than 3 per cent and should have a profit making record for the last three
(ii) Indian banks which are undertaking
PD business through a partly or wholly owned subsidiary and wish to undertake
PD business departmentally by merging / taking over PD business from their
partly / wholly owned subsidiary subject to fulfilling the criteria at 2(i)(a)
(iii) Foreign banks operating in India
who wish to undertake PD business departmentally by merging the PD business
being undertaken by group companies subject to fulfillment of criteria at
2(i)(a) to (c).
3. The authorization granted by
RBI will be for one year (July-June) and thereafter, RBI will review the
authorization on a yearly basis based on the performance criteria, such
as underwriting in auctions of primary issuance of Government Dated Securities
and Treasury Bills or fulfilment of bidding commitment and success ratio
in the primary market and achieving the turnover ratio in the secondary
4. Obligation for Bank-PDs
The Bank-PDs will be subject to underwriting
and all other obligations as applicable to standalone PDs and as may be
prescribed from time to time. The bank may maintain, at any point of time,
a minimum size of Rs.100 crore in its separate SGL account for PD business.
5. Prudential norms
(i) No separate capital adequacy is prescribed
for PD business, and the capital adequacy requirement for a bank will also
apply to the PD business.
(ii) The Government Dated Securities and Treasury
Bills under PD business will count for SLR.
(iii) The investment valuation guidelines
applicable to banks in regard to 'Held for Trading' will apply to the portfolio
of Government Dated Securities and Treasury Bills earmarked for PD business.
(iv) The bank shall have to maintain a separate
SGL account for its subsidiaries. The bank must also develop proper MIS in
6. Regulation and Supervision
(i) RBI's instructions to Primary Dealers
will apply to Bank-PDs, to the extent applicable.
(ii) As banks have access to the call
money market and the Liquidity Adjustment Facility (LAF) of RBI, Bank-PDs
will not have separate access to these facilities.
(iii) RBI will conduct on-site inspection
of Bank-PD business.
(iv) Bank-PDs will be required to submit
prescribed returns, as advised by RBI from time to time.
(v) Bank-PDs should bring to the RBI’s
attention any major complaint against it or action initiated / taken against
it by authorities such as the Stock Exchanges, SEBI, CBI, Enforcement Directorate,
Income Tax, etc.
(vi) Reserve Bank of India reserves the
right to cancel the Bank-PD authorization if, in its view, the concerned
bank has not fulfilled any of the prescribed eligibility and performance
7. Reserve Bank of India reserves its right
to amend or modify these guidelines from time to time, as may be considered