This will be the second financial institution to take up primary dealership activities, the first being I-Sec, a subsidary of ICICI. IFCI is yet to eye this line of activity. Once the RBI nod comes through, ICMS would be the 14th primary dealer (PD) to receive the licence. Other players in the sector perceive it to be a crucial development, given the financial muscle of the financial institution (FI), which will be a sine qua non now that the RBI is obviously receding more into regulatory activities rather than continuing as anactive participant in the operations of the government securities market.

While the sector was initially dominated by public sector bank subsidiaries, the recent entrants, who have received either PD licences or satellite dealership licences, have been more aggressive players such as DSP-Merrill Lynch, Kotak Mahindra, Deutsche Bank, ABN Amro Bank.

The provisions of the recent credit policy, where the RBI has specified that the minimum bidding commitment of all PDs taken together would be expected to absorb 100 per cent of T-bill auctions (in the case of government securities PDs would be allowed to underwrite 100 per cent of the notified amounts against the 50 per cent earlier), will mean greater involvement on the part of PDs, with the RBI gradually confining itself to regulation. Once RBI's realtime settlement system eases out the paper-based system, many of the infrastructural bottlenecks that have stymied the growth of primary dealership would be removed.

On its part, National Stock Exchange is alsoplaying its part to create a congenial support structure for the semi retail segment, by creating screen based trading facilities and offering guarantees to such trades through National Securities Clearing Corporation Ltd. All these measures are likely to translate into a lot of activity on the secondary debt market front.

The rationale behind ICMS' entry into primary dealership is to expand further beyond its primary market-related activities into the secondary market. The current turnover of ICMS in the gilts market is Rs 6000-7000 crore.

IDBI pioneered the primary market for retail bonds in 1996 with its first Flexibond issue. Its current strategy is to widen the secondary debt market by acting as market maker in the bonds issued by it, as well as in other debt instruments. IDBI's funding is skewed heavily in favour of bonds, as is obvious from the fact that bonds and debentures accounted for Rs 34,400 crore, while deposits contributed only Rs 2,800 crore to its total capital of Rs 50,239 crore as onSeptember 30, 1998.