Unveiling the draft paper on the proposed changes on functioning of primary dealers (PD), the Reserve Bank of India (RBI) has said it is necessary to ensure that the new PDs are adequately equipped to participate in all auctions of central government securities and T-bills, including an underwriting commitment and play an active role in the debt market.
?There is a need that the prospective primary dealers have a track record of relevant experience on which an assessment of the entity?s operational performance, control environment, and compliance position may be based. Moreover, if applicant PD is already registered as an NBFC for a year or so, the due diligence and ?fit and proper? criteria could be better assessed,? RBI said on Wednesday.
The current guidelines to authorise PDs in the Indian G-sec market were prescribed in the year 1995 when the PD system was introduced in India.
With a view to putting in place transparent regulatory guidelines on eligibility of a PD, RBI proposed new eligibility criteria for an entity activities to become of a PD. The existing PDs would be given two years time period to comply with the minimum turnover requirement of 15% of their total turnover in the G-sec business.