CAIIB · CB

ROLE OF PRIMARY DEALERS IN THE GOVERNMENT SECURITIES MARKET

Chapter notes, video classes, MCQ practice tests and quick-revision one-liners for Central Banking (Elective) — CAIIB.

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What is the primary role of Primary Dealers (PDs) in the Government Securities market?

Primary Dealers act as market makers in the Government Securities market, underwriting government borrowings and providing two-way quotes to ensure liquidity and depth in the G-Sec market.

What is the minimum number of standalone Primary Dealers currently authorized by RBI?

RBI has authorized around 6-7 standalone Primary Dealers.

Who regulates Primary Dealers in India?

Primary Dealers in India are regulated by the Reserve Bank of India (RBI), which issues guidelines covering their capital requirements, bidding obligations, and performance standards.

In which year was the Primary Dealer system introduced in India?

The Primary Dealer system was introduced in India in 1995.

What is the minimum net owned funds requirement for a standalone Primary Dealer?

A standalone Primary Dealer is required to maintain a minimum Net Owned Funds (NOF) of Rs. 150 crore as stipulated by the RBI.

What type of entity is eligible to apply for a Primary Dealer license in India?

Banks and registered NBFC entities with sufficient net worth are eligible.

What is meant by the 'underwriting commitment' of a Primary Dealer?

Underwriting commitment refers to the obligation of PDs to subscribe to a minimum percentage of each primary issuance of government securities in auctions, ensuring the government raises its required funds even when market appetite is low.

What is the primary obligation of a PD in the secondary market for Government Securities?

PDs must provide continuous two-way quotes for Government Securities.

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