Prudential Guidelines for Primary Dealers in Government Securities Market
The Reserve Bank of India (RBI) regulates Primary Dealers (PDs) in the Government Securities Market. PDs are required to maintain a minimum net worth and adhere to guidelines for sourcing funds and applying them.
Sources of Funds: PDs can access funds from call/notice markets, inter-corporate deposits, FCNR(B) loans, external commercial borrowing, non-convertible debentures, commercial paper, and liquidity support from RBI.
Application of Funds: PDs must invest in government securities, maintain a minimum holding period, and comply with exposure norms.
Guidelines for Specific Activities:
PDs must follow guidelines for ready forward transactions, portfolio management services, interest rate derivatives, credit default swaps, and investments in non-government securities.
Prudential Systems and Controls: PDs must establish robust accounting standards, risk management systems, and internal controls. They must also comply with guidelines for trading government securities on stock exchanges and conducting business through approved brokers.
Corporate Governance and Disclosure: PDs must adhere to guidelines on declaration of dividend and corporate governance.
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Download: Master Circular – Prudential Guidelines for the Primary Dealers in Government Securities Market