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Introduction to Primary Dealers
Jul 24, 2024
Primary Dealers: An Introduction
Definition
Primary Dealers (PD) are institutions registered with the Reserve Bank of India (RBI).
Their main function is to buy and sell government securities.
Roles and Importance
Primary Dealers are licensed to buy government securities directly from the RBI.
They can resell these securities to other institutions.
Their role is to help the government raise funds.
The presence of Primary Dealers makes the market organized and flexible.
Government Security
Government security determines how the government will raise short-term or long-term funds.
Short-term security is called treasury bills, while long-term security is called government bonds.
Characteristics of Primary Dealers
Primarily, these institutions are subsidiaries of commercial banks.
Any subsidiary of All India Financial Institutions can also be a primary dealer.
Foreign institutions with a joint venture or subsidiary in India can also attain the status of a primary dealer.
Registration Process
To become a primary dealer, an institution must first be registered as a non-banking financial company (NBFC) one year prior.
Major Primary Dealers in India
Commercial Bank Primary Dealers:
Bank of Baroda
Bank of America
Canara Bank
HDFC Bank
Union Bank of India
Standalone Primary Dealers:
Morgan Stanley India Private Limited
PNB Gilts
Conclusion
Primary Dealers play a crucial role in the buying and selling of government securities.
Without their assistance, the market for government securities would not be able to operate effectively.
Thank you!
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