RBI set to overhaul rules for bond houses

The RBI is set to overhaul the rules governing primary dealers, who act as the vital intermediaries for government borrowings, perhaps for the first time since they came into being in 2005.

“It is proposed to undertake a comprehensive review of the extant operational guidelines for primary dealers,” RBI said in its annual report.

The guidelines relating to basic eligibility criteria, viz., net-owned funds (NOF) requirement and targets, remain largely unchanged. The consolidated operational guidelines for PDs issued in 2005 are updated from time to time.


There are 21 PDs including 14 backed by banks and seven other standalone bond houses.

The PDs have the mandate to underwrite primary auctions of dated G-sec while they have a target of achieving bidding commitment and success ratio in respect of primary auctions of T-Bills/cash management bills (CMBs). They participate in weekly bond auctions at the RBI.

Those bond houses are also helping in market making for Mint Road’s Retail Direct, a platform that allows individuals to invest in sovereign bonds directly.

Partial devolvement on PDs took place on 17 instances amounting to Rs 97,938 crore during 2021-22 compared with fifteen instances for Rs 1,30,562 crore a year ago, according to RBI data.

No bid was accepted on nine instances for a total notified amount of Rs 99,000 crore due to the market conditions prevailing then as compared to four instances for a total notified amount of Rs 39,000 crore in the previous year, the central bank said