RBI/2006-07/75 IDMD. PDRS. 229 /03.64.00/2006-2007, DT. 18/07/2006
Master Circular-Operational Guidelines to Primary Dealers (Part - II)
PREVIOUSAnnex I
UNDERTAKINGTo
The Chief General Manager-in-Charge,
Internal Debt Management Department,
Reserve Bank of India,
Central Office Building,
Mumbai-400 001.
By
..
Registered Office
.
WHEREAS the Reserve Bank of India (RBI) has offered in principle to admit us as a Primary Dealer in Government securities in accordance with the Guidelines dated January 1, 2002 for the Primary Dealers in Government Securities Market.
AND WHEREAS as a precondition to our being authorised as a Primary Dealer we are required to furnish an undertaking covering the relative terms and conditions
AND WHEREAS at the duly convened Board of Directors meeting of ________________ on __________, the Board has authorised Shri/Smt./Kum. _________________ and Shri/Smt./Kum. __________________ to execute and furnish an UNDERTAKING to the Reserve Bank of India jointly and severally as set out below:
NOW, THEREFORE, in consideration of the RBI agreeing to admit us as a Primary Dealer, we hereby undertake and agree:
1. To commit to aggregatively bid in the auction of Treasury Bills and Government of India Dated Securities to the extent of
.per cent of each issue of auction Treasury Bills and for a minimum amount equal to the underwriting commitment (allotted under Minimum Underwriting Commitment and Additional Competitive Underwriting) for Government of India Dated Securities and to maintain the success ratio in aggregate winning bids at not less than 40 per cent for Treasury Bills.
2. To offer to underwrite primary issues of Government of India dated securities, Treasury Bills and State Government securities, for which auction is held, and accept devolvement, if any, of any amount as may be determined by RBI in terms of prevalent scheme for Bidding, Underwriting.
3. To determine prudential ceilings, with the prior approval of the Board of Directors of the company, for reliance on borrowings from the money market including repos, as a multiple of net owned funds, subject to the guidelines, if any, issued by the Reserve Bank in this regard.
4. To offer firm two-way quotes through the Negotiated Dealing System/ over the counter telephone market/ recognised Stock Exchanges in India and deal in the secondary market in Government dated securities and Treasury Bills of varying maturity from time to time and take principal positions.
5. To achieve a sizeable portfolio in Government securities and to actively trade in the Government securities market.
6. To achieve an annual turnover of not less than 5 times in Government dated securities and not less than 10 times in Treasury Bills of the average of month-end stocks subject to the turnover in respect of outright transactions being not less than 3 times in government dated securities and 6 times in Treasury Bills. To maintain the capital adequacy standards prescribed by the Reserve Bank of India, Internal Debt Management Department vide circular IDMD.No.01/(PDRS) 03.64.00 /2003-04 January 07, 2004 and to subject ourselves to all prudential and regulatory guidelines as may be issued by the Reserve Bank of India, Internal Debt Management Department from time to time.
7. To maintain infrastructure in terms of both physical apparatus and skilled manpower for efficient participation in primary issues, trading in the secondary market, and for providing portfolio advice and education to investors.
8. To continue to have in place the Guidelines on Securities Transaction to be followed by Primary Dealers issued under cover of IDMC.No.PDRS/2049-A/03.64.00/99-2000 dated December 31, 1999 and Master Circulars issued from time to time as also other necessary internal control systems for fair conduct of business and settlement of trades and maintenance of accounts.
9. To comply with all applicable Reserve Bank of India/Securities and Exchange Board of India (SEBI) requirements under the guidelines existing, and which may be laid down from time to time in this behalf, failing which RBI would be at liberty to cancel the authorisation as a Primary Dealer.
10. To abide by the code of conduct as laid down by RBI/SEBI or the Primary Dealers Association of India.
11. To maintain and preserve such information, records, books and documents pertaining to our working as a Primary Dealer as may be specified by the RBI from time to time.
12. To permit the RBI to inspect all records, books, information, documents and make available the records to the Inspectors and render all necessary assistance.
13. To maintain at all times a minimum net owned funds of Rs. 50 crore in Government securities and that the liquidity support, if any, availed and net borrowings from call money market and net repo borrowings are dedicated exclusively to the Government securities business.
14. To maintain an arms length distance from parent company/promoters.
15. To obtain prior approval of Reserve Bank of India for any change in the shareholding pattern of the company.
16. To submit in prescribed formats periodic reports including daily transactions and market information, monthly report of details of transactions in securities and risk position and performance with regard to participation in auctions, annual audited accounts and an annual performance review and such statements, certificates and other documents and information as may be specified by RBI from time to time.
17. To report the matter immediately to RBI and abide by such orders, instructions, decisions or rulings given by the RBI if and when any kind of investigation/inquiry/inspection is initiated against us by statutory/regulatory authorities, e.g. SEBI/RBI, Stock Exchanges, Enforcement Directorate, Income-tax authorities, etc.
We do hereby confirm that the above undertakings will be binding on our successors and assigns.
Dated this_____________ day of ________________________ Two Thousand
..
Signed, sealed and delivered by the within named,)
being the authorized persons, in terms of the )
Resolution No._____ of the Board of Directors )
at the duly convened Meeting held on_______ )
in the in the presence of _________________ )
Signatory (i)
(ii)
Witness (i)
(ii)
Annex II
A. Statements / Returns required to be submitted by Primary Dealers to IDMD
| Sr. No. | Return/Report | Periodicity | Last date for submission | Reference under which required |
| 1. | PDR-I* | Fortnightly | Next working day of the reporting fortnight | PD Guidelines |
| 2. | PDR-II* | Monthly | 10th of the following month | |
| 3. | PDR-III* | Quarterly | 15 of the month following the reporting quarter | |
| 4. | PDR IV* | Quarterly | 15th of the month of the month following the reporting quarter | |
| 5. | Annual Report & Annual Audited A/cs | Annual | As soon as annual accounts audited and finalised | |
| 6. | Auditor's Certificate on Net Owned Funds | Yearly | 30th June | |
| 7. | Reconciliation of holdings of Govt. Securities in own A/c and constituent A/c | Yearly | One month from the close of accounting year | IDMC.No.PDRS/2049A/03.64.00/99-2000 dated December 31, 1999 |
| 8. | Return on FRAs / IRS* | Fortnightly | As prescribed by MPD | MPD.BC.187/07.01.279/1999-2000 dated July 7, 1999. |
| 9. | Deviations, if any, reported by Concurrent Auditors on sale transactions of securities allotted in Primary Issues on the same day | Monthly | 15th of the month following the reporting month | IDMC.PDRS.No.PDS.1/03.64.00/2000-2001 dated October 6, 2000 |
| 10. | Statement of Transactions effected between Gilt A/c holders | Weekly | Next working day following the reporting week | PDO/SGL/CIRR.No. 07.01.13/2950/2000-2001 dated November 8, 2000. |
| 11. | Investments in non-Government securities | Yearly | Disclosures in the Notes on Accounts of the balance sheet, with effect from the financial year ending 31 March 2004. | IDMD.PDRS.No.3 /03.64.00/ 2003-04March 08, 2004 |
| 12. | Details of dividend declared during the accounting year | Yearly | Within a fortnight from the payment of dividend | IDMD.PDRS.No 6 /03.64.00/ 2003-04 June 03, 2004 |
* = Indicates that these returns should be submitted in electronic form as an excel file attachment through e-mail.
B. Statements / Returns required to be submitted by Primary Dealers to other departments (other than IDMD) of Reserve Bank of India
| Sr. No. | Return/Report | Periodicity | To be filed with Deptt. | Reference under which required |
| 1. | Return on FRAs / IRS | Fortnightly | MPD and IDMD | MPD.BC.187/07.01.279/1999-2000 dated July 7, 1999. |
| 2. | Statement showing balances of Govt. Securities held on behalf of each Gilt A/c holder | Half-Yearly | PDO | |
| 3. | Return on Call Money transactions with Commercial Banks | Fortnightly | DEAP, DMB | |
| 4. | Daily Return on Call/Notice/Term Money Transactions | Daily | MPD | For non-NDS members |
| 5. | Call and Notice Money Operations during the Fortnight | Fortnightly | | |
| 6. | Total Investments and Resources invested in short-term Instruments | Monthly | | |
| 7. | Information for Issue of Commercial Paper | On each issue of CP | MPD | IECD.2/08.15.01/2001-02 dated July 23, 2001 |
Note: 1. Return no. 9 is to be submitted to IDMD and MPD as hitherto.
2. The last date prescribed for submission of these statements by the concerned departments and/or IDMD should be adhered to.
Annex III
Illustration showing the underwriting amount, cut off rate of underwriting fee accepted by Reserve Bank of India
| | Instrument Name | XXXXXXXX | | |
| Auction Type | Multiple | | |
| Notified amount (NA) (in Rs. crore) | 4000 | | |
| No. of Standalone PDs | 17 | | |
| No. of Bank-PDs | 0 | | |
| Total No. of PDs (n) | 17 | | |
| a | Minimum Underwriting Commitment (MUC ) | 2000 | | |
| b | Per PD MUC (MUC/ n) | 117.65 | Rounded off Value | 118 |
| c | Adjusted MUC | 2006 | | |
| d | Additional competitive underwriting ACU = (NA - Adjusted MUC) | 1994 | | |
| e | Minimum bidding by each PD in ACU (3% of NA) | 120 | | |
| f | Minimum allotment to a PD to be eligible for higher commission on MUC i.e. min 4% of NA | 160 | | |
| Additional Competitive Underwriting (Bids Submitted) |
| | | a | b | c | d | | |
| S. No | PDs participated in U/W | Amount of bid in ACU (Rs. Crore) | Cumulative Amount (Rs. Cr) | Underwriting fee (in paise) | Amount of bid x U/w fee | | |
| 1 | A | 150 | 150 | 1.52 | 228 | | |
| 2 | B | 155 | 305 | 2.56 | 396.8 | Three lowest bids | |
| 3 | A | 60 | 365 | 3.5 | 210 | | |
| 4 | C | 95 | 460 | 3.7 | 351.5 | | |
| 5 | B | 200 | 660 | 3.94 | 788 | | |
| 6 | B | 25 | 685 | 4 | 100 | | |
| 7 | D | 120 | 805 | 4 | 480 | | |
| 8 | E | 95 | 900 | 4.49 | 426.55 | | |
| 9 | F | 70 | 970 | 4.5 | 315 | | |
| 10 | G | 50 | 1020 | 4.75 | 237.5 | | |
| 11 | E | 115 | 1135 | 4.9 | 563.5 | | |
| 12 | C | 90 | 1225 | 4.94 | 444.6 | | |
| 13 | F | 220 | 1445 | 4.95 | 1089 | | |
| 14 | G | 200 | 1645 | 5 | 1000 | | |
| 15 | H | 120 | 1765 | 5 | 600 | | |
| 16 | I | 120 | 1885 | 5 | 600 | | |
| 17 | I | 109 | 1994 | 5 | 545 | CUT-OFF | 1994 |
| 18 | I | 25 | 2019 | 5.5 | 137.5 | | |
| 19 | J | 120 | 2139 | 5.94 | 712.8 | | |
| 20 | K | 120 | 2259 | 6 | 720 | | |
| 21 | L | 120 | 2379 | 6 | 720 | | |
| 22 | M | 55 | 2434 | 6.5 | 357.5 | | |
| 23 | N | 120 | 2554 | 6.94 | 832.8 | | |
| 24 | O | 120 | 2674 | 7 | 840 | | |
| 25 | P | 120 | 2794 | 7 | 840 | | |
| 26 | Q | 120 | 2914 | 7 | 840 | | |
| Rate of commission payable to Winner(#) PDs on MUC @ | 4.20 | |
| Rate of commission payable to other PDs on MUC * | 2.29 |
(three lowest bids) |
| # Winner PDs are those who have been alloted an amount >= 4% of ACU amount |
| @ Weighted Average Commission of all alloted bids |
| * Weighted Average Commission of three lowest alloted bids |
| PD Wise eligible commission on ACU and ACU Allotment |
| [1] | [2] | [3] | [4]=[2] x [3] |
| Successful PDs | Successful bids in ACU (Rs. Cr) | Underwriting fee bid (in paise) | bid wise comm. payable on ACU (In Rs.) |
| A | 150 | 1.52 | 228 |
| A | 60 | 3.5 | 210 |
| A Total | 210 | | 438 |
| B | 155 | 2.56 | 396.8 |
| B | 200 | 3.94 | 788 |
| B | 25 | 4 | 100 |
| B Total | 380 | | 1284.8 |
| C | 95 | 3.7 | 351.5 |
| C | 90 | 4.94 | 444.6 |
| C Total | 185 | | 796.1 |
| D | 120 | 4 | 480 |
| D Total | 120 | | 480 |
| E | 95 | 4.49 | 426.55 |
| E | 115 | 4.9 | 563.5 |
| E Total | 210 | | 990.05 |
| F | 70 | 4.5 | 315 |
| F | 220 | 4.95 | 1089 |
| F Total | 290 | | 1404 |
| G | 50 | 4.75 | 237.5 |
| G | 200 | 5 | 1000 |
| G Total | 250 | | 1237.5 |
| H | 120 | 5 | 600 |
| H Total | 120 | | 600 |
| I | 120 | 5 | 600 |
| I | 109 | 5 | 545 |
| I Total | 229 | | 1145 |
| PD Wise eligible commission on MCU, Total commission payable and Total Allotment |
| | | | | | | (in Rs.) | (in Rs. cr) |
| | | [1] | [2] | [3] | [4] | [5] | MUC + [1] |
| Sno | Successful PDs | Total Allotment in ACU Auction to PD (Rs. Cr) | PD Wise Commission on ACU (in Rs.) | Winner PD# if [1] = 4% of NA | Commission payable on MUC (in Rs.) | Total Comm. On MUC & ACU [2] + [4] | Total Allotment in MUC & ACU |
| 1 | A Total | 210 | 438.00 | YES | 495638.47 | 496076.47 | 328 |
| 2 | B Total | 380 | 1284.80 | YES | 495638.47 | 496923.27 | 498 |
| 3 | C Total | 185 | 796.10 | YES | 495638.47 | 496434.57 | 303 |
| 4 | D Total | 120 | 480.00 | NO | 269880.55 | 270360.55 | 238 |
| 5 | E Total | 210 | 990.05 | YES | 495638.47 | 496628.52 | 328 |
| 6 | F Total | 290 | 1404.00 | YES | 495638.47 | 497042.47 | 408 |
| 7 | G Total | 250 | 1237.50 | YES | 495638.47 | 496875.97 | 368 |
| 8 | H Total | 120 | 600.00 | NO | 269880.55 | 270480.55 | 238 |
| 9 | I Total | 229 | 1145.00 | YES | 495638.47 | 496783.47 | 347 |
| | | | | | Total | 4017605.804 | |
| | Total | 1994 | | | | Total allotment to successful PDs | 3056 |
| | PDs below cut-off | Total Allotment in ACU Auction to PD (Rs. Cr) | PD Wise Total Commission on ACU (in Rs.) | Commission payable on MUC (in Rs.) | Total Comm. | Total Allotment (in Rs. cr) |
| 1 | J | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 2 | K | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 3 | L | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 4 | M | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 5 | N | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 6 | O | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 7 | P | 0 | 0 | 269880.55 | 269880.55 | 118 |
| 8 | Q | 0 | 0 | 269880.55 | 269880.55 | 118 |
| Total allotment to PDs below cut-off | 944 |
| Total coverage of Notified amount (in Rs. crore) | 4000 |
| (coverage %age) | 1 |
| Total commission payable (before rounding) | 6176650.19 | |
Annex IV
Illustrations showing adherence by PDs to Commitments on aggregative bidding in auction of Treasury Bills and success ratio
1. A PD has committed to bid aggregatively Rs. 500 crore GOI Treasury Bills as shown below. The success ratio to be maintained by the PD is 40 per cent in respect of Treasury Bills. Various scenarios in respect of fulfillment of the bidding commitment and the success ratio assuming that the bids tendered and the bids accepted will be as under:
(1) Treasury Bills:
(Rs. crore)
| SCENARIOS | (I) | (II) | (III) |
| Bidding Commitment (a) | 500 | 500 | 500 |
| Bids Tendered (b) | 600 | 500 | 400 |
| Bids Accepted (c) | 300 | 200 | 100 |
| Success Ratio Achieved (c)/(a) | 60% | 40% | 20% |
| Fulfilment of Bidding Commitment | Yes | Yes | No |
| Fulfilment of Success Ratio | Yes | Yes | No |
| Success ratio in Treasury Bills is the ratio of bids accepted and bidding commitment. | |
Annex V
Publication of Financial ResultsName of Primary DealerAudited Financial Results for the year ended 31st March
Sources of FundsCapital
Reserves and Surplus
LoansSecured
Unsecured
(of which call money borrowings)
Application of FundsFixed Assets
Investments
Government Securities (inclusive of T. Bills)
Commercial Papers
Corporate Bonds
Loans and Advances
(of which call money lendings)
Non Current Assets
Others
Profits and Loss accountIncome (business segment wise)
Interest
Discount
Trading Profit
Expenses
Interest
Administrative Costs
Profit before tax
Net Profit
Regulatory Capital required (as per Capital Adequacy Guidelines)
Actual Capital
Return on Net WorthAnnex VI
List of circulars consolidated| No | Circular no | Date | Subject |
| 1 | IDMC.PDRS.1532./03.64.00/1999-00 | November 2, 1999 | Primary Dealers-Leverage |
| 2 | IDMC.PDRS.2049A/03.64.00/1999-2000 | December 31,1999 | Guidelines on Securities transactions to be followed by Primary Dealers |
| 3 | IDMC.PDRS.5122./03.64.00/1999-00 | June 14,2000 | Guidelines on Securities Transactions by Primary dealers |
| 4 | IDMC.PDRS.PDS1./03.64.00/2000-01 | October 6, 2000 | Sale of securities allotted in Primary issues on the same day |
| 5 | IDMC.PDRS.4135/03.64.00/2000-01 | April 19,2001 | Scheme for Bidding, Underwriting and Liquidity support to Primary Dealers |
| 6 | IDMC.PDRS.87./03.64.00/2001-02 | July 5, 2001 | Liquidity support to Primary Dealers |
| 7 | IDMC.PDRS.1382./03.64.00/2000-01 | September 18,2001 | Dematerialised holding of bonds and debentures |
| 8 | IDMC.PDRS.3369./03.64.00/2001-02 | January 17, 2002 | Guidelines on Counter party limits and Inter-corporate deposits |
| 9 | IDMC.PDRS.4881 /03.64.00/2001-02 | May 8,2002 | Guidelines to Primary Dealers |
| 10 | IDMC.PDRS.5018./03.64.00/2001-02 | May 17, 2002 | Scheme for Bidding, Underwriting and liquidity support to Primary dealers 2001-02 |
| 11 | IDMC.PDRS.5039./03.64.00/2001-02 | May 20,2002 | Transactions in Government securities |
| 12 | IDMC.PDRS.5323./03.64.00/2001-02 | June 10,2002 | Transactions in Government securities |
| 13 | IDMC.PDRS.418./03.64.00/2002-03 | July 26,2002 | Publication of Financial results |
| 14 | IDMC.PDRS.1724./03.64.00/2002-03 | October 23,2002 | Underwriting of Government dated securities by Primary Dealers |
| 15 | IDMC.PDRS.2269./03.64.00/2002-03 | November 28,2002 | Publication of Financial results |
| 16 | IDMC.PDRS.2896./03.64.00/2002-03 | January 14, 2003 | Trading in Government securities on Stock Exchanges |
| 17 | IDMC.PDRS.3432./03.64.00/2002-03 | February 21, 2003 | Ready Forward Contracts |
| 18 | IDMC.PDRS.3820./03.64.00/2002-03 | March 24,2003 | Availment of FCNR(B) loans by Primary Dealers |
| 19 | IDMC.PDRS.1./03.64.00/2002-03 | April 10,2003 | Portfolio Management Services by Primary Dealers-Guidelines |
| 20 | IDMC.PDRS.4802./03.64.00/2002-03 | June 3, 2003 | Guidelines on Exchange Traded Interest Rate Derivatives |
| 21 | IDMC.PDRS.4802 ./03.64.00/2002-03 | June 11, 2003 | Guidelines on Exchange Traded Interest Rate Derivatives |
| 22 | IDMC.PDRS.122./03.64.00/2002-03 | September 22, 2003 | Rationalisation of returns submitted by Primary Dealers |
| 23 | IDMD. PDRS.No.3//03.64.00/2003-04 | March 08,2004 | Prudential guidelines on investment in non-Government securities |
| 24 | IDMD.PDRS.05/10.02.01/2003-04 | March 29,2004 | Transactions in Government Securities |
| 25 | IDMD.PDRS. No06/ 03.64.00/2003-04 | June 03,2004 | Declaration of dividend by Primary Dealers |
| 26 | RBI /2004-05/ 66 IDMD.PDRS. 01 10.02.01/2004-05 | July 23, 2004 | Transactions in Government securities |
| 27 | RBI /2004-05/67 -IDMD.PDRS. 02 /03.64.00/2004-05 | July 23,2004 | Success Ratio in Treasury Bill auctions for Primary Dealers |
| 28 | RBI/2004-05/ 136 IDMD.PDRS.No/ 03 /10.02.16/2004-05 | August 24,2004 | Dematerialization of Primary Dealers investment in equity |
| 29 | RBI/2004/218IDMD.PDRS.No/ 06/ 03.64.00/2004-05 | October 15, 2004 | Capital Adequacy Standards-Guidelines on Issue ofSubordinated Debt Instruments-Tier II and Tier III Capital |
| 30 | RBI/2005/459/IDMD.PDRS/4783/10.02.01/2004-05 | May 11, 2005 | Government Securities Transactions-T+1 settlement |
| 31 | RBI/2005/460/IDMD.PDRS/4779/10.02.01/2004-05 | May 11, 2005 | Ready Forward Contracts |
| 32 | RBI/2005/461/IDMD.PDRS/4779/10.02.01/2004-05 | May 11, 2005 | Sale of securities allotted in Primary issues |
| 33 | RBI/2005/474/IDMD.PDRS/4907/03.64.00/2004-05 | May 19, 2005 | Conduct of Dated Government Securities Auction under Primary Market Operations (PMO) module of PDO-NDS-Payment of Underwriting Commission |
| 34 | RBI/2005-06/ 73IDMD.PDRS. 337 /10.02.01/2005-06 | July 20, 2005 | Transactions in Government Securities |
| 35 | RBI/2005-06/132IDMD.No. 766/10.26.65A/2005-06 | August 22, 2005 | NDS-OM-Counterparty Confirmation |
| 36 | RBI/2005-06/308 DBOD.FSD.BC.No.64/24.92.001/2005-06 | February 27, 2006 | Guidelines for banks undertaking PD business |
| 37 | RBI /2005-06/309IDMD.No 03/11.01.01(B)/2005-06 | February 28, 2006 | Secondary Market Transactions in Government Securities - Intra-day short-selling |
| 38 | RBI/2005-06/347IDMD.PDRS.No.3007/03.64.00/2005-06 | April 4, 2006 | Revised Scheme of Underwriting Commitment and Liquidity Support |
| 39 | RBI /2005-06/382IDMD.No/3426 /11.01.01 (D)/2005-06 | May 3, 2006 | When Issued transactions in Central Government Securities |
| 40 | RBI/2006-07/49IDMD.PDRS/26/03.64.00/2006-07 | July 4, 2006 | Diversification of activities by stand-alone Primary Dealers-Operational Guidelines |
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