What changed
RBI updated the eligibility criteria for entities seeking authorisation as Primary Dealers (PDs). New conditions include a minimum net owned fund (NOF) of Rs 150 crore or Rs 250 crore (as prescribed in the Master Circular), at least one year of prior exposure to the G-Sec market with turnover and assets in G-Sec each at least 15% of total, and a mandatory annual turnover target for mid-segment (e.g., Provident Funds, Urban Cooperative banks) and retail investors not less than 75% of the minimum NOF. For foreign-owned entities, FIPB approval, three years of PD experience abroad, and system ring-fencing are required. Banks without a PD subsidiary must have NOF of Rs 1,000 crore, CRAR of 9%, net NPAs below 3%, three years of profitability, and approval from Department of Banking Operations and Development.
What it means for you
These guidelines raise the bar for PD entry, ensuring only well-capitalised, experienced players with a retail focus can participate. Banks and NBFCs must meet stricter financial thresholds and demonstrate commitment to serving mid-segment and retail investors, which could increase competition and deepen the G-Sec market. Existing PDs may face pressure to comply with new turnover targets, while new entrants need to plan for higher capital and operational readiness.
What you must do
- Review your entity's net owned funds against the new minimum thresholds (Rs 150 crore or Rs 250 crore for NBFCs; Rs 1,000 crore for banks).
- Ensure your G-Sec turnover and assets each account for at least 15% of total turnover and assets for the preceding year.
- Prepare a detailed annual plan with a turnover target for mid-segment (e.g., Provident Funds, Urban Cooperative banks) and retail investors, set at no less than 75% of the minimum NOF.
- If a foreign-owned entity, obtain FIPB approval, document parent's three-year PD experience, and implement system ring-fencing.
- Banks without a PD subsidiary must confirm CRAR of 9%, net NPAs below 3%, three consecutive years of profit, and obtain approval from Department of Banking Operations and Development.
Who it affects
Scheduled commercial banks and All India Financial Institutions planning PD subsidiaries, Foreign entities setting up PD subsidiaries or joint ventures in India, Companies incorporated under Companies Act, 1956 seeking PD authorisation, Banks intending to undertake PD business departmentally, Existing Primary Dealers (for renewal of authorisation)
What is the minimum net owned fund requirement for a company applying as a PD?
The minimum NOF is Rs 150 crore or Rs 250 crore, as prescribed in the Master Circular on operational guidelines to PDs, which is amended from time to time.
What turnover target must a PD applicant set for mid-segment and retail investors?
The annual turnover target for mid-segment (e.g., Provident Funds, Urban Cooperative banks) and retail investors must be at least 75% of the minimum NOF prescribed for PDs.
Are there additional conditions for foreign entities applying as PDs?
Yes. They need FIPB approval, the parent company must have at least three years of PD experience in active markets, and they must ring-fence their systems from the parent to protect data and avoid risk spillover.