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RBI/IDMD/2016-17/29
Master Direction IDMD.PDRD.01/03.64.00/2016-17 July 1, 2016
(Updated as on November 22, 2018)

All Primary Dealers

Dear Sir / Madam

Master Direction – Operational Guidelines for Primary Dealers

The Reserve Bank of India has, from time to time, issued a number of guidelines/instructions to
the Primary Dealers (PDs) with respect to their operations. The Master Direction enclosed
incorporates the updated guidelines/instructions/circulars on the subject. A list of circulars
finding reference in this Master Direction is enclosed in Annex-XIII and XIV. The Direction will
be updated from time to time as and when fresh instructions are issued. This Master Direction
has been placed on RBI website at www.rbi.org.in.

2. The banks undertaking PD activities departmentally should follow the extant guidelines
applicable to the banks on capital adequacy requirements and risk management.

Yours faithfully

Sd/-
(A. Mangalagiri)
Chief General Manager

Encl: As above
 Table of Contents
Section I: Regulations governing Primary Dealers
Page
Sl.No. Details
No.
1 Primary Dealer (PD) System 1
2 Primary Market Activities 4
3 Secondary Market Activities 7
4 Liquidity Standing Facility 8
5 Investment Guidelines 9
6 Systems/Controls 11
7 Violation/Circumvention of Instructions 14
8 Disclosure of Penal Actions 14
9 Exit/Termination Procedure 14
Section II: Additional Guidelines applicable to banks undertaking PD business
departmentally
Page
Sl.No. Details
No.
1 Introduction 16
2 Procedure for Authorization of bank-PDs 16
3 Applicability of Guidelines issued for bank-PDs 16
4 Maintenance of books and accounts 17
5 Capital Adequacy and Risk Management 18
6 Supervision by RBI 18
Annexes
Annex Page
Details
No. No.
I Format of Undertaking 19
II-A Statements / Returns required to be submitted by PDs to IDMD 22
II-B Statements / Returns required to be submitted by PDs to other than IDMD 23
II- C Statements / Returns required to be submitted by banks on their PD 24
business to IDMD
III Illustration showing the underwriting scheme 25
IV Illustration showing PDs’ commitment to T-Bills/CMBs auctions and success 29
ratio
V Format PDR–I Return 30
VI Format PDR-II Return 32
VII PDR III Return Format 37
VIII Criteria for use of internal model to measure market risk capital charge 48
IX Back Testing 54
X Format PDR-IV Return * 57
XI Publication of Financial Results 61
XII Monthly Return on Interest Rate Risk of Rupee Derivatives 62
XIII List of circulars consolidated 63
XIV List of circulars referred 68
 1

Section I – Regulations governing Primary Dealers

1. Primary Dealer System

1.1 Introduction
In 1995, the Reserve Bank of India (RBI) introduced the system of Primary Dealers (PDs) in the
Government Securities (G-Sec) Market. The objectives of the PD system are to strengthen the
infrastructure in G-Sec market, development of underwriting and market making capabilities for
G-Sec, improve secondary market trading system and to make PDs an effective conduit for
open market operations (OMO). As on June 30, 2015, there are seven standalone PDs and
fourteen banks authorized to undertake PD business departmentally.

1.2 Eligibility conditions

1.2.1 The eligibility criteria for an entity to apply to the Reserve Bank of India for undertaking
the activities of a PD are as under:
Eligible Institutions Eligibility conditions
a. Subsidiary of • Should be registered as an NBFC under Section 45-IA of the
scheduled RBI Act, 1934 for at least one year prior to the submission of
commercial application.
bank/s and All • Should have minimum net owned funds (NOF) 1 of Rs.150
India Financial crore for undertaking core activities and Rs.250 crore for
Institutions undertaking diversified activities (as defined in para 5).
b. Subsidiaries/ joint Before commencing PD business, applicant entity has to
ventures set up in submit an external auditor’s certificate to this effect.
India by entities • Should have exposure in the securities business and in
incorporated particular to the G-Sec market for at least one year prior to
abroad. the submission of application. Exposure for this purpose
c. Company would be as under:
incorporated i. Applicant’s turnover in the G-Sec business
under the during the year preceding the year of application
Companies Act, for PD authorisation should be at least equal to
1956 and does 15 per cent of its total turnover.
not fall under (a) ii. Its assets in G-Sec during the year preceding the
or (b). year of application should be at least equal to 15
per cent of its total assets.
• Applicant entity should submit an annual target along with
plan of action for turnover to be achieved on behalf of mid-
segment (Provident Funds, Urban Cooperative banks,
Regional Rural banks, Trusts, etc.) and retail (individual)
investors at the time of submission of their application for PD
authorisation. The annual minimum target will be same as
applicable to existing PDs from time to time as mentioned in
para 1.2.6 of this circular. Previous experience in servicing
retail and mid- segment customers in G-Sec will be viewed

1
In terms of the explanatory note to Section 45-IA of Chapter III-B of the RBI Act, 1934, NOF is calculated as (a) the aggregate of
the paid-up equity capital and free reserves as disclosed in the latest balance-sheet of the company after deducting there from– (i)
accumulated balance of loss; (ii) deferred revenue expenditure; and (iii) other intangible assets; and (b) further reduced by the
amounts representing – (1) investments of such company in shares of – (i) its subsidiaries; (ii) companies in the same group; (iii) all
other non-banking financial companies; and (2) the book value of debentures, bonds, outstanding loans and advances (including
hire-purchase and lease finance) made to, and deposits with,– (i) subsidiaries of such company; and (ii) companies in the same
group, to the extent such amount exceeds ten per cent of (a) above.
 favourably while processing the application for PD
authorisation.
• In case of subsidiaries/joint ventures set up by entities
incorporated abroad, in addition to conditions given above,
the following may be adhered to:
i. The applicant should have approval of Foreign
Investment Promotion Board.
ii. The parent foreign company directly or through its
subsidiaries should have been in PD business for
three years or more in active markets.
iii. Such entity should suitably ring fence its system
from its parent and associates
Banks which do not have • Minimum net owned funds (NOF) of Rs. 1,000 crore.
a partly or wholly owned • Minimum Capital to Risk Weighted Assets Ratio (CRAR) of
subsidiary undertaking 9 per cent.
PD business and • Net non-performing assets of less than 3 per cent and a
intending to undertake profit making record for last three years.
PD business • The applicant bank should have approval of Department of
departmentally Banking Regulation, Central Office, Reserve Bank of India,
Mumbai.
• Applicant bank should submit an annual target along with
plan of action for turnover to be achieved on behalf of mid-
segment and retail investors at the time of submission of
their application for PD authorisation. The annual minimum
target will be same as applicable to existing PDs from time
to time as mentioned in para 1.2.6 of this circular. Previous
experience in servicing mid-segment and retail customers in
G-Secs will be viewed favourably while processing the
application for PD authorisation.

1.2.2 An applicant will not be eligible for authorisation as a PD if, within the last one year, it
has been subject to litigation or regulatory action or investigation that the Reserve Bank
considers material or otherwise relevant to the business of PD. In making such
determination, RBI may consult with the appropriate regulators for their views.
1.2.3 An entity satisfying the criteria stipulated above should submit its application to the Chief
General Manager, Internal Debt Management Department (IDMD), RBI, Mumbai. The
RBI will, if satisfied, grant ‘in principle approval’. The applicant will, thereafter, submit an
undertaking in respect of the terms and conditions agreed to as per the prescribed
format given in Annex I. Based on the application and undertaking, an authorisation
letter will be issued by RBI. Continuation as a PD would depend on its compliance with
the terms and conditions of authorisation.
1.2.4 The decision to authorise PDs will be taken by RBI based on its perception of market
needs, suitability of the applicant and the likely value addition to the system.
1.2.5 The applicant entity may also have to adhere to other terms and conditions, as may be
specified by RBI from time-to-time.
1.2.6 Existing PDs should submit an annual target (in consultation with RBI) along with plan of
action for turnover to be achieved on behalf of mid-segment and retail investors in the
month of June every year. The annual target for July 2016-June 2017 should not be less
 than 150 per cent of minimum NOF for standalone PDs and 100 per cent of minimum
NOF for bank PDs. The target will be reviewed annually.
1.2.7 PDs are not permitted to set up step-down subsidiaries.

1.3 Role and obligations of the PDs

PDs are expected to play an active role in the G-Sec market, both in its primary and secondary
market segments through various obligations like participating in Primary auction, market
making in G-Secs, predominance of investment in G-Secs, achieving minimum secondary
market turnover ratio, maintaining efficient internal control system for fair conduct of business
etc. A PD is required to have a standing arrangement with RBI based on the execution of an
undertaking (Annex I) and the authorization letter issued by RBI every three years. Undertaking
will be based on passing of a fresh Board resolution by the PD every three years.

1.4 Facilities from RBI

The RBI currently extends the following facilities to the PDs to enable them to fulfill their
obligations effectively:
i. access to Current Account facility with RBI;
ii. access to Subsidiary General Ledger (SGL) Account facility with RBI;
iii. access to e-Kuber facility for primary auction;
iv. permission to borrow and lend in the money market including call money market and to
trade in all money market instruments;
v. memberships of electronic dealing, trading and settlement systems (NDS
platforms/INFINET/RTGS/CCIL);
vi. access to the Liquidity Adjustment Facility (LAF) of RBI;
vii. access to liquidity support from RBI under a scheme separately notified for standalone
PDs; and
viii. access to OMO by RBI.

The facilities are subject to review.

1.5 Regulation and Supervision by RBI

Operations of the PDs are subject to prudential and regulatory guidelines issued by RBI from
time to time.
1.5.1 Returns: As part of off-site supervision, PDs are required to submit prescribed periodic
returns to RBI as per Annex II–A & B. RBI may also prescribe any other return as it may deem
necessary.
1.5.2 On-Site Supervision: RBI will have the right to inspect the books, records, documents
and accounts of a PD. PDs are required to make available all such documents, records, etc. to
the RBI officers and render all necessary assistance as and when required.
1.5.4 In addition, PDs are required to meet registration and such other requirements as
stipulated by the Securities and Exchange Board of India (SEBI) including operations on the
Stock Exchanges, if they undertake any activity regulated by SEBI.
1.5.5 A PD should bring to the attention of RBI any major complaint against it or action
initiated/taken against it by authorities such as the Stock Exchanges, SEBI, CBI, Enforcement
Directorate, Income Tax Department, etc.
1.5.6 PDs are expected to join Primary Dealers Association of India (PDAI) and Fixed Income
Money Market and Derivatives Association (FIMMDA) and abide by the code of conduct framed
by them and such other actions as initiated by them in the interest of the securities markets.

2. Primary Market Activities

PDs are expected to support the primary issues of dated securities of Central Government and
State Government, T-Bills and CMBs through underwriting/bidding commitments. The related
guidelines are as under:

2.1 Underwriting of Dated G-Sec

2.1.1 Dated securities of Central Government

i. The underwriting commitment on dated securities of Central Government will be divided

into two parts - a) Minimum Underwriting Commitment (MUC), and b) Additional
Competitive Underwriting (ACU).
ii. The MUC of each PD will be computed to ensure that at least 50 percent of the notified
amount of each issue is mandatorily underwritten equally by all the PDs. The share under
MUC will be uniform for all PDs, irrespective of their capital or balance sheet size. The
remaining portion of the notified amount will be underwritten through an ACU auction.
iii. RBI will announce the MUC of each PD. In the ACU auction, each PD would be required
to bid for an amount at least equal to its share of MUC. A PD cannot bid for more than 30
per cent of the notified amount in the ACU auction.
iv. The auction could be either uniform price-based or multiple price-based depending upon
the market conditions and other relevant factors, which will be announced before the
underwriting auction for each issue.
v. Bids will be tendered by the PDs within the stipulated time, indicating both the amount of
the underwriting commitment and underwriting commission rates. A PD can submit
multiple bids for underwriting. Depending upon the bids submitted for underwriting, RBI will
decide the cut-off rate of commission and inform the PDs.
vi. Underwriting commission: All successful bidders in the ACU auction will be paid
underwriting commission on the ACU segment as per the auction rules. Those PDs who
succeed in the ACU for 4 per cent and above of the notified amount of the issue, will be
paid commission on the MUC at the weighted average of all the accepted bids in the ACU.
 Others will get commission on the MUC at the weighted average rate of the three lowest
accepted bids in the ACU.
vii. In the GOI securities auction, a PD should bid for an amount not less than its total
underwriting obligation. If two or more issues are floated on the same day, the minimum
bid amount will be applied to each issue separately.
viii. Underwriting commission will be paid on the amount accepted for underwriting by the RBI,
irrespective of the actual amount of devolvement, by credit to the current account of the
respective PDs at the RBI, Fort, Mumbai, on the date of issue of security.
ix. In case of devolvement, PDs would be allowed to set-off the accepted bids in the auction
against their shortfall in underwriting commitment accepted by the RBI. Devolvement of
securities, if any, on PDs will take place on pro-rata basis, depending upon the amount of
underwriting obligation of each PD after setting off the successful bids in the auction.
x. RBI reserves the right to accept any amount of underwriting up to 100 per cent of the
notified amount or even reject all the bids tendered by PDs for underwriting, without
assigning any reason.
xi. An illustration on underwriting procedure is given in Annex III.

2.1.2 Dated securities of State Governments

i. On announcement of an auction of State Development Loans (SDLs), which are dated
securities of the State Governments, RBI may invite PDs to collectively bid to underwrite
up to 100 per cent of the notified amount.
ii. The auction could be either uniform price-based or multiple price-based depending upon
the market conditions and other relevant factors, which will be announced before the
underwriting auction for each issue.
iii. A PD can bid to underwrite up to 30 per cent of the notified amount of the issue. If two or
more issues are floated on the same day, the limit of 30% is applied by taking the notified
amounts separately.
iv. Bids will be tendered by PDs within the stipulated time, indicating both the amount of the
underwriting commitments and underwriting commission rates. A PD can submit multiple
bids for underwriting.
v. Depending upon the bids submitted for underwriting, the RBI will decide the cut-off rate of
commission and the underwriting amount up to which bids would be accepted and inform
the PDs.
vi. RBI reserves the right to accept any amount of underwriting up to 100 per cent of the
notified amount or even reject all the bids tendered by PDs for underwriting, without
assigning any reason.
vii. In case of devolvement, PDs would be allowed to set-off the accepted bids in the auction
against their shortfall in underwriting commitment accepted by the RBI. Devolvement of
 securities, if any, on PDs will take place on pro-rata basis, depending upon the amount of
underwriting obligation of each PD after setting off the successful bids in the auction.
viii. Underwriting commission will be paid on the amount accepted for underwriting by the RBI,
irrespective of the actual amount of devolvement, by credit to the current account of the
respective PDs at the RBI, Fort, Mumbai, on the date of issue of security.

2.2 Bidding in Primary auctions of T-Bills/CMBs

i. Each PD will individually commit, at the beginning of the year (April – March), to submit
bids for a fixed percentage of the notified amount of T-Bills/CMBs in each auction.
ii. The minimum bidding commitment amount / percentage for each PD will be determined by
the RBI, in consultation with the PD. While finalizing the bidding commitments, the RBI will
take into account the NOF, the offer made by the PD, its track record and its past
adherence to the prescribed success ratio. The amount/percentage of minimum bidding
commitment so determined by the RBI will remain unchanged for the entire year or till
execution of the undertaking for the next year.
iii. In any auction of T-Bills/CMBs, if a PD fails to submit the required minimum bid or submits
a bid lower than its commitment, the RBI may take appropriate penal action against the
PD.
iv. A PD would be required to achieve a minimum success ratio of 40 percent of bidding
commitment in T-Bills/CMBs auctions (if an auction gets cancelled or if all bids are
rejected by RBI then PD should not take that auction’s notified amount in the calculation of
success ratio. Also, if RBI accepts partial amount, PD should take only accepted amount
for calculation purpose) which will be monitored on a half yearly basis, i.e. April to
September and October to March, separately (For illustrations please refer to Annex IV).
v. The CMB transactions may be reported in PDR returns along with the T-Bill transactions.

2.3 ‘When-Issued’ transactions in Central G-Sec

PDs shall adhere to the guidelines issued by the RBI vide circular IDMD.No/3426/11.01.01
(D)/2005-06 dated May 3, 2006, as updated vide circulars IDMD.No/2130/11/01.01 (D)/2006-07
dated November 16, 2006, IDMD.DOD.No.3166/11/01.01(B)/2007-08 dated January 1, 2008
and FMRD.DIRD.06/14.03.07/2015-16 dated December 10, 2015 for undertaking “When
Issued” transactions.

2.4 Submission of client bids in the primary auctions

The PDs are allowed to submit bids of their SGL/Gilt account holders in the primary auctions as
their own bids under competitive route after putting in place the following safeguards:
i. PDs should have a Board approved policy including appropriate risk management
system to take care of risks arising out of such activity
ii. List of clients, details of business done through such clients and appropriateness of risk
management system put in place may be periodically reviewed by the Board.
 iii. Records maintained in this regard should be subjected to concurrent audit.
PDs may execute the secondary market sale transaction and report the same on NDS-OM (T+1
settlement). With respect to the dated securities, the sale transaction may be made within one
hour of intimation of firm allotment in the primary auctions.

2.5 Submission of non-competitive bids

PDs shall adhere to the guidelines issued vide circular RBI/2008-09/479 - IDMD.No.5877/
08.02.33/2008-09 dated May 22, 2009, as amended from time to time, in respect of submission
of non-competitive bids in the auctions of the G-Sec.

2.6 Sale of securities allotted in primary issues on the same day

PDs shall adhere to the guidelines issued vide circulars IDMC.PDRS.No.PDS.1/03.64.00/ 2000-
01 dated October 6, 2000, RBI/2005/461–IDMD.PDRS.4777/10.02.01/2004-05 dated May 11,
2005 and RBI/2012-13/133-IDMD.PDRD.188/03.64.00/2012-13 dated July 16, 2012 for
undertaking sale of securities allotted in primary issues on the same day. PDs can avail services
of brokers for carrying out such sale contracts.

2.7 Settlement of primary auctions

The primary auction settlement is independent from the secondary market settlements and
therefore has to be funded separately. Successful PDs shall provide sufficient funds in their
current account with the RBI on the auction settlement days before 3:00 pm to meet their
obligations against the subscriptions in the primary auctions failing which the shortage will be
treated as an instance of ‘SGL bouncing’ and will be subjected to the applicable penal
provisions.

3. Secondary Market activities

3.1 Market making in G-Sec: PDs should offer two-way prices in G-Sec through the Negotiated
Dealing System-Order Matching (NDS-OM), over-the-counter (OTC) market and recognized
Stock Exchanges in India and take principal positions in the secondary market for G-Sec.

3.2 Turnover ratio: A PD should annually achieve a minimum turnover ratio of 5 times for
Government dated securities and 10 times for T-Bills/CMBs of the average month-end stocks.
The turnover ratio in respect of outright transactions should not be less than 3 times in
Government dated securities and 6 times in T-Bills/CMBs (Turnover ratio is the ratio of total
purchase and sales during the year in the secondary market to average month-end stocks).

3.3 Secondary Market Transactions - Short-selling

PDs shall adhere to the guidelines issued by the RBI vide circular IDMD.No
03/11.01.01(B)/2005-06 dated February 28, 2006, RBI/2006-07/243-
IDMD.No./11.01.01(B)/2006-07 dated January 31, 2007, IDMD.DOD.No.3165 /11.01.01(B)/
2007-08 dated January 2008, IDMD.PCD. 14/14.03.07/2011-12 dated December 28, 2011,
RBI/2011-12/615IDMD.PCD.No.21/14.03.07/2011-12 dated June 21, 2012,
IDMD.PCD.06/14.03.07/2014-15 dated September 30, 2014, FMRD.DIRD.02/14.03.007/2014-
15 dated December 24, 2014 and FMRD.DIRD.5/14.03.007/2015-16 dated October 29, 2015 on
“Secondary market transactions in Government Securities - Short Selling” as amended from
time to time.

3.4 Separate Trading of Registered Interest and Principal of Securities (STRIPS) in G-Sec
PDs shall adhere to the guidelines issued by the RBI vide circular RBI/2009-10/360-
IDMD.DOD.No.7/11.01.09 /2009-10 dated March 25, 2010, on STRIPS in G-Sec, as amended
from time to time.

3.5 Settlement of Secondary Market transaction

As per circular IDMD.PDRS./4783/10.02.01/2004-05 dated May 11, 2005 all outright secondary
market transactions in Government Securities are settled on T+1 basis except for outright
secondary market transactions undertaken with respect to FPIs and reported on NDS-OM,
which will be settled on T+2 basis subject to conditions mentioned in circular
FMRD.DIRD.06/14.03.007/2014-15 dated March 20, 2015, as amended from time to time.

4 Liquidity Support from RBI

In addition to access to the RBI's LAF, standalone PDs are also provided with liquidity support
by the RBI against eligible G-Sec including SDLs. The parameters based on which liquidity
support will be allocated are given below:
i. Of the total liquidity support, half of the amount will be divided equally among all the
standalone PDs. The remaining half (i.e. 50%) will be divided in the ratio of 1:1 based on
market performance in primary market and secondary market. Performance in primary
market will be computed on the basis of bids accepted in the T-Bill/CMB auctions and G-
Sec auctions in the proportionate weights of 1 and 3. Similarly, the secondary market
performance will be judged on the basis of outright turnover in T-Bills/CMBs and G-Sec in
the proportionate weights of 1 and 3.
ii. The PD-wise limit of liquidity support will be revised every half-year (April-September and
October-March) based on the market performance of the PDs in the preceding six months.
iii. The liquidity support will be made available at the ‘Repo Rate’ announced by the RBI.
iv. The liquidity support availed by a PD will be repayable within a period of 90 days. If it is
repaid after 90 days, the penal rate of interest payable by PDs is Bank rate plus 5
percentage points for the period beyond 90 days.

5. Investment Guidelines
5.1 Investment policy - PDs should frame and implement, a Board approved, investment policy
and operational guidelines on securities transactions. The policy should contain the broad
objectives to be followed while undertaking transactions in securities on their own account and
on behalf of clients, clearly define the authority to put through deals, and lay down procedure to
be followed while putting through deals, various prudential exposure limits, policy regarding
dealings through brokers, systems for management of various risks, guidelines for valuation of
the portfolio and the reporting systems etc. Operational procedures and controls in relation to
the day-to-day business operations should also be worked out and put in place to ensure that
operations in securities are conducted in accordance with sound and acceptable business
practices. While laying down these guidelines, the PDs should strictly adhere to RBI’s
instructions, issued from time to time. The effectiveness of the policy and operational guidelines
should be periodically evaluated.

5.2 The investment in G-Sec should have predominance over the non-core activities in terms of
investment pattern. Standalone PDs are required to ensure predominance by maintaining at
least 50 per cent of their total financial investments (both long term and short term) in G-Sec at
any point of time. Investment in G-Sec will include the PD’s Own Stock, Stock with RBI under
Liquidity Support / Intra-day Liquidity (IDL)/ LAF, Stock with market for repo borrowings and G-
Sec pledged with the CCIL.

5.3 Further, a PD’s investment in G-Sec (including T-Bills and CMBs) and Corporate Bond (to
the extent of 50% of NOF) on a daily basis should be at least equal to its net call/notice/repo
(including CBLO) borrowing plus net RBI borrowing (through LAF/ Intra-Day Liquidity/ Liquidity
Support) plus the minimum prescribed NOF.

5.4 PDs should necessarily hold their investments in G-Sec portfolio in SGL with RBI. They may
also have a dematerialised (Demat) account with depositories – National Securities Depository
Limited / Central Depository Services (India) Limited. All purchase/sale transactions in G-Secs
by PDs should be through SGL / Constituent SGL (CSGL) / Demat accounts.

5.5 PDs should hold all other investments such as CPs, bonds and debentures (privately placed
or otherwise) and equity instruments, only in demat form.

5.6 All problem exposures, which are not backed by any security or backed by security of
doubtful value, should be fully provided for. Where a PD has filed suit against another party for
recovery, such exposures should be evaluated and provisions made to the satisfaction of
auditors. Any claim against the PD should also be taken note of and provisions made to the
satisfaction of auditors.

5.7 The profit and loss account should reflect the problem exposures if any, and also the effect
of valuation of portfolio, as per the instructions issued by the RBI, from time to time. The report
of the statutory auditors should contain a certification to this effect.
5.8 HTM Portfolio
5.8.1 Standalone PDs are allowed to categorize a portion of their G-Sec portfolio in the HTM
category, subject to the following conditions:
i. The transfer of securities (both Central Government and State Government) to/from HTM
portfolio shall be done as per the policy formulated by the Board. Such transfers shall be
permitted only once in a quarter.
ii. Transfer of securities to/from HTM portfolio should be done with the approval of the Board
at the acquisition cost/ book value/ market value on the date of transfer, whichever is the
least, and the depreciation, if any, on such transfer shall be fully provided for. PDs are
allowed to shift investments to/from HTM portfolio with the approval of the MD of the
PD/Head of ALCO, only in case of exigencies. However, it should be ratified by the Board.
iii. Only securities acquired by the PD under primary auction will be eligible for classification
under HTM category.
iv. The quantum of securities that can be classified as HTM shall be restricted to 100% of the
audited NOF of the PD as at the end March of the preceding financial year.
v. The profit on sale of securities, if any, from the HTM category shall first be taken to the P &
L Account and thereafter be appropriated to the “Reserve Account”; loss on sale shall be
recognized in the P & L Account.
vi. Investments classified under HTM will be carried at acquisition cost, unless it is more than
the face value, in which case the premium should be amortized over the remaining period
to maturity. The book value of the security should continue to be reduced to the extent of
the amount amortized during the relevant accounting period.
vii. The concurrent auditors should specifically verify compliance with these instructions.
viii. The facility shall be available until further advice.

5.8.2 Banks undertaking PD activities departmentally may continue to follow the extant
guidelines applicable to banks with regard to the classification and valuation of the investment
portfolio issued by Department of Banking Regulation (DBR), RBI.

6 Systems/Controls
6.1 PDs shall have an efficient internal control system for fair conduct of business, settlement of
trades and maintenance of accounts.

i. PDs should maintain adequate physical infrastructure and skilled manpower for efficient
participation in primary issues, trading in the secondary market, and to advise and
educate investors.
ii. In respect of transactions in G-Sec, a PD should have a separate desk and maintain
separate accounts in respect of its own position and customer transactions and subject
them to external audit also.
 iii. All the transactions put through by the PD either on outright basis or ready forward basis
should be reflected on the same day in its books and records i.e. preparation of deal slip,
contract note, confirmation of the counter party, recording of the transaction in the
purchase/sale registers, etc.
iv. For every transaction entered into, the trading desk should generate a deal slip which
should contain data relating to nature of the deal, name of the counterparty, whether it is
a direct deal or through a broker, and if through a broker, name of the broker, details of
security, amount, price, contract date and time and settlement date. The deal slips
should be serially numbered and controlled separately to ensure that each deal slip has
been properly accounted for. Once the deal is concluded, the deal slip should be
immediately passed on to the back office for recording and processing. For each deal,
there must be a system of issue of confirmation to the counter-party. In view of the
reporting and confirmation of OTC trades on Negotiated Dealing System (NDS) and
guaranteed settlement through CCIL, the requirement to exchange written confirmation
for OTC trades in G-Sec has been dispensed with. With respect to transactions matched
on the NDS-OM module, separate counterparty confirmation of deals is not required.
v. Once a deal has been concluded, there should not be any substitution of the counter-
party by the broker. Similarly, the security sold/purchased in a deal should not be
substituted by another security under any circumstances.
vi. On the basis of vouchers passed by the back office (which should be done after
verification of actual contract notes received from the broker/counter-party and
confirmation of the deal by the counter party), the books of account should be
independently prepared.
vii. PDs should periodically review securities transactions and report to the top
management, the details of transactions in securities, details of funds/securities delivery
failures, even in cases where shortages have been met by CCIL.
viii. All security transactions (including transactions on account of clients) should be
subjected to concurrent audit by internal/external auditors to the extent of 100% and the
results of the audit should be placed before the CEO/MD of the PD once every month.
The compliance should be monitored on ongoing basis and reported directly to the top
management. The concurrent audit should also cover the business done through
brokers and include the findings in their report.
ix. The scope of concurrent audit should include monitoring of broker wise limits, prudential
limits laid down by RBI, accuracy and timely submission of all regulatory returns,
reconciliation of SGL/CSGL balances with PDO statements, reconciliation of current
account balance with DAD statements, settlements through CCIL, stipulations with
respect to short sale deals, when-issued transactions, constituent deals, money market
deals, adherence to accounting standards, verification of deal slips, reasons for
 cancellation of deals, if any, transactions with related parties on ‘arm’s length basis’,
provisions related to HTM portfolio etc.
x. PDs should have a system of internal audit focused on monitoring the efficacy and
adequacy of internal control systems.
xi. With the approval of their Board, PDs should put in place appropriate exposure limits /
dealing limits, for each of their counterparties which cover all dealings with such counter
parties including money market, repos and outright securities transactions. These limits
should be reviewed periodically on the basis of financial statements, market reports,
ratings, etc. and exposures taken only on a fully collateralized basis where there is
slippage in the rating/assessment of any counterparty.
xii. With the approval of their Boards, PDs should put in place reasonable leverage ratio for
their operations, which should take into account all outside borrowings as a multiplier of
their NOF.
xiii. There should be a clear functional separation of (i) trading (front office); (ii) risk
management (mid office); and (iii) settlement, accounting and reconciliation (back office).
Similarly, there should be a separation of transactions relating to own account and
constituents’ accounts.
xiv. PDs should have an Audit Committee of the Board (ACB) which should meet at least at
quarterly intervals. The ACB should peruse the findings of the various audits and should
ensure efficacy and adequacy of the audit function.

6.2 Purchase/Sale of securities through SGL transfer forms

All PDs should report / conclude their transactions on NDS / NDS-OM and clear/settle them
through CCIL as central counter-party. In such cases where exceptions have been permitted to
tender physical SGL transfer forms, the following guidelines should be followed:

i. Records of all SGL transfer forms issued/received should be maintained and a system for
verification of the authenticity of the SGL transfer forms received from the counter-party
and confirmation of authorized signatories should be put in place.
ii. Under no circumstances, a SGL transfer form issued by a PD in favour of counterparty
should bounce for want of sufficient balance in the SGL/Current Account. Any instance of
return of SGL form from the Public Debt Office (PDO) of the RBI for want of sufficient
balance in the account should be immediately brought to the notice of the PD’s top
management and reported to RBI with the details of transactions.
iii. SGL Transfer forms received by purchasing PDs should be deposited in their SGL
Accounts immediately. No sale should be effected by way of return of SGL form held by
the PD.
 iv. SGL transfer form should be in a standard format, prescribed by the RBI, and printed on
semi-security paper of uniform size. They should be serially numbered and there should
be a control system in place to account for each SGL form.

6.3 Bank Receipt or similar receipt should not be issued or accepted by the PDs under any
circumstances in respect of transactions in G-Sec.

6.4 Reconciliation of holdings of G-Sec

Balances as per books of PDs should be reconciled at least at monthly intervals with the
balances in the books of PDOs. If the number of transactions so warrant, the reconciliation
should be undertaken at more frequent intervals. This reconciliation should be periodically
verified during concurrent/internal audit of the PDs.

6.5 Transactions on behalf of Constituents

i. The PDs should undertake all due diligence while acting as agent of their clients for
carrying out transactions in securities.
ii. PDs should not use the constituents’ funds or assets for proprietary trading or for financing
of another intermediary’s operations.
iii. All transaction records should give a clear indication that the transaction belongs to
constituent and does not belong to PD’s own account.
iv. The transactions on behalf of constituents and the operations in the CSGL accounts
should be conducted in accordance with the guidelines issued by RBI on the CSGL
accounts.
v. PDs who act as custodians (i.e. CSGL account holders) and offer the facility of maintaining
gilt accounts to their constituents, should not permit settlement of any sale transaction by
their constituents unless the security sold is actually held in the gilt account of the
constituent.
vi. Indirect access to NDS-OM has been permitted to certain segments of investors through
banks and PDs vide circular IDMD.DOD.No.5893/10.25.66/2007-08 dated May 27, 2008.
PDs should adhere to the guidelines on maintenance of gilt accounts and investments on
behalf of gilt account holders while undertaking 'constituent deals' on NDS-OM.

6.6 Failure to complete delivery of security/funds in an SGL transaction

Any default in delivery of security/funds in an SGL sale /purchase transaction undertaken by a
PD will be viewed seriously. A report on such transaction, even if completed through the
securities/funds shortage handling procedure of CCIL, must be submitted to the IDMD, RBI
immediately. In terms of circular RBI/2010-11/115-IDMD.DOD.17/11.01.01(B)/2010-11 dated
July 14, 2010, for any default in delivery of security / funds in a SGL sale / purchase transaction
undertaken by a PD (event of bouncing of SGL transfer forms) and the failure of the PD to offer
satisfactory explanation for such bouncing of SGL, the PD shall be liable to pay penalties as per
the circular ibid.

7. Violation/Circumvention of Instructions
Any violation/circumvention of the above guidelines or the terms and conditions of the
undertaking executed by a PD with RBI (Annex I) would be viewed seriously and such violation
would attract penal action including the withdrawal of liquidity support, denial of access to the
money market, withdrawal of authorization for carrying on the business as a PD, and/or
imposition of monetary penalty or liquidated damages, as the RBI may deem fit.

8. Disclosure of Penal Actions

8.1 In order to maintain transparency with regard to imposition of penalties and in conformity
with the best practices on disclosure of penalties imposed by the regulator, the details of the
penalty levied on a PD shall be placed in the public domain.

8.2 The mode of disclosures of penalties, imposed by RBI will be as follows:

i. A Press Release will be issued by the RBI, giving details of the circumstances under which
the penalty is imposed on the PD along with the communication on the imposition of
penalty in public domain.
ii. The penalty shall also be disclosed in the 'Notes on Accounts' to the Balance Sheet of the
PD in its next Annual Report.

9. Exit / Termination procedure:

9.1 RBI may suspend or terminate a PD, as it may deem fit, in the following circumstances:
i. Violation/circumvention of the regulatory guidelines or the terms and conditions of the
undertaking executed by a PD with the RBI.
ii. Failure to meet the performance criteria and capital standards on an ongoing basis.
iii. Repeatedly providing bids and offers in the primary and/or secondary market that are not
reasonably competitive.
iv. RBI is of the view that the PD has attempted to manipulate the market; involved in market
abuse; made an incorrect representation or certification; failed to provide information
required under the extant guidelines, or provided information that was incorrect,
inaccurate, or incomplete.
v. If it appears, in the Reserve Bank’s judgment that the PD has an inadequate or weak
control environment.
vi. If a PD becomes the subject of, or involved with, regulatory or legal proceedings that, in
the judgment of the Reserve Bank, unfavorably impacts the PD business.
vii. PD intends to surrender PD authorisation on its own. In such a case, the PD should
discuss the orderly unwinding of any positions held, agree the timing and date of
 termination of PD operations, and the content of any announcements to be made to the
market, by the Reserve Bank. In the interests of discouraging ‘fair-weather’ trading and
ensure that a PD is available in the market even when the market condition is not
favourable, the Reserve Bank will not approve an application from the same firm for a
fresh PD authorisation for some considerable period of time.

9.2 RBI will notify the PD of its intention to impose a sanction, and will provide the PD with
an opportunity to submit its view, before taking a final decision.

9.3 RBI will ensure that a PD’s exit is carried out in a way that does not cause undue
disruptions to other market participants.

9.4 Such suspension or termination will be made public by RBI through press release. An
announcement in this regard shall be made preferably on the last working day of the week, with
the sanction effective from the close of business on the same day.

10. List of circulars consolidated and list of circulars referred are enclosed at Annex X and XI
respectively.
 Section II: Additional Guidelines applicable to banks undertaking
PD business departmentally

1. Introduction
Scheduled commercial banks (except Regional Rural Banks) have been permitted to undertake
PD business departmentally from 2006-07.

2. Procedure for Authorization of bank-PDs

2.1 Banks eligible to apply for undertaking PD business, [please see eligibility conditions at
paragraph 1.2.1 of Section I above] may approach the Chief General Manager, IDMD, RBI, 23rd
Floor, Central Office Building, Fort, Mumbai - 400 001 for an authorization for undertaking PD
business departmentally.

2.2 The banks, proposing to undertake the PD business by merging / taking over PD business
from their partly / wholly owned subsidiary, or foreign banks, operating in India, proposing to
undertake PD business departmentally by merging the PD business being undertaken by a
group company, will be subject to the terms and conditions, as applicable, of the undertaking
given by such subsidiary/ group company till such time a fresh undertaking is executed by the
bank.

2.3 The banks authorized to undertake PD business will be required to have a standing
arrangement with RBI based on the execution of an undertaking (Annex I) and the authorization
letter issued by RBI every three years (July-June). Undertaking will be based on passing of a
fresh Board resolution by the PD every three years.

3. Applicability of guidelines issued for PDs

3.1 The bank-PDs would be governed by the operational guidelines as given in Section – I
above, to the extent applicable, unless otherwise stated. Furthermore, the bank-PDs' role and
obligations in terms of supporting the primary market auctions for issue of dated G-Sec and T-
Bills/CMBs, underwriting of dated G-Sec, market-making in G-Sec and secondary market
turnover in G-Sec will also be at par with those applicable to standalone PDs as enumerated in
Section - I of this Master Direction.

3.2 Bank-PDs are expected to join PDAI and FIMMDA and abide by the code of conduct framed
by them and such other actions initiated by them in the interest of the securities market.

3.3 The requirement of ensuring minimum investment in G-Sec and T-Bills on a daily basis,
based on net call / RBI borrowing and NOF will not be applicable to bank-PDs who shall be
guided by the extant guidelines applicable to banks.
3.4 As banks have access to the call money market, refinance facility and the LAF of RBI, bank-
PDs will not have separate access to these facilities and liquidity support as applicable to the
standalone PDs.

3.5 The guidelines issued vide circular IDMD.No/3426/11.01.01 (D)/2005-06 dated May 3, 2006,
as updated vide circulars IDMD.No/2130/11/01.01 (D)/2006-07 dated November 16, 2006,
IDMD.DOD.No.3166/11/01.01(B)/2007-08 dated January 1, 2008 and
FMRD.DIRD.06/14.03.07/2015-16 dated December 10, 2015 on ’When-issued’ trades will be
applicable to bank-PDs also.

3.6 Bank-PDs shall be guided by the extant guidelines applicable to banks as regards borrowing
in call/notice/term money market, ICDs, FCNR (B) loans /External Commercial Borrowings and
other sources of funds.

3.7 The investment policy of the bank may be suitably amended to include PD activities also.
Within the overall framework of the investment policy, the PD business undertaken by the bank
will be limited to dealing, underwriting and market-making in G-Sec. Investments in Corporate /
PSU / FIs bonds, CPs, CDs, debt mutual funds and other fixed income securities will not be
deemed to be a part of PD business.

3.8 The classification, valuation and operation of investment portfolio guidelines as applicable to
banks in regard to "Held for Trading" portfolio will also apply to the portfolio of G-Sec including
T-Bills/CMBs earmarked for PD business.

3.9 The G-Sec including T-Bills/CMBs under PD business will count for SLR purpose.

3.10 Bank-PDs shall be guided by the extant guidelines applicable to banks as regards
business through brokers, repo transactions, interest rate derivatives (OTC & exchange traded),
investment in non-G-Sec, Issue of Subordinated Debt Instruments and declaration of dividend.

4. Maintenance of books and accounts

4.1 The transactions related to PD business, undertaken by a bank departmentally, should be
executed through the existing SGL account of the bank. However, Bank-PDs need to maintain
distinct PD book as per DBR guidelines RBI/2006-07/104 DBOD.FSD.BC.
No.25/24.92.001/2006-07 dated August 9, 2006. The decision regarding maintaining a PD book
as part of HFT-G-Sec portfolio or treating the entire HFT-G-Sec- portfolio as PD book is left to
the banks. However, banks may clearly indicate in their investment policy the intention of
denoting the whole or part of HFT-G-Sec book as PD book with the approval of their
Board/ALCO.
4.2 Bank-PDs shall decide about classification (HTM/AFS/HFT-G-Sec-bank/HFT-G-Sec-PD) of
securities allotted in the primary auction/purchased in the secondary market, at the time of
acquisition of the securities.
4.3 It should be ensured that, at any point of time, there is a minimum balance of Rs.100 crore
of G-Sec earmarked for PD business.
4.4 Bank-PDs should subject 100 per cent of the transactions and regulatory returns submitted
by PD department to concurrent audit. An auditor’s certificate for having maintained the
minimum stipulated balance of Rs.100 crore of G-Sec in the PD-book on an ongoing basis and
having adhered to the guidelines/instructions issued by RBI should be forwarded to IDMD, RBI
on a quarterly basis.

5. Capital Adequacy and Risk Management

5.1 The capital adequacy and risk management guidelines applicable to a bank undertaking PD
activity departmentally, will be as per the extant guidelines applicable to banks. In other words,
for the purpose of assessing the bank's capital adequacy requirement and coverage under risk
management framework, the PD activity should also be taken into account.

5.2 The bank undertaking PD activity may put in place adequate risk management systems to
measure and provide for the risks emanating from the PD activity.

6. Supervision by RBI
6.1 The banks authorized to undertake PD business departmentally are required to submit
prescribed periodic returns to RBI promptly. The current list of such returns and their periodicity,
etc. is furnished in Annex II- C.

6.2 Reserve Bank reserves its right to amend or modify the above guidelines from time to time,
as may be considered necessary.

******************
 Annex I

Format of Undertaking
To
The Chief General Manager,
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 permit us to undertake
Primary Dealer (PD) activity in Government securities in accordance with the Guidelines issued
thereon from time to time.

AND WHEREAS as a precondition to our being authorized to undertake PD activity 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 for the period
July ….. to June ……. to the RBI jointly and severally as set out below:

NOW, THEREFORE, in consideration of the RBI agreeing to permit us to undertake PD activity,

we hereby undertake and agree:

1. To commit to aggregatively bid in the auction of Treasury Bills (TBs), including Cash
Management Bills (CMBs) to the extent of specific per cent of each issue of auction
Treasury Bills/Cash Management Bills as decided every year (April-March) and for a
minimum amount equal to the underwriting commitment (allotted under Minimum
Underwriting Commitment and Additional Competitive Underwriting) for GoI Dated Securities
and to maintain the success ratio in aggregate winning bids at not less than 40 per cent for
TBs and CMBs or such other percent as may be notified by RBI keeping in view the relevant
factors.

2. To offer to underwrite primary issues of GoI dated securities, TBs, CMBs, 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. a) To determine prudential ceilings, with the prior approval of the Board of Directors (Board)
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 RBI in this regard
(applicable to standalone PDs only).

b) To adhere to prudential ceilings, with the prior approval of the Board of the bank, subject
to the guidelines, if any, issued by the RBI in this regard (applicable to bank-PDs only).

4. To offer firm two-way quotes through NDS / NDS-OM, over the counter telephone market /
recognised Stock Exchanges in India and deal in the secondary market in Government
dated securities and TBs 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 TBs/CMBs of the average of month-end stocks (in the book
separately maintained for the PD business) subject to the turnover in respect of outright
transactions being not less than 3 times in Government dated securities and 6 times in TBs
/CMBs or as may be notified by RBI from time to time.

7. To maintain the capital adequacy standards prescribed by the RBI, and to subject ourselves
to all prudential and regulatory guidelines as may be issued by the RBI from time to time.

8. To maintain adequate infrastructure in terms of both physical apparatus and skilled

manpower for efficient participation in primary issues, trading in the secondary market, and
for providing advice and education to investors.

9. To adhere to “Guidelines on Securities Transaction to be followed by PDs” issued vide

circular IDMC.No.PDRS/2049-A/03.64.00/99-2000 dated December 31, 1999 and Master
Direction issued from time to time and put in place necessary internal control systems for fair
conduct of business and settlement of trades and maintenance of accounts.

10. To comply with all applicable RBI /Securities and Exchange Board of India (SEBI)
requirements under the existing guidelines 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 PD.

11. To abide by the code of conduct as laid down by RBI/SEBI, the Primary Dealers’
Association of India (PDAI) and the Fixed Income, Money Markets and Derivatives
Association of India (FIMMDA).

12. To maintain separate books of account for transactions relating to PD business (distinct from
the normal banking business) with necessary audit trails and to ensure that, at any point of
time, there is a minimum balance of Rs.100 crore of Government securities or as may be
notified by RBI from time to time earmarked for PD business (applicable to bank-PDs only).

13. To maintain and preserve such information, records, books and documents pertaining to our
working as a PD as may be specified by the RBI from time to time.

14. To permit the RBI to inspect all records, books, information, documents and make available
the records to the officers deputed by the RBI for inspection/scrutiny and render all
necessary assistance.

15. To maintain at all times a minimum net owned funds of Rs.150 crore / Rs.250 crore or as
may be prescribed by RBI from time to time in Government securities and to deploy the
liquidity support from the RBI, net borrowings from call money market and net repo
borrowings exclusively in Government securities (applicable to standalone PDs only).

16. To maintain an arm’s length relationship in transactions with group and related entities.

17. To obtain prior approval of RBI for any change in the shareholding pattern of the company
(applicable to standalone PDs only).

18. 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.
19. To report the matter immediately to Internal Debt Management Department of the 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.

20. To pay an amount of Rupees Five Lakh, or as applicable, to the RBI, for violation of any of
the instructions issued by the RBI in the matter or for non-compliance with any of the
undertakings given hereinabove.

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 )
at the duly convened Meeting held on___________ )
in the in the presence of _______________ )

Signatory (i)
(ii)

Witness (i)
(ii)
Notes:
1. Para 3.a, 15 and 17 are applicable to standalone PDs only.
2. Para 3.b, words in italics in para 6 and para 12 are applicable to bank-PDs only.
 Annex II-A

Statements / Returns required to be submitted by PDs to IDMD

Sr. Return/Report Periodicity Last date for submission Reference

No. under which
required
1. PDR-I* (Sources and Fortnightly Next working day of the
application of funds reporting fortnight.
maintained on daily basis)
2. PDR-II* (Securities market Monthly 10th of the following
turnover on monthly basis) month.
3. PDR-III* (Statement on Quarterly 15th of the month following
capital adequacy)
the reporting
4. PDR IV* (Financial and Quarterly 15th of the month following
balance sheet indicators) the reporting quarter. PD Guidelines
5. Return on FRAs / IRS* Monthly 10th of the following
month.
6. Annual Report & Annual Annual As soon as annual
Audited A/cs accounts are audited and
finalized.
7. Auditor's Certificate on Net Yearly 30th June.
Owned Funds
8. Details of dividend declared Yearly Within a fortnight from the
during the accounting year payment of dividend.

* Returns to be submitted on XBRL online platform

 Annex II-B

Statements / Returns required to be submitted by PDs

to departments other than IDMD of Reserve Bank of India

Sr. Return/Report Periodicity To be Reference under which

No. filed with required
Dept.
1. Return on FRAs / IRS MPD.BC.187/07.01.279/199
Fortnightly MPD
9-2000 dated July 7, 1999.
2. Statement showing balances of
Govt. Securities held on behalf Half-Yearly PDO
of each Gilt A/c holder
3. Return on Call Money
transactions with Commercial Fortnightly DEPR
Banks
4. Information for Issue of On each MPD IECD.2/08.15.01/2001-02
Commercial Paper issue of CP dated July 23, 2001.

Note: The last date prescribed for submission of these statements by the departments
concerned and/or IDMD should be adhered to.
 Annex II-C

Statements / Returns required to be submitted by banks

on their Primary Dealership business to IDMD

Sr. Return/Report Periodicity Last date for submission

No.
1. PDR-II (format enclosed as Annex
Monthly 10th of the following month.
VI) *
2. Concurrent auditor certificate for
having maintained the minimum
15th of the month following
stipulated balance of Rs. 100 crore Quarterly
the reporting quarter.
of G-Sec in the PD-book on an
ongoing basis.
3. Annual Report on PD activity of the Within 30 days of the
bank. Annual finalization of audited
accounts.
* Returns to be submitted on XBRL online platform
 Annex III

Illustration showing the underwriting amount, cut-off of fee quoted and commission
payable to PDs

Instrument Name XXXXXXXX

Auction Type Multiple
Notified amount (NA) 4200
Total No. of PDs (n) 21
Minimum Underwriting Commitment (MUC) 2100

Per PD MUC (MUC/n) 100

Total PD commitment under MUC collectively (Adjusted MUC) 2100

Additional Competitive Underwriting (ACU)

ACU = (NA - Adjusted MUC) 2100
Minimum bidding by each PD in ACU
(equal to per PD MUC) 100

Total underwriting commitment for each PD under MUC and ACU 200
Total Underwriting ( 212 *19) 4200

Minimum allotment to a PD to be eligible for higher commission on MUC i.e.

min 4% of Notified Amount 168
 …………………. Annex III
Bids submitted under Additional Competitive Underwriting Auction
Amount Weighted
PDs
of bid Cumulative Underwriting Amount Average
Sr. participated
in ACU Amount fee (in paise / of bid * Remarks underwriting
No in U/W
(Rs. (Rs. Cr) Rs.100) U/w fee fee (paise /
auction
Crore) Rs.100)
1 A 150 150 1.52 228.00 1.52
2 B 155 305 2.56 396.80 2.05
Three lowest
3 A 60 365 3.50 210.00 bids 2.29
4 C 95 460 3.70 351.50 2.58
5 B 200 660 3.94 788.00 2.99
6 B 25 685 4.00 100.00 3.03
7 D 120 805 4.00 480.00 3.17
8 E 95 900 4.49 426.55 3.31
9 F 70 970 4.50 315.00 3.40
10 G 50 1020 4.75 237.50 3.46
11 E 115 1135 4.90 563.50 3.61
12 C 90 1225 4.94 444.60 3.71
13 F 220 1445 4.95 1089.00 3.90
14 G 200 1645 5.00 1000.00 4.03
15 H 120 1765 5.00 600.00 4.10
16 I 120 1885 5.00 600.00 4.15
17 I 109 1994 5.00 545.00 CUT-OFF 4.20
18 I 25 2019 5.50 137.50 4.22
19 J 120 2139 5.94 712.80 4.31
20 K 120 2259 6.00 720.00 4.40
21 L 120 2379 6.00 720.00 4.48
22 M 55 2434 6.50 357.50 4.53
23 N 120 2554 6.94 832.80 4.64
24 O 120 2674 7.00 840.00 4.75
25 P 120 2794 7.00 840.00 4.84
26 Q 120 2914 7.00 840.00 4.93
27 R 106 3020 8.00 848.00 5.04
28 S 106 3126 8.50 901.00 5.16
29 M 80 3206 9.00 720.00 5.25
30 K 100 3306 9.25 925.00 5.38
Rate of commission payable to PDs on MUC for those who 4.20
have been allotted an amount >= 4% of notified amount (weighted average of all allotted bids)
2.29
Rate of commission payable to other PDs on MUC (weighted average of three lowest bids)
 …………………. Annex III

PD Wise eligible commission on ACU and ACU Allotment

[a] [b] [c] [d]={[b]*10000000*[c]/100}/100

Successful bids in
Successful Underwriting fee bid Bid wise commission payable
ACU
PDs (in paise / Rs.100) on ACU (In Rs.)
(Rs. Cr)

A 150 1.52 228,000.00

A 60 3.50 210,000.00
A Total 210 438,000.00
B 155 2.56 396,800.00
B 200 3.94 788,000.00
B 25 4.00 100,000.00
B Total 380 1,284,800.00
C 95 3.70 351,500.00
C 90 4.94 444,600.00
C Total 185 796,100.00
D 120 4.00 480,000.00
D Total 120 480,000.00
E 95 4.49 426,550.00
E 115 4.90 563,500.00
E Total 210 990,050.00
F 70 4.50 315,000.00
F 220 4.95 1,089,000.00
F Total 290 1,404,000.00
G 50 4.75 237,500.00
G 200 5.00 1,000,000.00
G Total 250 1,237,500.00
H 120 5.00 600,000.00
H Total 120 600,000.00
I 120 5.00 600,000.00
I 101 5.00 505,000.00
I Total 221 1,105,000.00
 ………………. Annex III

Underwriting Commission Details

Weighted
Whether
average fee
MUC ACU Total ACU Commiss Total
taken for Commn.
PD amount amount amount accepted ion on Commissi
MUC on MUC
accepted accepted accepted is >= 4% ACU on
commission
NA
calculation

(paise per
(in crore) (in crore) (in crore) Rs.100) (Rs.)

A 106 210 316 YES 4.20 445,200 438,000 883,200

B 106 380 486 YES 4.20 445,200 1,284,800 1,730,000

C 106 185 291 YES 4.20 445,200 796,100 1,241,300

D 106 120 226 NO 2.29 242,740 480,000 722,740

E 106 210 316 YES 4.20 445,200 990,050 1,435,250

F 106 290 396 YES 4.20 445,200 1,404,000 1,849,200

G 106 250 356 YES 4.20 445,200 1,237,500 1,682,700

H 106 120 226 NO 2.29 242,740 600,000 842,740

I 106 221 327 YES 4.20 445,200 1,105,000 1,550,200

J 106 0 106 NO 2.29 242,740 0 242,740

K 106 0 106 NO 2.29 242,740 0 242,740

L 106 0 106 NO 2.29 242,740 0 242,740

M 106 0 106 NO 2.29 242,740 0 242,740

N 106 0 106 NO 2.29 242,740 0 242,740

O 106 0 106 NO 2.29 242,740 0 242,740

P 106 0 106 NO 2.29 242,740 0 242,740

Q 106 0 106 NO 2.29 242,740 0 242,740

R 106 0 106 NO 2.29 242,740 0 242,740

S 106 0 106 NO 2.29 242,740 0 242,740

TOTAL 2014 1986 4000 6,029,280 8,335,450 14,364,730

 Annex IV

Illustrations showing PDs’ Commitment to

T-Bills / CMBs auctions and Success Ratio

A PD has committed to bid aggregatively Rs. 500 crore in T-Bills as shown below. The success
ratio to be maintained by the PD is 40 per cent in respect of T- Bills/CMBs. 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:

T-Bills/CMBs: (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%
Fulfillment of Bidding Commitment Yes Yes No

Fulfillment of Success Ratio Yes Yes No

Success Ratio in T-Bills/CMBs is the ratio of bids accepted to the bidding commitment.
 Annex V
Format - PDR I Return

Name of PD:
Net Owned Funds (as per last b/s):
Return for fortnight ending:
Amount in Crore date wise fortnightly statement
1
A Outright purchases (Face Value)
(i) Government dated securities and T-Bills
(ii) Other securities
B Outright sales (Face Value)
(i) Government dated securities and T-Bills
(ii) Other securities
C Repo transactions
i) Borrowing (amount)
- from RBI
- from the market
ii) Lending (amount)
- to RBI
- to the market
D Call Money transactions
- Borrowing
- Lending
2 Outstanding balances (Settled position figures)
A Sources of Funds
a) Net Owned funds
(as per last audited balance sheet)
b) Current year’s accruals under profit /loss account
c) Call Money Borrowings
d) Notice Money borrowings
e)Term Money borrowings
f) Borrowing from RBI under SLF
g) Borrowing from RBI under LAF
h) Borrowing under NCDs
i) Repo borrowing from market
j) Corporate bond repo borrowing
k) Borrowing under CBLO
k) Borrowing under credit lines of banks/FIs
m) Borrowings through Inter-Corporate Deposits
- maturing up to 14 days
- maturing beyond 14 days
n) FCNR(B) Loans
o) Commercial Paper issuances
p)Bond issuances
q) Others (Give details for items in excess of Rs 10 cr)
Total
 B Application of Funds
a) Government dated securities, SDL & -Bills
(Book value)@
I) Own Stock
i) Dated G-sec(excluding IIBs)
ii) IIBs
iii) SDL
iv) 91 Day T Bills
v) 182 Day T Bills
vi) 364 Day T Bills
vii) CMBs
viii) Others, if any
II) Stock with RBI under Assured Support
III) Stock with RBI under LAF
IV) Stock with market for repo borrowing
b) Lending in Call money Market
c) Lending in Notice money market
d) Lending in Term money market
e) Repo Lending to market
f) Lending under CBLO
g) Repo lending to RBI
h) Investment in Corporate Bonds
i) Investment in shares
j) Investment in Mutual funds schemes
- debt oriented
- equity oriented
k) Investment in Subsidiaries.
l) Investment in FDs
m) Other financial assets if any
(Give details for items in excess of Rs 10 cr)
n) Fixed Assets
o) Others (Give details for items in excess of Rs 10 cr)
Total
Own Stock position (SGL Balance) (Face value)
i) T-Bills
ii) Dated Securities
iii) State Development Loans (SDLs)
3 a) Portfolio duration for Securities#
b) Portfolio duration for dated G-Sec
c) VaR for the day (with prescribed holding period
of 15 days) as % of portfolio #
d) Leverage ratio (the PD as a whole)#
@ Exclude stock received as pledge for repo lending to RBI/market participants and also the
stock reported under II, III and IV.

# Board approved figures may be given in the foot note.

 Annex VI
Format - PDR II Return

Form
PDR 2
Name of the Primary Dealer
Statement as at the end of :
(Rs. in crore) Cumulative figures
SECTION A - SECURITIES MARKETS TURNOVER
Dated State Total
GOI Govt. Treasury
Securities IIBs Securities Bills/CMBs
I PRIMARY MARKET
H1 H2
(April- (Oct-
NEW SUBSCRIPTIONS Sep) Mar)
i) Bidding Commitment* N.A.
ii) Bids Tendered **
iii) Non-competitive bids
Bids Accepted (A) (including non-comp
iv) bids)
v) Success Ratio
REDEMPTIONS (B)
II TOTAL = I (A) + I (B)
III UNDERWRITING
Amount offered for underwriting
i) (MUC+ACU) N.A.
ii) Amount of underwriting accepted by RBI N.A.
iii) Amount of devolvement N.A.
iv) Underwriting fees received (in Rupees) N.A.
IV SECONDARY MARKET TURNOVER - OTC - Outright (including OMO and NDS-OM transactions)
i) Purchases
ii) Sales
TOTAL OUTRIGHT TURNOVER (A)
Of which deals done with non-NDS members:
i) Purchases
ii) Sales
REPURCHASEAGREEMENTS:
i) Repo (both legs)
ii) Reverse Repo (both legs)
TOTAL REPOS TURNOVER (B)
V Total Turnover = OTC IV (A) + IV (B)
SECONDARY MARKET TURNOVER - STOCK
VI EXCHANGES
i) Purchases
ii) Sales
Total (VI)

TOTAL SECONDARY MARKET TURNOVER

VII (V + VI)

TOTAL TURNOVER (II + VII)

* In case of dated government securities, bidding commitment is total underwriting allotment
(MUC+ACU)
** Include applications made under tap issues
 (normally applicable to State Loans)
(VIII to XII below is for standalone PDs only)
VIII REPURCHASE AGREEMENTS WITH RBI UNDER LAF
i) Repo (both legs)
ii) Reverse Repo (both legs)
IX TURNOVER IN EQUITY SHARES AND EQUITY LINKED MUTUAL
FUND UNITS
A. Equity Shares Purchases Sales
a. Primary Market
b. Secondary Market

B. Equity Linked Mutual Funds Purchases Sales

a. Primary Market
b. Secondary Market
X. CALL (average on daily product basis)
i) Borrowings
ii) Lendings
iii) Net borrowing
XI. NOTICE MONEY (average on daily product basis)
i) Borrowings
ii) Lendings
iii) Net borrowing

XII. TERM MONEY

i) Borrowings …..
ii) Lendings ……
iii) Net Borrowings …….
XII. Liquidity support
(i) availed from RBI (average
on daily product basis)
......
(ii) outstanding at the end of
month
 SECTION B - EXCHANGE TRADED INTEREST RATE DERIVATIVES

NPA^^ of the NPA of the NPA of the NPA of the

futures contract futures futures futures
outstanding at contract contract contract
the beginning of entered into reversed outstanding
the month during the during the at the end
month month of the
month

I. Activity during the month

91 Day Treasury Bill
month 1
month 2
month 3
10 Year Zero Coupon Bond
month 1
month 2
month 3
10 Year Notional Bond
month 1
month 2
month 3
(NPA is to be furnished according to the underlying interest exposure wise breakup)

II. Analysis of "highly effective"

hedges
A certificate from Concurrent Auditors stating that the size of the hedge portfolio and that the

hedge is highly effective as per the definition of RBI circular dated June 3, 2003

III. Analysis of trading positions

NPA of the MTM value
Trading Futures of the
Position trading
futures
position
91 Day Treasury Bill
month 2
month 3
10 Year Zero Coupon Bond
month 2
month 3
10 Year Notional Bond
month 2
month 3
^^ NPA = Notional Principal Amount
 Section C-(For Bank PDs only)

PD HFT (Book Value in Rs crore)

Outstanding on month end Average month end balance

Dated G-Sec
(excluding IIBs)
91 Day Treasury Bill
182 Day Treasury Bill
364 Day Treasury Bill
CMBs
SDLs
IIBs

Whether the entire HFT G-Sec is treated as PD book or part of it is treated as PD book?

entire HFT G-Sec is treated as PD book

part of HFT G-Sec is treated as PD book
 Section D-(Data on Retail Segment)

Mid/ retail segment

Retail and mid
Target for the
No. of gilt segment turnover
year ended
accounts held achieved from July
June ….
till ….

RRBs -- -- --
UCBs -- -- --
Trusts -- -- --
Provident Funds
(includes gratuity funds) --
Individuals -- -- --

Others, if any (specify) -- -- --

Total --
 Annex VII
PDR III Return - Format

Statement of Capital Adequacy - Quarter ended -

Name of the Primary Dealer :
Statement - 1 (Summary) (Amount in Rs.)

(i) Total of Risk Weighted Assets(RWA) for Credit Risk

(Appendix I)

(ii) (a) Tier-I Capital funds (after deductions)

(b) Tier-II Capital funds eligible
(c) Total of available Tier-I & II capital funds

(iii) Minimum credit risk capital required

i.e. (i) x 15 per cent

(iv) Excess of Tier-I & II capital funds available

for market risk capital charge i.e. (ii) (c) – (iii)

(v) The Market Risk capital charge worked

out as the higher of the amounts under the
Standardised method and the one as per
internal risk management framework based VaR model
(Appendices II and III)

(vi) Capital funds available to meet (v)

i.e: excess of Tier-I and Tier-II as at (iv) above,

(vii) Over all Capital Adequacy

(a) Total RWA for credit risk i.e. (i)
(b) Capital charge for market risk i.e. (v)
(c) Numerical Link for (b) = 6.67
i.e.(reciprocal of credit risk capital ratio of 15%)
(d) Risk Weighted Assets relating to
Market Risk i.e. (b) x (c)
(e) Total Risk Weighted Assets i.e. (a) + (d)
(f) Minimum capital required i.e. (e) x 15%
(g) Total Capital funds available i.e. (ii) + (vi)
(h) less : Capital funds prescribed by other regulators/
licensors e.g. SEBI/ NSE/ BSE/OTCEI
(i) Net capital funds available (g – h)
for PD business

(viii) Capital to Risk-Weighted Assets Ratio (CRAR) % (i / e) * 100

Following Appendices are to be sent along with the PDR III Return:

Appendix I - Details of the various on-balance sheet and off-balance sheet items, the risk
weights assigned and the risk adjusted value of assets have to be reported in this format. The
format enclosed is purely illustrative. PDs are required to adhere to the guidelines on activities
permitted to be undertaken by PDs while diversifying business activities.
Appendix II - Details of the market risk charge using the standardised model as per the format
enclosed.
Appendix III - Details of market risk using the VaR based internal model as per the format
enclosed.
Appendix IV - Details of back-testing results for the previous quarter, giving the details of VaR
predicted by the model, the actual change in the value of the portfolio and the face value of the
portfolio.
Appendix V - Details of stress testing, along with details of the change in the value of the
portfolio for a given change in the yield, in the format enclosed.
 Appendix I
CREDIT RISK

A. BALANCE SHEET ITEMS

FUNDED RISK ASSET BOOK RISK RISK

VALUE WEIGHT ADJUSTED
Rupees % VALUE
I. Cash balances and balances in current account with RBI 0%
II. Amount lent in call/ notice money market and balances
in current account with banks 20%

III. Investments
(a) Government securities/ Approved securities
guaranteed by Central / State governments other 0%
than at (e) below
(b) Fixed deposits, Bonds and Certificates of Deposit
20%
of banks, PDs and Public Financial Institutions
(c) Bonds issued by banks / PDs / public financial
100%
Institutions (as specified by DBR) as Tier-II capital
(d) Shares of all companies/units of mutual funds 100%
(e) debentures / bonds / commercial papers of
companies other than in (b) above (As per circular
DNBR.CO.PD.No.080/03.10.01/2015-16 dated
April 28, 2016, as amended from time to time)
i. Short term instruments (Aggregate amount rating
wise)
20%
A1+
30%
A1
50%
A2
100%
A3
150%
A4&D
100%
Unrated

ii. Long term instruments (Aggregate amount rating

wise)
20%
AAA
30%
AA
50%
A
100%
BBB
150%
≤BB
100%
Unrated

(f) Securities of Public Sector Undertakings

guaranteed by Central / State Govts. but issued
outside the market borrowing programme
20%
Note: In case where the guarantee has been
invoked and the concerned state government has
remained in default, PDs should assign 100% risk
weight.
(g) Securities of and other exposures on PDs in the
Government Securities market including bills
100%
rediscounted
 (h) Subordinated debts issued by other PDs as Tier-II
capital 100%

IV. Current Assets

(a) Loans to staff 100%
(b) Other secured loans and advances considered 100%
good
(c) Others (to be specified) 100%

V. Fixed Assets (net of depreciation)

(a) Assets leased out 100%
(b) Fixed Assets 100%
VI. Other assets
(a) Income-tax deducted at source (net of provision) 0%

(b) Advance tax paid (net of provision) 0%

(c) Interest due on Government securities 0%
(d) Others (to be specified and risk weight indicated X%
as per the counter party)

AA. TOTAL RISK-WEIGHTED BALANCE SHEET ASSETS

B. OFF-BALANCE SHEET ITEMS

FUNDED RISK ASSET BOOK CREDIT RISK RISK

VALUE CONV WEIGHT ADJ
FACTOR VALUE
Rupees
% %
i. Share/ debenture/ auction stock underwritten
- Government/ any exposure guaranteed by 50 0
Government
- Banks/ Financial Institutions 50 20
- PDs 50 100
- All others 50 100
ii. Partly-paid shares/debentures including actual
devolvement and other securities
- Government/ any exposure guaranteed by 100 0
Government
- Banks/ Financial Institutions 100 20
- PDs in the Government securities market 100 100
- All others 100 100
iii. Notional Equity/Index Positions underlying the 100 100
equity derivative
iv. Repurchase agreements where the credit risk
remains with the PD
- Government/ any exposure guaranteed by 100 0
Government
- Banks/ Financial Institutions 100 20
- PDs 100 100
- All others 100 100
v. Other contingent liabilities/ commitments like standby
facility with original maturity of over one year
 - Government/ any exposure guaranteed by 50 0
Government
- Banks/ Financial Institutions 50 20
- PDs 50 100
- All others 50 100

vi. Interest Rate Derivative*

Residual maturity of 1 year or less 0.5
Residual maturity of 1 year to 5 years 1
Residual maturity of over 5 years 3
vii. Foreign Exchange Contract*
Residual maturity of 1 year or less 2
Residual maturity of 1 year to 5 years 10
Residual maturity of over 5 years 15
Note: Cash margins/deposits should be deducted before applying the credit conversion factor
*:Risk weights would be as per the counterparty

BB. TOTAL RISK-WEIGHTED OFF-BALANCE SHEET ASSETS

C. TOTAL RISK-WEIGHTED BALANCE SHEET & OFF-BALANCE SHEET ASSETS

 Appendix II
PDR-III Quarterly Return
Statement 2
MARKET RISK CAPITAL STATEMENT
(Appreciation in book value not recognized)

Standardised Method
A. Interest rate Instruments & Equity /Equity like instruments

INSTRUM Maturity POSITI BOOK BOOK MO DURATI ZONE YIELD ASSUM CHANG CHANG CHANG MARKET
ENT Date ON (FV) PRICE VALUE DIFI ON ED ED ED E IN RISK
ED BUCKET CHANG YIELD PRICE PRICE CHARGE
DUR E IN
ATI YIELD
ON (bps)
(Including
equity
positions)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)

Total of A
B. Unhedged Foreign Exchange Position 15%

Total of B
Total
(A+B)

Position Market Risk Measure

(Marked to Market value) (15% of the position)
C. Unhedged Foreign Exchange Position

D. Asset items subjected to flat charge of 15% for market risk measurement

Memo items:
Items of assets which, with the approval of RBI, have been classified as investment items and not
subjected to market risk measure:

Asset Book Value MTM/NAV

1.
2.
3.
 Appendix III

VaR Calculation

Details of the VaR calculation – for the last 60 days

Total
Date Portfolio Value VaR (Rs.) VaR with holding VaR with holding period as
(Rs.) period a percentage of portfolio
One Day

(a) Average of 60 day VaR (with holding period)

(b) 3.3 times the 60 day average VaR (with holding period)
(c) Last day’s VaR
(d) Market Risk Measure {higher of (b) and (c) above}
 Appendix IV
Back Testing of VaR Model

For the last 250 trading days

Backtesting Report as part of PDR III for Quarter ended…………………..

Actual Hypothetical
No. of observations (excluding holidays) 250 250
No. of failures, i.e. No. of times VaR
underpredicted the actual trading/hypothetical ….. …..
MTM losses

DATE-WISE BACKTESTING RESULTS

(Rs. in crore)
S. No. Date 1 day Mkt. Mkt. Difference Failure Actual Failure
VaR Value Value (Y/N) P/L (Y/N)
Entire Entire Next Day
Portfolio Portfolio Same
Portfolio
1
2
3
4
.
.
.
.
.
.
250

The daily VaR preceding holidays should be up-scaled by the square root of number of
intervening holidays. For, example, if the Friday is followed by 2 holidays, then the one VaR
figure for Friday should be multiplied by square root of 2.
 Appendix V

Details of Stress Testing

STRESS TEST AS ON:

Name of the PD:

ASSETS (All tradable interest rate related assets)

MTM Value (Rs. Crore) Weighted Average
Mod. Duration (years)
1 G-Sec and T-Bills
2 Corporate/PSU/FI Bonds
3 Receiving leg in respect of FRA/IRS
4 Other tradable interest rate instruments

Total MTM value of assets (Va)

Weighted Average Mod. Duration of the assets (Da)

LIABILITES (excluding NOF)

MTM Value (Rs. Crore) Weighted Average
Mod. Duration (years)
1 Net borrowing Call, notice & term money
2 Net borrowing in Repo (including LAF of RBI)
3 Net Borrowing through CBLO
4 Borrowing through ICDs
5 Borrowing through CPs
6 Borrowing through Bond issuances
7 Credit lines from banks/FIs
8 Paying leg in respect of FRA/IRS
9 Other tradable interest rate liabilities

Total MTM value of liabilities (Vl)

Weighted Average Mod. Duration of Liabilities (Dl)

Mod. Duration of NOF (Dn) = (Va*Da - Vl*Dl)/(Va-Vl)

Percentage change in NOF = (-) Dn*Change in interest rates (1%)

Change in NOF = (-) Dn* Change in Interest rates (1%)*NOF

Other details:
Net interest income in the current year so far
Trading profits/loss in the current year so far
Unrealised MTM (Net gain/loss on cash positions)
Unrealised MTM (Net gain/loss on derivative positions)
Other income, if any (Details to be specified) ***
NOF deployed in fixed income and related instruments
Total NOF (Break-up to be furnished)

Note: NOF should be determined as per the definition prescribed in this regard. The MTM gains
or losses should be adjusted in the NOF.

***Details of Other Income

Capital funds of the firm as on the date of stress test
(Rs. in crore)

i. Tier-I Capital
ii. Tier-II Capital

iii. Total Capital (i+ii)

iv. Details of Deductions

a. Investment in subsidiaries
b. Intangible assets
c. Losses in current accounting period
d. Deferred tax assets
e. Losses brought forward from previous accounting periods
f. Capital funds prescribed by other regulator
v. Total Deductions(a+b+c+d+e+f)
vi. Net Total Capital Funds (iii-v)
Less
vii. Change in NOF due to one per cent increase in yields
viii. Net capital funds available after providing for change in NOF
ix. Risk-weighted assets for the credit risk of the firm
x. Risk-weighted assets for the market risk of the firm
xi. Total risk-weighted assets (ix+x)
xii. Capital adequacy ratio as on the date of stress test (viii/xi)
 Annex VIII
(See para 5)

Criteria for use of internal model to measure market risk capital charge

A General criteria

1. In order that the internal model is effective, it should be ensured that :

- the PD's risk management system is conceptually sound and its implementation
is certified by external auditors;
- the PD has sufficient number of staff skilled in the use of sophisticated models
not only in the trading area but also in the risk control, audit, and back office
areas;
- the PD has a proven track record of reasonable accuracy in measuring risk (back
testing);
- the PD regularly conducts stress tests along the lines discussed in Para B.4
below
2. In addition to these general criteria, PDs using internal models for capital purposes will be
subject to the requirements detailed in Sections B.1 to B.5 below.

B.1 Qualitative standards

The extent to which PDs meet the qualitative criteria contained herein will influence the level at
which the RBI will ultimately set the multiplication factor referred to in Section B3 (b) below, for
the PDs. Only those PDs, whose models are in full compliance with the qualitative criteria, will
be eligible for use of the minimum multiplication factor. The qualitative criteria include:
a) A PD should have an independent risk control unit that is responsible for the design and
implementation of the system. The unit should produce and analyze daily reports on the
output of the PD's risk measurement model, including an evaluation of the relationship
between measures of risk exposure and trading limits. This unit must be independent from
trading desks and should report directly to senior management.

b) The unit should conduct a regular back testing programme, i.e. an ex-post comparison of the
risk measure generated by the model against actual daily changes in portfolio value over
longer periods of time, as well as hypothetical changes based on static positions.

c) Board and senior management should be actively involved in the risk control process and
must regard risk control as an essential aspect of the business to which significant resources
need to be devoted. The daily reports prepared by the independent risk control unit must be
reviewed by a level of management with sufficient seniority and authority to enforce both
reductions in positions taken by individual traders and reductions in the PD’s overall risk
exposure.

d) The PD’s internal risk measurement model must be closely integrated into the day-to-day
risk management process of the institution. Its output should accordingly be an integral part
of the process of planning, monitoring and controlling the PD’s market risk profile.
e) The risk measurement system should be used in conjunction with internal trading and
exposure limits. Trading limits should be related to the PD’s risk measurement model in
a manner that is consistent over time and that it is well-understood by both traders and
senior management.

f) A routine and rigorous programme of stress testing should be in place as a supplement

to the risk analysis based on the day-to-day output of the PD’s risk measurement model.
The results of stress testing should be reviewed periodically by senior management and
reflected in the policies and limits set by management and the Board. Where stress
tests reveal particular vulnerability to a given set of circumstances, prompt steps should
be taken to manage those risks appropriately.

g) PDs should have a routine in place for ensuring compliance with a documented set of
internal policies, controls and procedures concerning the operation of the risk
measurement system. The risk measurement system must be well documented, for
example, through a manual that describes the basic principles of the risk management
system and that provides an explanation of the empirical techniques used to measure
market risk.

h) An independent review of the risk measurement system should be carried out regularly
in the PD’s own internal auditing process. This review should include the activities of the
trading desks as well as the risk control unit. A review of the overall risk management
process should take place at regular intervals (ideally not less than once a year) and
should specifically address, at a minimum:

• the adequacy of the documentation of the risk management system and process;
• the organization of the risk control unit ;
• the integration of market risk measures into daily risk management;
• the approval process for risk pricing models and valuation systems used by front and
back-office personnel;

• the validation of any significant change in the risk measurement process;

• the scope of market risks captured by the risk measurement model;
• the integrity of the management information system;
• the accuracy and completeness of position data;
• the verification of the consistency, timeliness and reliability of data sources used to
run internal models, including the independence of such data sources;
• the accuracy and appropriateness of volatility and other assumptions;
• the accuracy of valuation and risk transformation calculations;
• the verification of the model's accuracy through frequent back testing as described in
(b) above and in the Annex IX.
 i) The integrity and implementation of the risk management system in accordance with the
system policies/procedures laid down by the Board should be certified by the external
auditors as outlined at Para B.5.

j) A copy of the back testing result should be furnished to RBI.

B.2 Specification of market risk factors

An important part of a PD’s internal market risk measurement system is the specification of an
appropriate set of market risk factors, i.e. the market rates and prices that affect the value of the
PD’s trading positions. The risk factors contained in a market risk measurement system should
be sufficient to capture the risks inherent in the entire portfolio of the PD. The following
guidelines should be kept in view:
a) For interest rates, there must be a set of risk factors corresponding to interest rates in each
portfolio in which the PD has interest-rate-sensitive on-or-off-balance sheet positions. The
risk measurement system should model the yield curve using one of a number of generally
accepted approaches, for example, by estimating forward rates of zero coupon yields. The
yield curve should be divided into various maturity segments in order to capture variation in
the volatility of rates along the yield curve. For material exposures to interest rate
movements in the major instruments, PDs must model the yield curve using all material risk
factors, driven by the nature of the PD’s trading strategies. For instance, a PD with a
portfolio of various types of securities across many points of the yield curve and engaged in
complex trading strategies would require a greater number of risk factors to capture interest
rate risk accurately. The risk measurement system must incorporate separate risk factors to
capture spread risk (e.g. between bonds and swaps), i.e. risk arising from less than
perfectly correlated movements between Government and other fixed-income instruments.

b) For equity prices, at a minimum, there should be a risk factor that is designed to capture
market-wide movements in equity prices (e.g. a market index). Position in individual
securities or in sector indices could be expressed in "beta-equivalents" relative to this
market-wide index. More detailed approach would be to have risk factors corresponding
to various sectors of the equity market (for instance, industry sectors or cyclical, etc.), or
the most extensive approach, wherein, risk factors corresponding to the volatility of
individual equity issues are assessed. The method could be decided by the PDs
corresponding to their exposure to the equity market and concentrations.

B.3 Quantitative standards

a) PDs should update their data sets at least once every three months and should also
reassess them whenever market prices are subject to material changes. RBI may also
require PDs to calculate their VaR using a shorter observation period if, in its judgement,
this is justified by a significant upsurge in price volatility.
 b) The multiplication factor will be set by RBI on the basis of the assessment of the quality
of the PD’s risk management system, as also the back testing framework and results,
subject to an absolute minimum of 3. The document ‘Back testing’ mechanism to be
used in conjunction with the internal risk based model for market risk capital charge’,
enclosed as Annex IX, presents in detail the back testing mechanism.

PDs will have flexibility in devising the precise nature of their models, but the parameters
indicated at B.1, B.2 and B.3 above are the minimum which the PDs need to fulfill for
acceptance of the model for the purpose of calculating their capital charge. RBI will have the
discretion to apply stricter standards.

B.4 Stress testing

1. PDs that use the internal models approach for meeting market risk capital requirements
must have in place a rigorous and comprehensive stress testing program to identify events or
influences that could greatly impact them.

2. Stress scenarios of PDs need to cover a range of factors than can create extraordinary
losses or gains in trading portfolios, or make the control of risk in those portfolios very difficult.
These factors include low-probability events in all major types of risks, including the various
components of market, credit and operational risks.

3. Stress test of PDs should be both of a quantitative and qualitative nature, incorporating both
market risk and liquidity aspects of market disturbances. Quantitative criteria should identify
plausible stress scenarios to which PDs could be exposed. Qualitative criteria should
emphasize that two major goals of stress testing are to evaluate the capacity of the PD’s capital
to absorb potential large losses and to identify steps the PD can take to reduce its risk and
conserve capital. This assessment is integral to setting and evaluating the PD’s management
strategy and the results of stress testing should be regularly communicated to senior
management and, periodically, to the Board of the PD.

4. PDs should combine the standard stress scenarios with stress tests developed by PDs
themselves to reflect their specific risk characteristics. Specifically, RBI may ask PDs to provide
information on stress testing in three broad areas as discussed below.

(a) Scenarios requiring no simulations by a PD

PDs should have information on the largest losses experienced during the reporting period
available for RBI’s review. This loss information could be compared to the level of capital
that results from a PD’s internal measurement system. For example, it could provide RBI
with a picture of how many days of peak day losses would have been covered by a given
VaR estimate.
 (b) Scenarios requiring a simulation by a PD
PDs should subject their portfolios to a series of simulated stress scenarios and provide RBI
with the results. These scenarios could include testing the current portfolio against past
periods of significant disturbance, incorporating both the large price movements and the
sharp reduction in liquidity associated with these events. A second type of scenario would
evaluate the sensitivity of the PD’s market risk exposure to changes in the assumptions
about volatilities and correlations. Applying this test would require an evaluation of the
historical range of variation for volatilities and correlations and evaluation of the PD’s current
positions against the extreme values of the historical range. Due consideration should be
given to the sharp variation that at times has occurred in a matter of days in periods of
significant market disturbance.

(c) Scenarios developed by a PD to capture the specific characteristics of its portfolio

In addition to the scenarios prescribed by RBI under (a) and (b) above, a PD should also
develop its own stress tests which it identified as most adverse based on the characteristics
of its portfolio. PDs should provide RBI with a description of the methodology used to identify
and carry out stress testing under the scenarios, as well as with a description of the results
derived from these scenarios.

The results should be reviewed periodically by senior management and should be reflected in
the policies and limits set by management and the Board. Moreover, if the testing reveals
particular vulnerability to a given set of circumstances, the RBI would expect the PD to take
prompt steps to manage those risks appropriately (e.g. by reducing the size of its exposures).

B.5 External Validation

PDs should get the internal model validated by external auditors, including at a minimum, the
following:
(a) Verifying that the internal validation processes described in B.1(h) are operating in a
satisfactory manner.

(b) Ensuring that the formulae used in the calculation process as well as for the pricing of
complex instruments are validated by a qualified unit, which in all cases should be
independent from the trading desks.

(c) Checking that the structure of internal model is adequate with respect to the PD’s activities
and geographical coverage.

(d) Checking the results of the PD’s back testing of its internal measurement system (i.e.
comparing VaR estimates with actual profits and losses) to ensure that the model provides
 a reliable measure of potential losses over time. PDs should make the results as well as the
underlying inputs to their VaR calculations available to the external auditors.

(e) Making sure that data flows and processes associated with the risk measurement system
are transparent and accessible. In particular, it is necessary that auditors are in a position
to have easy access, wherever they judge it necessary and under appropriate procedures,
to the model’s specifications and parameters.
 Annex IX
BACK TESTING

“Back Testing” mechanism to be used in conjunction with the internal risk based model
for market risk capital charge

The following are the parameters of the back testing framework for incorporating into the
internal models approach to market risk capital requirements.

2. PDs that have adopted an internal model-based approach to market risk measurement
are required routinely to compare daily profits and losses with model-generated risk measures
to gauge the quality and accuracy of their risk measurement systems. This process is known as
"back testing". The objective is the comparison of actual trading results with model-generated
risk measures. If the comparison uncovers sufficient differences, there may be problems, either
with the model or with the assumptions of the back test.

3. Description of the back testing framework

3.1 The back testing program consists of a periodic comparison of the PD’s daily VaR
measures with the subsequent daily profit or loss (“trading outcome”). Comparing the risk
measures with the trading outcomes simply means that the PD counts the number of times that
the risk measures were larger than the trading outcome. The fraction actually covered can then
be compared with the intended level of coverage to gauge the performance of the PD’s risk
model.

3.2 Under the VaR framework, the risk measure is an estimate of the amount that could be
lost on a set of positions due to general market movements over a given holding period,
measured using a specified confidence level. The back tests are applied to compare whether
the observed percentage of outcomes covered by the risk measure is consistent with a 99%
level of confidence. That is, back tests attempt to determine if a PD’s 99th percentile risk
measures truly cover 99% of the firm’s trading outcomes.

3.3 Significant changes in portfolio composition relative to the initial positions are common at
end of trading day. For this reason, the back testing framework suggested involves the use of
risk measures calibrated to a one-day holding period. A more sophisticated approach would
involve a detailed attribution of income by source, including fees, spreads, market movements,
and intra-day trading results.

3.4 PDs should perform back tests based on the hypothetical changes in portfolio value that
would occur; presuming end-of-day positions remain unchanged.
3.5 Back testing using actual daily profits and losses is also a useful exercise since it can
uncover cases where the risk measures are not accurately capturing trading volatility in spite of
being calculated with integrity.

3.6 PDs should perform back tests using both hypothetical and actual trading outcomes.
The steps involve calculation of the number of times the trading outcomes are not covered by
the risk measures (“exceptions”). For example, over 200 trading days, a 99% daily risk
measure should cover, on average, 198 of the 200 trading outcomes, leaving two exceptions.

3.7 The back testing framework to be applied entails a formal testing and accounting of
exceptions on a quarterly basis using the most recent twelve months as on date. PDs may
however base the back test on as many observations as possible. Nevertheless, the most
recent 250 trading days' observations should be used for the purposes of back testing. The
usage of the number of exceptions as the primary reference point in the back testing process is
the simplicity and straightforwardness of this approach.

3.8 Normally, in view of the 99% confidence level adopted, 2.5 exceptions may be
acceptable in the observation period of 250 days. However, in Indian context, a level of 4
exceptions would be acceptable to consider the model as accurate. Exceptions above this,
would invite supervisory actions. Depending on the number of exceptions generated by the PD’s
back testing model, both actual as well as hypothetical, RBI may initiate a dialogue regarding
the PD’s model, enhance the multiplication factor, may impose an increase in the capital
requirement or disallow use of the model as indicated above depending on the number of
exceptions.

3.9 In case large number of exceptions is being noticed, it may be useful for the PDs to dis-
aggregate their activities into sub sectors in order to identify the large exceptions on their own.
The reasons could be of the following categories:

a) Basic integrity of the model

(i) The PD’s systems simply are not capturing the risk of the positions themselves
(e.g. the positions of an office are being reported incorrectly).

(ii) Model volatilities and/or correlations were calculated incorrectly (e.g. the
computer is dividing by 250 when it should be dividing by 225).

b) Model’s accuracy could be improved

The risk measurement model is not assessing the risk of some instruments with sufficient
precision (e.g. too few maturity buckets or an omitted spread).

Bad luck or markets moved in fashion unanticipated by the model

 (i) Random chance (a very low probability event).
(ii) Markets moved by more than the likely prediction of the model (i.e. volatility was
significantly higher than expected).
(iii) Markets did not move together as expected (i.e. correlations were significantly
different than what was assumed by the model).
d) Intra-day trading
There was a large (and money-losing) change in the PD’s position or some other income
event between the end of the first day (when the risk estimate was calculated) and the end
of the second day (when trading results were tabulated).
 Annex X

Format - PDR IV Return

Name of the Primary Dealer :

Quarterly return on select Financial & Balance Sheet indicators for quarter ended
(Rs. in crore)
I. BALANCE SHEET INDICATORS Quarter ended Previous
(cumulative) Quarter
SOURCES OF FUNDS
Share Capital
Reserves & Surplus
Deposits, if any
Secured loans
Unsecured loans
TOTAL
APPLICATION OF FUNDS
Fixed Assets
a) Tangible asset
Gross Block (a+b)
less Depreciation
Net block
b) In tangible asset
Add Capital work in progress
Investments
a. Govt. Securities
1. Dated GOI securities
2. State Govt. Securities
3. T-bills
b. Others (Specify)
Current Assets, Loans and Advances
(A) Current Assets
Accrued Interest
Stock-in-Trade:
i) T bills 91 days
ii) T bills 182 days
iii) T bills 364 days
iv) CMBs
v) Dated G-Sec
vi) IIBs
vii) CDs
viii) CPs
ix) Corporate bonds & Debentures
x) Equity shares
xi) Others

Sundry Debtors
Other Assets
Cash& Bank balance
(B) Loans & Advances
 Less:

Other Current Liabilities

Provisions

Net Current Assets

Deferred Tax

Miscellaneous Expenses not written off

Others (specify)

TOTAL

Quarter ended Previous

II. P& L INDICATORS (cumulative) Quarter
INCOME
Discount Income
1. G-sec
2. CPs
3. CDs
4.Others
Interest Income
1. G-sec(excluding IIBs)
2. IIBs
3. Call/Term
4. Repo
5.Corporate Bonds
6. Others
Trading Profits
1.G-sec (excluding IIBs)
2. IIBs
3.CPs,
4.CDs
5.Derivatives
6.Others
Other Income
1. G-sec
2. Others (specify)

TOTAL INCOME

EXPENDITURE
Interest Expenses
1. Call/Term
2. Repo
3. Borrowing from RBI
4.CBLO
5. Others
 Operating Expenses
Establishment & Administrative Expenses
Provisions against doubtful assets
Depreciation on Fixed Assets
Other expenses (specify)

TOTAL EXPENDITURE
MTM: Loss or
Gain
PROFIT BEFORE TAX
Less:
a. provision for taxation
b. deferred tax
PROFIT AFTER TAX

III. FINANCIAL INDICATORS

Certain Key Figures

Dividend paid/proposed
Retained earnings
Average Earning assets
Average Non-earning assets
*** Average total assets

1. Average dated G-sec (Central and State)

2. Average T-Bills
3. Other average assets
**** Average Interest bearing liabilities
1. Call borrowing
2. Repo
3. Borrowing from RBI
4. Others
Average yield on assets
(Total interest income/Average Earning
Assets)
Average cost of funds
(Total interest expended/Average interest
bearing liabilities)
Net interest income
Non-interest income
Non-interest expenditure
Net total income

Measures of Return
Return on Assets
Before tax (PBT/Ave.Total Assets)
After tax (PAT/Ave.Total Assets)
Return on average Equity
 Before tax (PBT/Ave.Equity)
After tax (PAT/Ave.Equity)
Return on Capital Employed
Before tax (PBT/(Owners' Equity+Total Debt))
After Tax (PAT/(Owners' Equity+Total Debt))
Net Margin Analysis
Net Margin (PAT/Total Income)
Interest expenses/Total income

Quarter ended Previous

IV. PERFORMANCE INDICATORS (cumulative) Quarter

NOF (Rs. in crore)

CRAR (as %)

Average duration of the Portfolio (in years)

Average leverage (as ratio)

Effect of 1% shock in yields on portfolio value

(Rs. in crore)

MTM value of all securities (Rs. in crore)

a. T bill 91 days
b. T bill 182 days
c. T bill 364 days
d. CMBs
e. Dated G- Sec
f. IIBs
g. CPs
h. CDs
i. Corporate bonds
***** j. Others
Notes:
1. The details of share capital, reserves, etc. may be enclosed as Annexes.
2. Where average figures are involved, it may be taken to mean as average of
month end balances.

*** Average assets refer to the simple average of month end book balance.
**** Average liabilities refer to the simple average of month end book balance.
***** Before adjusting Repo transactions and MTM depreciation on IRS transactions.

Signature
 Annex XI

Publication of Financial Results

Name of Primary Dealer

Audited Financial Results for the year ended March 31, ………

Sources of Funds
Capital
Reserves and Surplus
Loans
Secured
Unsecured
(of which call money borrowings)

Application of Funds
Fixed Assets
Investments
Government Securities (inclusive of T-Bills & CMBs)
Commercial Papers
Corporate Bonds
Loans and Advances
(of which call money lendings)
Non-Current Assets
Others

Profits and Loss account

Income (business segment wise)
Interest
Discount
Trading Profit
Expenses
Interest
Administrative Costs
Profit before tax
Net Profit

Regulatory Capital required (as per Master Direction for SPDs)

Actual Capital
Return on Net Worth

Notes on Accounts:
 Annex XII

Monthly Return on Interest Rate Risk of Rupee Derivatives

As at end-month
Name of the Bank/Institution: (Rs. In Cr)

1. Cash Bonds Market Value PV01

(a) (b) (c)
(a) HFT (See Note 1)
(b) AFS (See Note 1)
(c) HTM (See Note 1)
Total [(a) to (c) above]
Notional Amount PV01(Rs. in
2. Rupee Interest Rate Derivatives (Rs. in Crore) Crore)
(a) Bond Futures (See Note 1)
(b) MIBOR (OIS) (See Note 2)
(c) MIFOR (See Note 2)
(d) G-Sec benchmarks (See Note2)
(e) Other benchmarks (Please report
separately) (See Note 2&4)
(f) Forward Rate Agreements (See Note 3)
Total [(a) to (f) above]

3. Grand Total of (1) & (2)

4. Tier I Capital

Note 1. PV01 may be taken as POSITIVE for long positions and NEGATIVE for
short positions.
Note 2. PV01 may be taken as POSITIVE if receiving a swap and NEGATIVE if
paying a swap.
Note 3. For FRAs, use the PVO1 of the underlying deposit/instrument.
Note 4. In 2 (e) above, swaps on other benchmarks such as LIBOR may be
reported separately for each benchmark
 Annex XIII
List of circulars consolidated
No Circular no Date Subject
1 IDMC.PDRS.1532 November 2, 1999 Primary Dealers – Leverage
/03.64.00/1999-00
2 IDMC.PDRS.2049A December 31,1999 Guidelines on Securities transactions to
/03.64.00/1999-2000 be followed by Primary Dealers
3 IDMC.PDRS.5122 June 14, 2000 Guidelines on Securities Transactions by
/03.64.00/1999-00 Primary dealers
4 IDMC.PDRS.4135 April 19, 2001 Scheme for Bidding, Underwriting and
/03.64.00/2000-01 Liquidity support to Primary Dealers
5 IDMC.PDRS.87 July 5, 2001 Liquidity support to Primary Dealers
/03.64.00/2001-02
6 IDMC.PDRS.1382 September 18, 2001 Dematerialised holding of bonds and
/03.64.00/2000-01 debentures
7 IDMC.PDRS.3369 January 17, 2002 Guidelines on Counter party limits and
/03.64.00/2001-02 Inter-corporate deposits
8 IDMC.PDRS.4881 May 8, 2002 Guidelines to Primary Dealers
/03.64.00/2001-02
9 IDMC.PDRS.5018 May 17, 2002 Scheme for Bidding, Underwriting and
/03.64.00/2001-02 liquidity support to Primary dealers
10 IDMC.PDRS.5039 May 20, 2002 Transactions in Government securities
/03.64.00/2001-02
11 IDMC.PDRS.5323 June 10, 2002 Transactions in Government securities
/03.64.00/2001-02
12 IDMC.PDRS. 418 July 26, 2002 Publication of Financial results
/03.64.00/2002-03
13 IDMC.PDRS.1724 October 23, 2002 Underwriting of Government dated
/03.64.00/2002-03 securities by Primary Dealers
14 IDMC.PDRS.2269 November 28, 2002 Publication of Financial results
/03.64.00/2002-03
15 IDMC.PDRS.2896 January 14, 2003 Trading in Government securities on
/03.64.00/2002-03 Stock Exchanges
16 IDMC.PDRS.3432 February 21, 2003 Ready Forward Contracts
/03.64.00/2002-03
17 IDMC.PDRS.3820 March 24, 2003 Availment of FCNR(B) loans by Primary
/03.64.00/2002-03 Dealers
18 IDMC.PDRS.1 April 10, 2003 Portfolio Management Services by
/03.64.00/2002-03 Primary Dealers – Guidelines
19 IDMC.PDRS.4802 June 3, 2003 Guidelines on Exchange Traded Interest
/03.64.00/2002-03 Rate Derivatives
20 IDMC.PDRS.122 September 22, 2003 Rationalisation of returns submitted by
/03.64.00/2002-03 Primary Dealers
21 IDMD.PDRS.No.3 March 08, 2004 Prudential guidelines on investment in
/03.64.00/2003-04 non-Government securities
22 IDMD.PDRS.05 March 29, 2004 Transactions in Government Securities
/10.02.01/2003-04
23 IDMD.PDRS.06 June 03, 2004 Declaration of dividend by Primary
/03.64.00/2003-04 Dealers
24 IDMD.PDRS.01 July 23, 2004 Transactions in Government securities
/10.02.01/2004-05
25 IDMD.PDRS.02 July 23, 2004 Success Ratio in Treasury Bill auctions for
/03.64.00/2004-05 Primary Dealers
26 RBI/2004-05/136 – August 24, 2004 Dematerialization of Primary Dealer’s
IDMD.PDRS.No.03 investment in equity
 /10.02.16/2004-05
27 RBI/2005/459 May 11, 2005 Government Securities Transactions –
IDMD.PDRS.4783 T+1 settlement
/10.02.01/2004-05
28 RBI/2005/460 May 11, 2005 Ready Forward Contracts
IDMD.PDRS.4779
/10.02.01/2004-05
29 RBI/2005/474/IDMD.PD May 19, 2005 Conduct of Dated Government Securities
RS/4907/03.64.00/2004- Auction under Primary Market Operations
05 (PMO) module of PDO-NDS – Payment of
Underwriting Commission
30 RBI/2005-06/73 July 20, 2005 Transactions in Government Securities
IDMD.PDRS.337
/10.02.01/2005-06
31 RBI/2005-06/132 August 22, 2005 NDS-OM – Counterparty Confirmation
IDMD.No.766/10.26.65A
/2005-06
32 RBI/2005-06/308 February 27, 2006 Guidelines for banks’ undertaking PD
DBOD.FSD.BC.No.64/2 business
4.92.01/2005-06
33 RBI/2006-07/49 July 4, 2006 Diversification of activities by standalone
IDMD.PDRS/26/03.64.0 Primary Dealers-Operational Guidelines
0/2006-07
34 RBI/2006-2007/298 March 30, 2007 Liquidity Adjustment Facility – Acceptance
FMD.MOAG No.13 of State Development Loans under Repos
/01.01.01/2006-07
35 RBI/2007-08/104 July 31, 2007 FIMMDA Reporting Platform for Corporate
IDMD.530/03.64.00/200 Bond Transactions
7-08
36 DBOD.FSD.BC.No. August 9, 2006 Guidelines for banks undertaking PD
25/24.92.001 business
/2006-07
37 RBI/2006-07/140 October 5, 2006 Operational guidelines for banks
IDMD.PDRS.1431 undertaking/proposing to undertake PD
/03.64.00/2006-07 business
38 IDMD/11.08.15/809 August 23, 2007 Reporting platform for OTC Interest Rate
/2007-08 Derivatives
39 RBI/2007-2008/186 November 14, 2007 Revised Scheme of Underwriting
IDMD.PDRS.No.2382/03 Commitment and Liquidity Support
.64.00/2007-08
40 RBI/2008-09/187 September 19, 2008 Settlement of Primary Auctions –
IDMD.PDRD.1393 / Shortage of Funds
03.64.00/ 2008-09
41 RBI/2009-10/136 August 31, 2009 Investment Portfolio of Primary Dealers-
IDMD.PDRD.1050/ Relaxation in the existing norms
03.64.00/2009-10
42 RBI/2009-10/144 September 2, 2009 Enhancement of Minimum Net Owned
IDMD.PDRD.1097 Funds
/03.64.00/2009-10
43 RBI/2009-10/143 September 2, 2009 Increase in Call/Notice Money Borrowing
IDMD.PDRD.1096 Limit
/03.64.00/2009-10
44 RBI/2009-10/242 December 1, 2009 Waiver of trade confirmation in
IDMD.PDRD.2424 Government Securities transactions in
/03.64.00/2009-10 OTC market
45 RBI/2009-10/343 March 9, 2010 Extension of HTM Category for PDs
IDMD.PDRD.3843
/03.64.00/2009-10
46 RBI/2009-10/394 April 12, 2010 Quantum of Government securities to be
IDMD.PDRD.4537 held in the HTM category by PDs
/03.64.00/2009-10
47 RBI /2009-10 / 496 June 15, 2010 Primary Dealers – Imposition of Penalties
IDMD.PDRD.5533 – Disclosure
/03.64.00/2009-10
48 RBI/2009-10 / 497 June 17, 2010 Cash Management Bills – Bidding
IDMD.PDRD.5573 Commitment and Success Ratio
/03.64.00/2009-10
49 RBI / 2010 -11/142 July 27, 2010 Applicability of Non-Banking Financial
IDMD.PDRD.No.19 (Non-Deposit Accepting or Holding)
/03.64.00/2010-11 Companies Prudential Norms (Reserve
Bank) Directions, 2007 to Primary Dealers
50 RBI/2010-11/224 October 1, 2010 Raising resources through Inter
IDMD.PCD.No. 20 Corporate Deposits (ICDs)
/14.03.05/2010-11
51 RBI/2010-11/270 IDMD. November 11, 2010 Exposure Norms: Applicability of Non-
PCD.No.1652 Banking Financial (Non-Deposit Accepting
/14.03.05/2010-11 or Holding) Companies Prudential Norms
(Reserve Bank) Directions, 2007 to
standalone Primary Dealers
52 RBI/2010-11/401 IDMD. February 10, 2011 Investment in non-Government Securities-
PCD.No. 26 Non-Convertible Debentures (NCDs) of
/14.03.05/2010-11 maturity up to one year by standalone
Primary Dealers (PDs).
53 RBI/2010-11/438 March 18, 2011 FIMMDA accredited brokers for
IDMD.PDRD.No. transactions in OTC Interest Rate
3961/03.64.00/ Derivatives Market.
2010-11
54 RBI/2011-12/162 August 30, 2011 Authorisation Guidelines for Primary
Dealers (PDs)
IDMD.PCD. 9
/14.03.05/2011-12
55 RBI/2010-11/542 May 23, 2011 Guidelines on Credit Default Swaps
IDMD.PCD.No.
(CDS) for Corporate Bonds
5053/14.03.04/2010-11
56 RBI/2011-12/108 July 06, 2011 Transactions in Government Securities-
IDMD.PCD.06/14.03.07/
Extension of DVP III facility to Gilt Account
2011-12
holders
57 IDMD.PDRD.No. March 07, 2012 Bidding in Primary Auctions-Clarification
3464/06.64.00/2011-12

58 RBI/2011- August 23, 2011 Issuance of Non -Convertible Debentures

12/157/IDMD.PCD.08/14
(NCDs)-Minimum Rating of NCDs
.03.03/2011-12
59 RBI/2011- August 30, 2011 Authorisation Guidelines for Primary
12/162/IDMD.PCD.9/14.
Dealers (PDs)
03.05/2011-12
60 RBI/2011- December 28, 2011 Secondary market transactions in
12/324/IDMD.PCD.14/14
Government Securities-Short Selling
.03.07/2011-12
61 RBI/2011- December 30, 2011 Exchange-traded Interest Rate Futures
12/330/IDMD.PCD.17/14
.03.01/2011-12
62 IDMD.PCD.15/ED (RG)- December 30, 2011 Interest Rate Futures (Reserve Bank)
2011 (Amendment) Directions, 2011

63 RBI/2011- February 06, 2012 Transactions in Government Securities

12/387/IDMD.PCD.19/14
.03.07/2011-12
64 RBI/2011- June 21, 2012 Secondary market transactions in
12/615/IDMD.PCD.21/14 Government Securities-Short Selling
.03.07/2011-12
65 RBI/2012-13/133/ July 16, 2012 Sale of securities allotted in Primary
IDMD.PDRD.188 issues on the same day
/03.64.00/2012-13
66 RBI/2012-13/189/ September 3, 2012 Applicability of credit exposure norms for
IDMD.PCD.No.718/14.0 bonds guaranteed by the Government of
3.05/2012-13 India
67 RBI/2012-13/412/ February 06, 2013 Permission to standalone PDs for
IDMD.PCD.No.2310 membership in SEBI approved Stock
/14.03.05/2012-13 Exchanges for trading in corporate bonds
68 RBI/2012-13/494/ May 08, 2013 Submission of Undertaking: Renewal of
IDMD.PDRD.No. 3089/ Authorisation
03.64.027/ 2012-13
69 RBI/2012-13/549 June 26, 2013 Guidelines on Securities Transactions to
IDMD.PCD.13 be followed by Primary Dealers
/14.03.07/2012-13
70 RBI/2013-14/168 July 31, 2013 Revised PD returns for Primary Dealers
IDMD.PDRD.No. 346 /
10.02.23 / 2013-14
71 RBI/2013-14/243 September 10, 2013 Increase in HTTM limits for Standalone
IDMD.PDRD.No. 828/ PDs
03.64.00 / 2013-14
72 RBI/2013-14/541 March 27, 2014 Exposure norms for standalone PDs
IDMD.PCD. 12/14.03.05/
2013-14
73 RBI/2013-14/630 June 5, 2014 Annual Turnover Target on behalf of Mid-
IDMD.PDRD.No. segment and Retail investors for Primary
3404/03.64.000/2013-14 Dealers (PDs)
74 IDMD.PDRD.No.7/03.64 December 15, 2014 Decrease in Held to Maturity (HTM) limits
.00/2014-15 for Standalone PDs

70 IDMD Mailbox January 19, 2012 Maintenance of Distinct PD Book

71 IDMD Mailbox February 06, 2012 Secondary Market Transactions in
Government Securities-Short Selling
72 IDMD Mailbox February 28, 2012 Investment in Cash Management Bills by
Foreign Institutional Investors
 Annex XIV
List of circulars referred
Sr.
Circular no. Date Subject
No.
1 IDMC No.PDRS./2049A/03.64.00/99-2000 December 31, 1999 Guidelines on Securities Transactions
to be followed by Primary Dealers
2 RBI/2004/51DNBS February 10, 2004 Entry of NBFCs into Insurance
(PD)C.C.No.35/10.24/2003-04 Business
3 RBI/2005/461 May 11, 2005 Sale of securities allotted in Primary
IDMD.PDRS.4777/10.02.01/2004-05 issues
4 RBI/2005-06/309 February 28, 2006 Secondary Market Transactions in
IDMD.No.03/11.01.01(B)/2005-06 Government Securities - Intra-day
short-selling
5 RBI-2005-06/352 April 5, 2006 Prevention of Money Laundering Act,
DNBS(PD). CC 68 /03.10.042/2005-06 2002 - Obligations of NBFCs in terms
of Rules notified there under
6 RBI/2006-07/178 November 16, 2006 When Issued (WI)’ transactions in
IDMD.No.2130/11.01.01(D)/2006-07 Central Government Securities
7 RBI/2006-07/243 January 31, 2007 Secondary Market Transactions in
IDMD.No./11.01.01(B)/2006-07 Government Securities - Short-selling
8 RBI/2006-2007/333 April 20, 2007 Comprehensive Guidelines on
DBOD.No.BP.BC. 86/21.04.157/2006-07 Derivatives
9 RBI/2006-2007/385 May 8, 2007
Guidelines on Corporate Governance
DNBS.PD/CC 94/03.10.042/2006-07
10 RBI/2007-2008/104 July 31, 2007 FIMMDA Reporting Platform for
IDMD. 530 /03.64.00/ 2007-08 Corporate Bond Transactions
11 RBI /2007-2008/220 IDMD.DOD.No.3165 January 1, 2008 Secondary Market Transactions in
/11.01.01(B)/ 2007-08 Government Securities - Short-selling
12 RBI/2007-08/335 May 27, 2008 NDS – Order Matching (OM) System –
IDMD.DOD.No. 5893 /10.25.66/ 2007-08 Access through the CSGL Route
13 RBI/2008-09/479 May 22, 2009 Auction Process of Government of
IDMD.No.5877/08.02.33/2008-09 India Securities
14 RBI/2009-10/141 September 1, 2009 Guidelines on Exchange Traded
IDMD.PDRD.No. 1056/03.64.00/2009-10 Interest Rate Derivatives
15 RBI/2009-10/184 October 16, 2009 Settlement of OTC transactions in
IDMD No.1764 /11.08.38/2009-10 corporate bonds on DvP-I basis
16 RBI/2009-10/284 January 8, 2010 Ready Forward Contracts in Corporate
IDMD.DOD.No.05/11.08.38/2009-10 Debt Securities
17 RBI/2009-10/356 March 23, 2010 Guidelines for Accounting of Repo /
IDMD/4135/11.08.43/2009-10 Reverse Repo Transactions
18 RBI/2009-10/360 March 25, 2010 Guidelines on Stripping/Reconstitution
IDMD.DOD.no.7/11.01.09/2009-10 of Government Securities
19 RBI/2009-10/505 June 23, 2010 Issuance of Non-Convertible
IDMD.DOD.10/11.01.01(A)/2009-10 Debentures (NCDs)
20 RBI/2010-2011/115 July 14, 2010 Government Securities Act, 2006,
IDMD. DOD.17/11.01.01(B)/2010-11 Sections 27 & 30 - Imposition of
penalty for bouncing of SGL forms
21 RBI/2010-11/268 November 9, 2010 Ready Forward Contracts in Corporate
IDMD.PCD.22/11.08.38/2010-11 Debt Securities
22 RBI/2010-11/299 December 06, 2010 Issuance of Non-Convertible
IDMD.PCD.No. 24/14.03.03/2010-11 Debentures (NCDs)
23 RBI/2011-12/324 December 28, 2011 Secondary Market transactions in
IDMD.PCD.14/14.03.07/2011-12 Government Securities- Short selling
24 RBI/2010-11/542 IDMD.PCD.No. May 23, 2011 Guidelines on Credit Default Swaps
5053/14.03.04/2010-11 (CDS) for Corporate Bonds
25 RBI/2011- August 23, 2011 Issuance of Non -Convertible
12/157/IDMD.PCD.08/14.03.03/2011-12 Debentures (NCDs)-Minimum Rating of
NCDs
26 RBI/2011- August 30, 2011 Authorisation Guidelines for Primary
12/162/IDMD.PCD.9/14.03.05/2011-12 Dealers (PDs)
27 RBI/2011- December 28, 2011 Secondary market transactions in
12/324/IDMD.PCD.14/14.03.07/2011-12 Government Securities-Short Selling
28 RBI/2011- December 30, 2011 Exchange-traded Interest Rate Futures
12/330/IDMD.PCD.17/14.03.01/2011-12
29 IDMD.PDRD.No.3464/06.64.00/2011-12 March 07, 2012 Bidding in Primary Auctions-
Clarification
30 RBI/2011- June 21, 2012 Secondary market transactions in
12/615/IDMD.PCD.21/14.03.07/2011-12 Government Securities-Short Selling
31 RBI/2012-13/365/ January 7, 2013 Revised Guidelines on Ready Forward
Contracts in Corporate Debt Securities
IDMD.PCD.09/14.03.02/2012-13
32 RBI/2012-13/366/ January 7, 2013 Revised Guidelines on Credit Default
Swaps (CDS) for Corporate Bonds
IDMD.PCD.10/14.03.04/2012-13
33 RBI/2012-13/405/IDMD.PCD.No.2223/ January 30, 2013 Measures to enhance the role of
14.03.05 /2012-13 standalone Primary Dealers in
Corporate Bond Market
34 RBI/2012-13/550 IDMD.PCD.11 June 26, 2013 Settlement of OTC transactions in
/14.03.06/2012-13 Corporate Bonds on DvP-I basis
35 RBI/2013-14/400 FMD.MSRG.No. 94 December 4, 2013 Reporting platform for OTC foreign
/02.05.002/2013-14 exchange and Interest Rate Derivatives
36 RBI/2013-14/402 December 5, 2013 Exchange-Traded Interest Rate
IDMD.PCD. 08/14.03.01/2013-14 Futures
37 RBI/2013-14/410 December 19, 2013 Participation in Exchange Traded
IDMD.PCD.09 /14.03.01/2013-14 Interest Rate Futures
38 RBI/2013-14/500 February 24, 2014 FIMMDA’s Trade Reporting and
IDMD.PCD.10 /14.03.06/ 2013-14 Confirmation platform for OTC
transactions in Corporate Bonds and
Securitized Debt Instruments
39 IDMD.PCD.06/14.03.07/2014-15 September 30, 2014 Secondary market transactions in
Government Securities - Short Selling
40 FMRD.FMID.01/14.01.02/2014-15 December 19, 2014 F-TRAC – Counterparty Confirmation

41 FMRD.DIRD.02/14.03.007/2014-15 December 24, 2014 Secondary Market Transactions in

Government Securities – Short Selling
42 FMRD.DIRD.04/14.03.002/2014-15 February 03, 2015 Repo in Corporate Debt Securities
(Reserve Bank) Directions, 2015
43 FMRD.DIRD.5/14.03.002/2014-15 February 05, 2015 Re-repo in Government Securities
Market
44 FMRD.DIRD.06/14.03.007/2014-15 March 20, 2015 T+2 settlements for outright secondary
market transactions in Government
Securities undertaken by Foreign
Portfolio Investors and reported on
NDS-OM
45 DNBR.(PD).CC.No. 033/03.10.001/2014- April 30, 2015 Distribution of Mutual Fund products by
15 NBFCs
46 FMRD.DIRD.5/14.03.007/2015-16 October 29, 2015 Secondary Market Transactions in
Government Securities – Short Selling
47 FMRD.DIRD.06/14.03.07/2015-16 December 10, 2015 When Issued transactions in Central
Government Securities
48 FMRD.FMD.No. 02.03.183/7/2015-16 March 17, 2016 Participation of Standalone Primary
Dealers in Currency Futures Market
49 DNBR.CO.PD.No.080/03.10.01/ 2015-16 April 28, 2016 Risk Weight in respect of investments
in Corporate Bonds by Standalone
Primary Dealers (SPDs)
50 FMRD.FMID.8/14.01.02/2015-16 April 28, 2016 F-TRAC – Counterparty Confirmation

51 FMRD.DIRD.10/14.03.002/2015-16 May 19, 2016 Repo / Reverse Repo Transactions

with RBI