BoB Primary Dealership Operation Kicks Off

Bank of Baroda today kicked off operations of its 100 per cent primary dealership (PD) subsidiary, BoB Capital Markets Ltd. The company, which has been set up with a paid-up capital of Rs 60 crore, is eyeing a turnover of Rs 12,500 crore in the first year of its operations and a net profit of around Rs 20 crore.

BoB Capital Markets, in its original avatar, was set up in 1996 as a merchant banking subsidiary of the bank with a paid-up capital of Rs 10 crore. It received "in-principle" approval of the Reserve Bank of India (RBI) to start the PD operations in July 2001.

"The bank has infused Rs 50 crore (the minimum capitalisation level to start PD operations) into BoB Capital Markets thereby taking its paid-up capital to Rs 60 crore," C H Palan, managing director, BoB Capital Markets, said.

The PD will be looking for business from the parent bank, co-operative banks (in and around Mumbai, Ahmedabad and Baroda where the bank has a strong presence), public sector units, and by retailing government securities through the network of BoB's branches.

Palan said BoB Capital, the 18th primary dealership to be authorised by the RBI to operate in the government securities market, will continue with its merchant banking operations and the PD operations under the same roof.

The PD outfit's paid-up capital is expected to go up to around Rs 150 crore in the next two years in order to be able sustain higher levels of operations, he added.

The PD system was introduced by the Reserve Bank of India to not only strengthen the infrastructure in the government securities market in order to make it vibrant, liquid, broad-based but also to ensure the development of underwriting and market making capabilities for the government securities outside the RBI so that the latter could gradually shed these functions.