The Reserve Bank of India (RBI) has paid around Rs 108 crore as commissions to the six primary dealers in the financial year 1996-97.
The easy market conditions that prevailed last year and the commissions have helped the primary dealers in raking in sizeable profits.
Contrary to initial apprehensions about the viability of the primary dealership system, the newer entrants into the business, SBI Gilts, Gilt Securities, I Sec and PNB Gilts, are expected to achieve handsome gains with these players fetching at least Rs 20 crore profit in the last fiscal.
At the same time it cannot be disputed that the commissions paid by the apex bank to the primary dealers has helped in bringing down the yields in the primary market, said market sources.
The reason is that the primary dealers used to build in a portion of the commission that they got into the bids. Thus, they could offer finer rates than the banks at the auctions. This helped the PDs to get a huge chunk of gilts at the auctions which they could off load later in the market at a premium.
It is understood that the RBI is planning to revamp the existing guidelines. At present the primary dealers can avail of the commissions on all their successful bids. Under the existing formula, the commission for every Rs 100 of successful bid was 12.5 paise on 91-day treasury bills and 50 paise on 364-day treasury bills.
