The Reserve Bank of India has decided to register only seven satellite dealers out of the fourteen entities selected earlier as satellite dealers for government securities. Besides this, four new entities two of which are banks have been appointed as satellite dealers by RBI yesterday.
The seven companies selected by RBI as registered satellite dealers include DSP Merrill Lynch Ltd, Ceat Financial Services Ltd, Kotak Mahindra Capital Company, Birla Global Finance Co Ltd, Dil Vikas Finance Ltd and Srei International Securities.
While the four new entities registered as satellite dealers include Tower Capital and Securities Pvt Ltd, Tata Finance Securities, Bank of America and Bank of Madura. The central bank has said that two banks will have to set up a separate unit dedicated to the securities business, particularly the government market.
Apart of the seven companies registered yesterday, RBI had earlier given an in principal approval to J M Financial, R R Financial, Peregrine Capital India, Foresight Financial Services, Mafatlal Finance, Birla Marlin Securities, Prudential Stocks and Securities, A K Capital Securities, Ashok Leylands Investor Services and Escorts Securities.
In a letter to the registered satellite dealers, RBI has said that their registration will remain valid for three years and is subjected to them fulfilling the terms and conditions set by RBI. The central bank has state that it will reserve rights to cancel the satellite dealership if the entity has not fulfilled any of the specified performance criteria. The central bank has asked the satellite dealers to generate outright turnover in central government securities including treasury bills of not less than Rs 30 crore in a year.
The satellite dealers will have to achieve an annual turnover including repos of not less than five times of average month end stocks in government securities subject to the turnover in respect to outright transactions being less than three times of average month end stocks.
They will also have to achieve a portfolio of not less than 20 per cent in government securities in relation to total assets before the end of the year of operations as satellite dealer, said RBI. They will not be allowed to lend or borrow in the call money market, however they can have access to liquidity support through reverse repos with the RBI in central government dated securities and auction treasury bills up to 50 per cent of the outstanding stocks in government securities at the end of the previous working days.
