Satellite Dealers System Likely To Be In Place By April

The institution of the system of satellite dealers is expected to be kicked off by the end of this financial year. According to informed sources, the Reserve Bank of India (RBI) is keen on getting the satellite dealers operational by April 1, 1997.

This is also the feedback that some of the primary dealers have got from the central bank. If the RBI wants the satellite dealers to be operational by the end of the financial year it should announce the list of the successful applicants by the end of this month.

The RBI had announced the guidelines for empanelment of satellite dealers in December last year. The last date for filing of applications was January 31. It has been envisaged that the satellite dealers will complement the working of primary dealers.

 

While the primary dealers have been successful in their market making operations by offering two-way quotes, they do not have the necessary infrastructure to retail these securities.

To overcome this problem some of them are planning to use the bank branch network. For instance SBI Gilts plans to use select branches of its promoter the State Bank of India (SBI). SBI Gilts has identified some branches of SBI in the mtero cities.

There are however some differences in the guidelines governing the satellite and primary dealers. As per the guidelines, unlike the primary dealers, satellite dealers are not required to make any firm commitments at the auctions. At the same time, they will not be required to take part of deveolvement as and when it happens.

Many of the non-bank finance companies like Kotak Mahindra, Ceat Finance have expressed interest in becoming satellite dealers. Among the prospective applicants, Ceat Finance has already started acquainting itself with the market by offering two-way quotes in some securities for limited amounts. It might be recalled that the non bank finance companies had applied for empanelment as primary dealers but the RBI accepetd the proposals of only the banks and ICICI Securities and Fincnae Company, an ICICI subsidiary.

It is now expected that the NBFCs with their distribution network will help in the broadbasing of the gilts market. The Reserve Bank is expected to keep this in mind and the geographical reach of the applicants will be taken into account when the applications are screened.