Banking Rbi

RBI/2010-11/508 RPCD.CO.RCB.BC.No.65/ 07.38.01/2010-11 May 3, 2011

All State and Central Co-operative Banks

Dear Sir,

Interest Rates on Deposits

Please refer to our directive RPCD.No.DIR.BC.53/D.1-87/88 dated November 2, 1987, as amended from time to time, on the above subject.

2. It has been decided to increase the interest rate on domestic and ordinary Non-Resident savings deposits as well as savings deposits under Non-Resident (External) Accounts Scheme by 0.5 percentage point from 3.5 per cent to 4.0 per cent per annum with immediate effect.

3. All other instructions issued from time to time in this regard will remain unchanged.

4. An amending Directive RPCD.CO.RCB.BC.Dir.No.64/07.38.01/2010-11 dated May 3, 2011 is enclosed.

5. Please acknowledge receipt of this circular to the Regional Office concerned.

Yours faithfully,

(C.D.Srinivasan)

Chief General Manager

Encl: As above

RPCD.CO.RCB.BC.Dir.No.64/07.38.01/2010-11 May 3, 2011

Interest Rates on Deposits

In exercise of the powers conferred by Section 35 A of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) and in partial modification of Directive RPCD No.Dir.BC.53/D.1-87/88 dated November 2, 1987, as amended from time to time, on Interest Rates on Deposits, the Reserve Bank of India, being satisfied that it is necessary and expedient in the public interest so to do, hereby directs that, the rate of interest on domestic and ordinary Non-Resident savings deposits as well as savings deposits under Non-Resident (External) Accounts Scheme shall be 4.0 per cent per annum with immediate effect.

(V.K.Sharma) Executive Director

Proposed Guidelines on Authorisation of Primary Dealers (PDs) in India

Introduction

The system of PDs in the Government Securities (G-Sec) market was introduced in 1995 to strengthen the infrastructure in the G-Sec market, improve secondary market trading system, which would contribute to price discovery, enhance liquidity and turnover and encourage voluntary holding of G-Sec amongst a wider investor base and make PDs an effective conduit for conducting open market operations (OMO). The current guidelines to authorise PDs in the Indian G-Sec market were prescribed in the year 1995 when the PD system was introduced in India.

2. As on March 31, 2011, there were twenty PDs, of which twelve were banks carrying on Primary Dealership business departmentally (Bank-PDs) and the remaining eight were non-bank entities, known as standalone PDs, registered as NBFCs under section 45-IA of the RBI Act, 1934.

3. The share of PDs (both bank-PDs and standalone PDs) in primary auctions of T-Bills and Central Government dated securities has been significant since the year 2006 when RBI stopped participating in primary auctions. During the year 2009-10, the share of PDs in T-Bills and G-Sec stood at 61.49 per cent and 42.01 per cent respectively. Thus, PDs have provided depth and volume to the Indian G-Sec market by playing an active role in both primary and secondary segments of the G-Sec market.

Need for review of authorisation process

4. Increase in roles and responsibilities of standalone PDs: The Indian G-Sec market has evolved since the inception of the PD system. The roles and responsibilities of PDs have also changed over a period of time. Since July 2006, in addition to the core PD business, PDs have been allowed to undertake certain specific diversified activities such as trading in equity and equity derivatives; equity oriented mutual funds, underwriting public issues of equity etc. There have also been significant market developments such as introduction of ‘when issued' market, short sale of G-Sec, Interest Rate Futures, repo in corporate bonds etc., where PDs have been allowed to participate. Active participation of PDs in corporate bond market has also been envisaged. PDs are also expected to make extra efforts to widen the investor base in G-Sec market by attracting players such as provident funds, pension funds, cooperative banks, trusts, NGOs and other institutions and retail investors. Viewed in this context, there is a need to have experienced and well capitalized PDs in the Indian G-Sec market to promote competition and to complete the market borrowings of Government (both Central and state) in an orderly