The Reserve Bank of India (RBI) has allowed standalone primary dealers (SPDs) to borrow in foreign currency from their parent companies and entities it has authorised.
- They may access overdraft facilities in nostro accounts solely for operational use. Nostro is a bank account held in another country by a domestic bank, but in the currency of the foreign country.
- A standalone primary dealer dealing in euros would open an account with a bank in the European Union for transaction settlements.
- As of March 31, 2023, there were seven SPDs, registered as non-banking financial companies (NBFCs) with the RBI.
- The RBI has also included SPDs within the scope of norms for risk management and inter-bank dealings, enabling them to engage in foreign exchange products.
- SPDs were in 2018 authorised to offer forex products to clients, including foreign portfolio investors.
- SPDs have been classified as Authorised Dealer Category-III. Their work in forex products will constitute part of their non-core activities.
- SPDs are key intermediaries in the Indian Government securities (G-Sec) market.
- In 1995, RBI had introduced the system of primary dealers (PDs) to strengthen the infrastructure in G-Sec market to make it vibrant, liquid and broad based; ensure development of underwriting and market making capabilities for G-Sec outside the RBI and improve secondary market trading system.
