The Hindu Business Line : `Banks need not be primary dealers'

The current distinction between banks and primary dealers will hopefully disappear, as primary dealers (PDs) do not have large balance sheets to play a major role in the Government securities market, according to Dr R.H. Patil, Chairman, Clearing Corporation of India.

Speaking at the Fixed Income Money Market Derivatives Association of India and Primary Dealers Association of India (FIMMDA-PDIA) sixth annual conference, Dr Patil said, "We need pure and simple PDs and banks need not be PDs."

Dr Patil also said the fixed income and derivatives market can evolve only if there is transparency. He said that if the FIMMDA and PDIA wanted to be self-regulatory organisations, they should report their activities on a real-time basis. A problem faced by FIMMDA is that it is not driven by organisational heads, said Dr Patil. "That gap needs to be bridged. It can solve problems like funding," he said.

There is also a need for attitudinal change in the area of corporate debt, Dr Patil said. Just as banks are selling mutual funds, they should also sell corporate bonds of `AAA' rated companies, as there is a huge appetite for it.

Mr Jaspal Bindra, General Manager, South Asia, Standard Chartered Bank, said that the debt market in foreign countries is four to five times the size of the equity market. India is an exception. He said, "That is why developing a regulatory authority in the debt side is a challenge. Moving towards SRO is an indication of the maturity of financial markets."

Mr Aditya Puri, Managing Director, HDFC Bank, said that currently the fixed income market has developed without regulatory concerns. There was a need to build up opinions, he said.

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