The Reserve Bank of India (RBI) is set to meet with standalone primary dealers on Tuesday and banks with integrated primary dealership units on Thursday to discuss issues related to primary dealer operations, according to multiple treasury officials familiar with the development. These meetings are expected to be attended by senior RBI officials, including treasury heads from various institutions. Sources said that one of the main points of discussion will likely be the recent rise in government bond yields, which has drawn the central bank’s attention.
Primary Dealers (PDs) are financial institutions authorized by the Reserve Bank of India (RBI) to buy, sell, and underwrite government securities (G-Secs). They act as market makers in the government bond market — meaning they help ensure there is always someone to buy or sell these bonds, keeping the market liquid and efficient.
Possible Discussion on Digital Currency and Retail Bonds
According to dealers, the agenda may also include discussions on the Central Bank Digital Currency (CBDC) and the RBI Retail Direct Scheme, an initiative aimed at encouraging more retail participation in the government bond market. Currently, this market is largely dominated by institutional investors. These topics have been discussed in similar previous meetings, the officials added.
Concerns Over Rising Yields
“The RBI will definitely ask about why yields are going up,” said one treasury official. “The fact that the meeting has been called immediately after a bond auction cancellation doesn’t seem like a coincidence.” In bond market terms, a “cancellation” happens when the RBI rejects bids at a government bond auction, meaning the government decides not to raise funds that week.
Recently, the yield on the 10-year benchmark 6.33% 2035 government bond rose sharply to 6.60%, its highest level in a month, following weak demand from investors. At the ₹32,000 crore gilt auction on Friday, the RBI rejected all bids worth ₹11,000 crore for the 6.28% 2032 bond, as traders were seeking higher yields. The rejection led to some recovery later in the day, with the 2035 bond yield falling slightly to 6.53% by the close.
Who Will Attend the Meetings?
It is not yet clear whether the RBI has invited all primary dealers or just a select few. India currently has seven standalone primary dealers and 21 banks with integrated primary dealership operations. Primary dealers play a key role in the government securities (G-Sec) market — they act as market-makers, helping in the buying and selling of bonds to maintain liquidity. These entities are regulated by the RBI and are crucial to the smooth functioning of the debt market. “As of now, all we know is that the agenda mentions ‘primary dealer-related activities,’” another treasury official said. “We will only know the full details once the meeting begins.”
