Primary Dealer
An institution authorised by the Reserve Bank to underwrite and make markets in government securities.
How it is identified
Test: the entity holds a Reserve Bank authorisation, bids in primary auctions and quotes two-way prices in the secondary market
Unit
qualitative
In depth
Primary dealers commit to bidding in every government securities auction and to underwriting unsubscribed portions, which is what guarantees the government can borrow on schedule. They also provide continuous two-way quotes in the secondary market, which is the source of most of its liquidity. Their obligations are the reason the government securities market functions far better than the corporate bond market, which has no equivalent. For a retail investor they are invisible infrastructure, but they are why a G-sec can be bought and sold at a reasonable spread on any day.
Worked example
An auction of ₹30,000 crore of government securities receives ₹27,000 crore of bids from the market. Primary dealers underwrite and absorb the ₹3,000 crore shortfall, so the borrowing programme proceeds on schedule.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Primary Dealer” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.