The Reserve Bank of India has announced its decision to amend accounting rules for standalone primary dealers, allowing some primary dealers (PDs) to maintain a "held-to-maturity" (HTM) category. The move will largely benefit dealers and help stimulate demand for government bonds.

Dealers are required to maintain their entire holdings in trading book according to current norms. The existing norms also ignore net appreciation, while providing base effect under net depreciation. The apex bank has also imposed a 'cap' on transferable securities, which would be the 100 per cent of the paid-up capital.

Pradeep Madhav, Managing Director of STCI Primary Dealer Ltd said: "In view of the fact that interest rates are going up, RBI may have considered giving the PDs some respite."

Dealers entitled to avail relaxed norms are required to purchase bonds from auction; while bonds raised from secondary markets will not be covered under new norms. Dealers will be allowed to transfer to and from HTM once in a quarter, under the scheme coming up in March 2008.

A head of primary dealership said: "With large volumes and auctions every Friday, there may not be enough time to churn the portfolio, and the appetite may be limited fearing risk. But it will now help increase my appetite."