It has appointed DSP Merrill Lynch, Kotak Mahindra Capital Company, Ceat Financial Services, Tata Finance Securities, JP Morgan Securities, ABN-Amro Bank and Deutche Bank.

Both ABN-Amro and Deutche Bank will have to set up subsidiaries, which will operate as seperate units dedicated predominantly to the securities business and in particular to the government securities market, the RBI said.

An RBI release said these entities will be operational as PDs as soon as the terms and conditions are settled between the Reserve Bank and the entities to whom the in-principle approval has been granted. The final approval will be given by the Reserve Bank.

Out of the seven entities which have received the in-principle approval, fouralready operate as satellite dealers (SDs) in the gilt market. Satellite dealers are the second rung of players after PDs in the gilt market.

At present, there are six primary dealers -- DFHI, STCI, Gilts Securities Trading Corporation, ICICI Securities, SBI Gilts and PNB Gilts. "It is expected that with the addition of seven more entities to the existing PDs, the PD system will further strengthen the infrastructure for the government securities market, deepen the secondary market, provide enhanced liquidity and increase the turnover in the government securities market.

On November 28 last year, the RBI granted approval to nine entities to operate as SDs. These include DSP Merril Lynch, Ceat Financial, Kotak Mahindra Capital, Birla Global, Hoare Govett, Dil Vikas, Srei International Tower Capital and Securities and Tata Finance.