Pherwani to head group for policy on new stock exchanges

The government has constituted a study group led by M.J. Pherwani, Chairman of the Stock Holding Corporation of India, to bring order to the proliferation of stock exchanges. The group will examine the need for establishment of new stock exchanges, keeping in view the requirements of balanced development of the securities in the industry and prescribe criteria for approval of new stock exchanges. With the number of recognized exchanges jumping from five in 1957 to nineteen currently, the group is tasked with establishing strict criteria for approving new bourses. The committee is expected to submit its roadmap by March 31, 1991.

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Development finance institutions have played a constructive role in establishing India's industrial base. However, these institutions seem to have moved away from their developmental role and are getting entangled deeper in management and control of private sector industries. Corporate circles have been pleading for a re-examination of the role and appointment of nominee directors to avoid day-to-day interference in company operations. Furthermore, some argue that financial institutions should keep their funds rolling by disposing of shares with a ready market. The concept of growth or mutual funds has yet to take root in the country, but such funds could prove successful in mobilising and canalising community savings for industrial development.

The Securities and Exchange Board of India (SEBI) has framed rules to register and regulate stock dealers, share shoppes, and unauthorised stock exchanges under Section 12 of the SEBI Act. These rules are proposed with a view to redressing the grievances of investors in semi-urban and rural areas who have been experiencing difficulties in getting services for disposal of securities or consolidating odd lots. The regulations impose a statutory duty on stock dealers to deal only on a spot delivery basis and issue receipts in a specified form. Additionally, every applicant eligible for grant of a certificate must pay an initial fee of Rs 50,000 to keep the certificate in force. Stock dealers will have to submit information relating to their activities as and when required by SEBI.

The government has amended the Securities Contracts (Regulation) Rules, 1957, to allow a company to become a member of a stock exchange if it satisfies certain conditions. The conditions are that the company is formed in compliance with the provisions of section 322 of the Companies Act, that a majority of the directors are shareholders of the company and members of the stock exchange, and that the directors have "unlimited liability" in the company. Under the amended rules, notified in the Gazette of India Extraordinary, the stock exchanges would admit these members on the recommendations of several financial institutions, including the Industrial Finance Corporation and the Industrial Development Bank of India