FDI likely to help regional bourses

MUMBAI: The government is likely to clear the decks for foreign direct investment in exchanges soon. The main beneficiaries of the move would be the regional stock exchanges that are witnessing dipping business.

Currently, of the two depositories, NSDL already has four foreign banks as shareholders, a fact which may well have influenced the thinking in favour of allowing foreign investment in capital market infrastructural agencies. Both the major stock exchanges also control clearing corporations besides the Clearing Corporation of India which has been promoted by major local banks and institutions.

The FDI policy has been in the works with the Reserve Bank of India having raised the issue with the government on foreign investment in this segment. The government’s FDI policy for the financial sector does not have any mention of stock exchanges, depositories and clearing corporations.

It does not figure in the 19 permissible investments in the financial sector. The policy, now being finalised by the finance ministry and to be announced by the department of industrial policy and promotion, will help address this issue, officials said. They also feel that the entry of a strategic investor in the form of a major global stock exchange could enhance the reputation and credibility of local bourses.

Capital markets regulator — the Securities and Exchange Board of India (Sebi) — had recommended FDI of up to 26% as outlined by a committee headed by Sebi member G Anantharaman. The strategic investors could be multilateral agencies, insurance firms, banks, a depository or clearing corporations, the committee had said in its report submitted a couple of months ago.

Along with the unveiling of the policy, the government is also looking at an appropriate governance model for stock exchanges, depositories and clearing corporations. The aim is to ensure greater discipline and to bring about more transparency in the operations of these institutions.

A policy for divestment in stock exchanges and FDI may be imperative also in the context of a litigation involving the Coimbatore Stock Exchange. The Madras High Court recently sought to know the exit policy for stock exchanges that wants to wind up, the road map for such closures and the legal and tax implications of such a move.