Primary Market Reforms In India

Abolition of Controller of Capital Issues: The Capital Issues (Control) Act, 1947 governed capital issues in India. The capital issues control was administered by the Controller of Capital Issues (CCI).

    • The Narasimham Committee (1991) had recommended the abolition of CCI and wanted SEBI to protect investors and take over the regulatory function of CCI.
    • As a result, the government replaced the Capital Issues (Control) Act and abolished the post of CCI.
    • Companies are allowed to approach the capital market without prior government permission subject to getting their offer documents cleared by SEBI.

Securities and Exchange Board of India (SEBI)

    • SEBI was set up as a non-statutory body in 1988 and was made a statutory body in January 1992.
    • SEBI has introduced various guidelines for capital issues in the primary market. They are explained below
      • Companies are required to disclose all material facts and specific risk factors associated with their projects
      • SEBI has also introduced a code of advertisement for public issues for ensuring fair and truthful disclosures
      • SEBI has allowed the companies to determine the par value of shares issued by them.
      • SEBI has allowed issues of IPOs through “book building” process

FIIs Permitted to Operate in the Indian Market

    • Foreign institutional investors such as mutual funds and pension funds are allowed to invest in equity shares as well as in debt market, including dated government securities and treasury bills

Accessing Global Funds Market:

    • Indian companies are allowed to access global finance market and benefit from the lower cost of funds. They have been permitted to raise resources through issue of American Depository Receipts (ADRs), Global Depository Receipts (GDRs), Foreign Currency Convertible Bonds (FCCBs) and External Commercial Borrowings (ECBs).
    • Also, Indian companies can list their securities on foreign stock exchanges through ADR/GDR issues

Intermediaries under the Purview of SEBI

    • Merchant bankers, and other intermediaries such as mutual funds including UTI, portfolio managers, registrars to an issue, share transfer agents, underwriters, debenture trustees, bankers to an issue, custodian of securities, and venture capital funds – have been brought under the purview of SEBI

Credit Rating Agencies

    • Various credit rating agencies such as Credit Rating Information Services of India Ltd. (CRISIL – 1988), Investment Information and Credit Rating Agency of India Ltd. (ICRA – 1991), Cost Analysis and Research Ltd. (CARE – 1993) and so on were set up to meet the emerging needs of capital market.