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Ambani panel recommends sweeping changes in laws for capital market

The Prime Minister's Advisory Council on the Financial Sector and Capital Markets has recommended sweeping changes in the existing laws and suggested flexible labour policies to create millions of new jobs.

Mukesh Ambani, convenor of the group, in his detailed report also favoured the liberalisation in various sub-sectors of the financial sector.

Among its recommendations, the report has suggested bringing down the government ownership in banks, financial institutions and insurance companies and also to make prudential norms stringent and supervision tight.

Favouring to promote competition from private players, the report seeks to allow the financial sector intermediaries to function on commercial principles.

The report has recommended to sell real assets for disinvestment of PSUs even at prices lower than those prevailing in the market. The proceeds could be utilised to retire debt and reduce interest bills.

Calling for the need to develop debt and equity markets, the report recommends investments by pension funds and insurance companies in the equity markets. It also calls for abolishing the Board for Industrial and Financial Reconstruction and creation of a strong mutual fund industry to channel retail savings.

Recommending a strengthening of the legal system for recovery of dues from NPAs, the report also suggested more powers of financial intermediaries with respect to asset recovery.

It also called for liberalisation of investment norms, encouragement of active management of contractual funds and widening of investor base through broadbanding of pension/provident fund and insurance industries.

The report favoured the hedging opportunities to facilitate market making by primary dealers and short selling/borrowing of securities by secondary dealers. It also called for an efficient trading and settlement process by setting up a depository for fixed income securities.

Rationalising tax and regulatory norms across players/instruments, establishment of nationwide access to trading infrastructure at affordable costs and encouragement of foreign institutional investors in debt market, were other major recommendations for the capital market. The report also suggested changes in disclosure and reporting norms for all traders.

With regard to the equity market, it strongly recommended amendment of the Securities and Contract Regulation Act to allow for derivatives trading. The report also recommended changes in taxation structure and sought to encourage retail investment in the markets through mutual funds.

On the issue of pension/provident funds, the report recommended conversion of the government pension system to fully funded accounts.

UNI

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