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'Allow banks to operate in badla market'

Commercial banks, financial institutions and mutual funds should be allowed to operate in the badla or carry forward trading finance market.

Making this plea in a pre-Budget memorandum to Finance Minister Yashwant Sinha, the Federation of Indian Stock Exchanges has made several suggestions. The FISE is promoted by 18 stock exchanges in the country.

Among the other suggestions are making companies offer shares to the public with a premium exceeding the quantum permissible under the erstwhile Capital Issues (control) Act and confining book-building exercise to not more than 25 per cent of the issue, with the remaining shares offered to the public at 15 to 20 per cent below the book-building price.

A statement, issued by the FISE, said that the percentage of public offer for entitlement for listing be raised from 25 per cent to at least 40 per cent.

''At least 50 per cent of the offerings must be made in the domestic market before a company is permitted to access the global depository receipts market,'' the FISE said.

As for depositories, the statement said that the operations should be subsidised for a minimum period of three years to popularise the concept.

It has also suggested the appointment of market-makers by companies whose shares are illiquid in the stock markets.

''Market-makers should be given the facility of shares and finance at a concession. Failure to appoint market-makers should result in delisting of shares with proper exit facilities to the shareholders,'' the statement said.

The FISE has also demanded a grant of Rs 200 million for the Inter-connected Stock Exchange of India. The FISE said that the promoters of ISE are regional exchanges, which are not self-sufficient financially.

The statement said that 5 per cent of annual accretions to provident fund, gratuity and pension funds be permitted to be invested in equities. These funds should also be allowed to invest a higher percentage of annual accretions in debt instruments and bonds issued by the financial institutions and infrastructure companies.

The FISE has urged the government to ask General Insurance Corporation to draft a suitable insurance policy to cover all the risks related to the securities business so that its subsidiaries can adopt them.

''Fiscal incentives like renewal of the erstwhile Section 80 CC, exemption of dividend income of mutual funds from income tax, restoration of free limit of Rs 15,000 for capital gains and taxing Indian investors at the same rate as the foreign institutional investors for long-term capital gains need to be granted,'' the FISE demanded.

UNI