Reforms of Capital Market
The 1991-92 securities scam prompted the governments to increase the pace of reforms in the capital market. Several reform measures have been undertaken since then in both the primary and secondary segments of the equity market. Primary Capital Market
1) The Securities and Exchange Board of India was set up in early 1988 as a non-statutory body under an administrative arrangement. It was given statutory powers in January 1992 through the enactment of the SEBI Act, 1992 for regulating the securities market. The two objectives mandated in the SEBI Act are investor protection and orderly development of the capital market. 2) The Capital Issues (Control) Act, 1947 was repealed in May 1992, allowing issuers of securities to raise capital from the market without requiring the consent of nay authority either for floating an issue or pricing it. Restrictions on right and bonus issues were also removed. The interest rate on debentures was freed. However, the new issue of capital has now been brought under SEBI’s purview and issuers are required to meet the SEBI guidelines for disclosure and investor protection, which are being strengthened from time to time to protect investor interest. 3) The requirement to issue shares at a par value of Rs 10 and Rs 100 was withdrawn. This gave companies the freedom to determine a fixed value per share. This facility is available to companies which have dematerialized their shares. Moreover, the shares cannot be issued in the decimal of a rupee. The companies which have already issued shares at Rs 10 or Rs 100 per value also eligible for splitting and consolidating the share values. 4) To reduce the cost of issue, underwriting by issuer was made optional, subject to the condition that if an issue was not underwritten and in case it failed to secure 90 per cent of the amount offered to the public, the entire amount so collected would be refunded. 5) One of the significant steps towards integrating the Indian...
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