Reforms in Indian Capital Market
1.Establishment of development financial institutions:
For providing long-term funds to industry, Government of India established many financial institutions i.e., IFCI (1948), ICICI (1955), IDBI(1964), IRCI(1971), UTI(1964) etc. Moreover 14 major commercial banks were nationalised in 1969 and another6 banks were nationalised in 1980.
2. Legislative Measures :
The government passed the Companies Act in 1956. This Act gave considerable power to the government to centre and direct the corporate enterprise in India. Similarly the Capital Issue (Control) Act was passed in 1974 to regulate investment in different enterprise.
3. Reforms in Government Securities Market
- Establishment of Securities Trading Corporation of India (STCI) in 1994 to develop institutional structure for government security market.
- The delivery versus Payment System was introduced in 1995 for the settlement of transactions in government in government securities.
- The negotiated dealing system (NDS) was operationalised in Feb 2002 to enable online electronic bidding facility in state/central government security market.
4. Establishment of SEBI
SEBI (Security Exchange Board of India) was established on April 22, 1988 as a non-statutory body by the government of India to look after the issue of development of central market. But, due to increasing business activities of capital market and various scandals of 1992 in exchange market SEBI came into force as a statutory body on Jan 30th, 1992.
5. Registration of intermediaries
As per the provision of SEBI Act 1992, registration of intermediaries such as stock brokers and sub brokers and sub-broker started. The registration is on the basis of certain eligibility such as capital adequacy, infrastructure etc.
6. Credit Rating Agencies
Three credit rating agencies i.e., Credit Rating Information Service of India Limited (CRISIL)(1988), Investment Information and Credit Rating Agency of India Limited (ICRA) (1991) and Credit Analysis and Research Limited (CARL) were setup in order to assess the financial health of different financial institutions and agencies related to stock market activities.
7. Investors Protection
Under the purview of SEBI the central government of India has setup the Investors Education and Protection Fund (IEPE) in 2001. It works in educating and guiding investors and to protect the interest of the small investors from frauds and also malpractices in the capital market.