As chairman and managing director of National Securities Depository Ltd, you were not heard before Sebi passed a very critical order against you last year.
I would not comment on that case. The general principle that ex-parte orders should be an exception and not the rule is a good principle. Without going into specific cases, I would say that as a rule the regulator should not have any reason not to hear the involved parties. You can come to a fair conclusion only after you have heard both sides.
What needs to be done to make Sebi orders foolproof?
Appropriate training and good quality orders.
Any plan to change the norms for foreign institutional investors (FIIs) and investment through participatory notes? Lot of investors are leaving Indian market and rushing to Singapore…
The October (2007) decision of Sebi was a conscious attempt to tell the FII world what categories of investors are permitted to operate in our market and we prefer these categories to come and register here and we have had tremendous response. The foreign investors are registering with us as FIIs as well as sub-accounts. I am told more than 400 new registrations have happened since October.
Flows going up and ebbing is a phenomenon we will have to live with as the market conditions will change. There will always be a two-way traffic. In fact, the maturity of the market gets tested at such times.
As regards institutions going to Singapore, it is a larger issue. It is a question of whether we want to allow additional categories to come into the market. It depends on how far we want to go down on the capital account convertibility route.
Your plan for trading of corporate bonds?
There have been a lot of efforts in the past for the creation of a corporate bond market and there have been differing views. Some people maintain that this market will remain OTC (over the counter) while others feel that these bonds should be exchange-traded. We want to review the situation and find why our earlier attempts failed.
There is no point in making yet another attempt without understanding the issues. We will complete our review in the next two-three months.
There is another area which has also been engaging our attention for some time—creation of a market for smaller companies. We had OTCEI and Inter-Connected Stock Exchange. We also had Indonext platform on Bombay Stock Exchange for small firms. Unfortunately, none of these worked.
We are reviewing that area as well. Small firms are caught in a jam. They cannot access the market and, because they cannot access the market, private equity investors and venture capital firms do not want to invest in them as they do not see an exit route. There is an urgent need to create this market. We need to figure out what should be done. If we need to relax rules or change laws, we will attempt that.
You rejected the recommendation of the GRIP (Group on Review of Issue Processes) panel to digitize at one go the processing of IPO applications.