Stiff delisting norms in the offing: FM

Finance Minister P Chidambaram today said the government would tighten the delisting norms for companies.

Speaking during a debate on the Securities Law (Amendment) and Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bills, which were passed by the Lok Sabha, he said there was scope for further reforms in the market and the government would periodically review the functioning of the stock exchanges.

On the recent rise in the Sensex, Chidambaram said: "Foreign institutional investors are the driving force in the market. I would like retail investors to be the driving force."

He said retail investors were coming back to the market and delivery-based transactions had increased but added that "the stock market is just one of the indicators of the health of the economy".

Chidambaram said a number of stock exchanges were set up under incorrect models and the National Stock Exchange was based on the correct one.

He said the corporatisation of stock exchanges should be expedited. The finance minister said the Securities Laws (Amendment) Bill was modified from what the NDA government had placed before the 13th Lok Sabha to include mutual fund in the category of securities. 

Stating that the Bill was aimed at making the management of stock exchanges more transparent, Chidambaram said it would also strengthen the stock exchanges and make transactions open to public scrutiny.

Replying to a question on the enforcement of the Security Interest and Recovery of Debts Laws (Amendment) Bill, he said the legislation would enable lenders to take over the business of borrowers in case of a default.

Comparing the non-food credit offtake in April-December 2004 with that of previous year, he said it showed that the economy was growing and banking like just another business would also show some default. "As credit expands, there may be some defaults," he said.

The minister said the Bill was necessary since without it the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 would have become ineffective.