49% FDI in bourses not to inculde commexes yet

The finance ministry's proposal to allow 49 per cent foreign direct investment in stock exchanges, inclusive of 24 per cent foreign institutional investment, will not automatically cover commodity exchanges.

Ministry officials said the proposal was at the moment limited to only stock exchanges.

"The commodity exchanges come under the administrative control of the Ministry of Consumer Affairs. Once the proposal for allowing FDI in stock exchanges is approved, we will table this model before them. Or they can formulate a separate policy," a finance ministry official said.

North Block has circulated its proposal to allow FDI in stock exchanges to the Securities and Exchange Board of India and the Reserve Bank of India for comment. Once the proposal is finalised, the ministry will seek Cabinet approval for the same.

After approval, the Department of Industrial Policy and Promotion will modify the FDI policy to create a new category, "FDI in stock exchanges", which will include not just the Bombay Stock Exchange but all regional stock exchanges.

Officials pointed out that while both stock and commodity exchanges appeared on the face to be similar in dealing with financial transactions, their operations were different.

"A stock exchange is essentially a spot market, while commodity is about futures. Also, some commodity exchanges are limited to certain commodities," the official said.

The government's present FDI policy for the financial sector does not mention stock exchanges, depositories and clearing corporations. They do not figure in the 19 permissible investments in the financial sector.

Of the two depositories in the country, National Securities Depository Ltd already has four foreign banks as shareholders.

It might be recalled that the Sebi and the RBI had recommended different caps on foreign direct investment in stock exchanges. Ministry officials said both had been asked to comment on the structure proposed by the ministry.