No unregulated hedge funds in mkts: Govt

The government has said unregulated hedge funds will not be allowed to operate in the country in the wake of securities scams, which played havoc on the bourses in 2000 and 2001.

U K Sinha, joint secretary in charge of capital markets, said: "It will be difficult to let unregulated hedge funds to invest here, particularly after the JPC had pointed fingers at the overlap lacunae in the regulatory coordination."

"If the hedge funds are regulated in their home countries, we are prepared to accept them. In fact, they are participating in the Indian markets under FIIs," he said, and added that "unregulated hedge funds are a problem."

To a query as to why the government had so far refrained from floating sovereign bonds, he said the rates for those papers would become the benchmark for corporate bonds.

The high fiscal deficit makes the government a less credit-worthy borrower than corporates who raise funds at lower rates. "Sovereign bonds will be detrimental to corporate sector as the rates for them will be on the higher side whereas they are now able to raise funds at much competitive rates," he said.