SBI too may have a stake in the exchange.
The National Stock Exchange (NSE) is close to finalising a deal with State Bank of India (SBI) and IDBI Bank for setting up a platform for trading in securities of small and medium enterprises (SMEs).
It has already roped in Small Industries Development Bank of India (Sidbi) and Infrastructure Leasing and Financial Services (IL&FS) as partners for the venture.
While confirming the development, a senior NSE executive said that a deal with IDBI Bank has been finalized and talks were on with SBI.
The details of the structure were, however, yet to be thrashed out as some of the financial institutions were not keen on setting aside a large equity base, a senior executive at one of the banks said.
Market regulator Securities and Exchange Board of India (Sebi) has set a Rs 100-crore net worth criteria for those wanting to set up a separate SME exchange, a condition not difficult for NSE to meet as it had a strong balance sheet, an NSE executive said. In addition, the exchange also meets all other criteria set by the regulator.
These include having an online system with disaster recovery, surveillance mechanism, arbitration mechanism, proper risk management systems and a separate clearing house.
While trading in SME stocks would be done on the existing NSE platform, the plan is to leverage on the network of banks like SBI, IDBI and Sidbi, which are the top providers of loans to the industry segment. “Since all these banks already have a strong presence across the country and they are already well connected with small companies, both loans and listing for them will be easy and cheaper,” said a source close to the development.
On the other hand, the banks too would have an advantage as they would not have to create a separate trading platform, which would otherwise require separate branding and valuation.
While the Bombay Stock Exchange (BSE) has the first-mover advantage in launching a separate trading platform for SMEs known as IndoNext, it has not been able to capture the segment too aggressively for lack of effective marketing in smaller cities, where majority of the SMEs are located.
Three years ago, BSE had created IndoNext along with the Federation of Indian Stock Exchanges to enable SMEs to raise equity and debt, and facilitate trading in these instruments.
Other players such as MCX are also eyeing this space.
