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Unit 2: Financial Market Reforms

6. Permission to Indian companies to raise resources abroad through the issue of Global Notes
Depository Receipts (GDR) and Foreign Currency Convertible Bonds (FCCBs);
7. Disinvestments by the Government of India of its holdings in public sector undertakings;
8. Replacement of FERA by FEMA;

9. Opening up of the market for portfolio investments by FIIs and encouraging foreign
private participation in financial services including stock broking;
10. Permitting entry of new institutions like merchant banks, leasing and hire purchase
companies, and venture capital funds/companies;
11. Permitting commercial banks to raise equity share capital from the market;
12. Permitting public sector financial institutions to participate/underwrite debenture issues
of MRTP/FERA companies up to 5% of each issue of debentures;
13. Permitting introduction of innovative financial instruments such as warrants, cumulative
convertible preference shares, non-voting shares, sweet equity shares, and a host of hybrid
bonds/debentures.
14. Permitting companies to issue Non-Convertible Debentures (NCDs') along with warrants
to qualified institutional buyers.
15. Making it mandatory on the part of promoters to disclose the details of shares held by
them in listed entities promoted by them.
16. According approval to the concept of "anchor investor" in public issues, whereby a person
other than a promoter can be allocated as much as 30 percent of the portion reserved for
qualified institutional buyers (usually 60 percent) in an issue through a bidding process.
The minimum size of application for anchor investors would be ` 10 crore and their
margin payable on application is 25 percent and the balance 75 percent to be paid within
2 days of the date of closure of the public issue.
17. Simplifying regulatory framework for issuance and listing of non-convertible debt
securities by an issuer company, public sector undertaking or statutory corporation.

Self Assessment

Fill in the blanks:
1. Govt. of India approved a new instrument, called ……………............, in 1989.
2. GDR stands for ……………............
3. FCCB stands forv
4. NCD is the abbreviation for ……………............

2.3 Developments in New Issue Market

Cumulative effect of the above, coupled with the surging economic growth and concomitant
rise in household savings (about 30 percent) and increasing appetite of individual and institutional
investors for investment brought about cataclysmic change in landscape of the new issue market
and its related activities, heralding the emergence of matured and resilient market in the country,
as is evident from the quantitative and qualitative dimensions of the new issue activity.

2.3.1 Quantitative Dimension

 Table 2.3 shows that new issue market on the whole exhibited spectacular performance in
terms of garnering of resources through new issue floatation's.

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