4 Capital Market Reforms

8/8/2019 4 Capital Market Reforms

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CAPITAL MARKET.

Capital market is a market for long termfunds.

It can be defined as the institutional

arrangements or facilitating the borrowingand lending of medium term and long termfunds.

In the capital market the supply of funds

largely from individual savings, corporatesavings, banks, insurance companies,specialized financing agencies, andGovernment.



CAPITAL MARKET REFORMS

A. Primary Capital Market.

1. The SEBI is empowered to regulate the

securities market for investors protectionand an orderly development of capitalmarket.

2. Issuers of securities are required to meet theSEBI guidelines for disclosure and investors

protection.



3.Allowing the issuers of securities to raise

capital from the market either by floating or

pricing of issues.

4.Primary capital market has been widened

with public sector banks, financial institutionsand public sector enterprises for raising

resources from the market by way of Debt

and equity.



B Secondary Market Reforms.

1. The online screen based electronic trading

system has been introduced.

2. All stock exchanges have establishedclearing houses.

3. Dematerialisation of securities through

depository system and transfer throughelectronic book entry is being pursued to

strengthen investors protection.



4. Listed Companies are required to furnishunaudited financial results to the stockexchanges.

5. Foreign institutional investors are permittedto operate mutual funds , pension funds,

country funds in money market. They havealso permitted to invest in debt market anddated Govt. securities and treasury bills.

6. Indian companies are permitted to raise

capital from the international capital throughissues of Global Depository receipts, ADR,Foreign Currency Convertiable Bonds, andexternal commercial borrowings.



7. Brokers, sub brokers and various financial

intermediaries have been brought under the

control of the SEBI. The SEBI is authorized toundertaking inspection of the stock

exchanges.

8. Companies have been permitted to buy back

their own shares for capital restructuring not

exceeding 25 percent of the paid up capitaland free reserves.

9. Insider trading prohibited by the SEBI Act,1992and make it as punishable criminal

offence.



MONEY MRKT Vs CAPITAL MRKT.

MONEY MARKET CAPITAL MARKET

1.It is a market for short-term

loanable funds for a periodof not exceeding one year.

2. This market supplies fundsfor financing currentbusiness operations ,

working capitalrequirements of industriesand short periodrequirements of the Govt.

It is a market for long-term

funds exceeding a periodof one year.

2. This market supplies fundsfor financing the fixedcapital requirements of

trade and commerce aswell as the long termrequirements of the Govt.



Money Market Capital Market

3. The instruments that are

dealt in a money market areBills of Exchange, treasury

bills, commercial papers,certificate of deposit etc.

4. Each single money market

instrument is of largeamount. A TB is of minimum

for one lakh. Each CD or CPis for a minimum of Rs.25

lakhs.

3. This market deals in

instruments like shares,debentures, Govt. Bondsetc.

4. Each single capital marketinstrument is of small

amount. Each share valueis Rs.10. Each debenturevalue is Rs. 100.




5. The central bank and

Commercial banks are themajor institutions in themoney market.

6. Money marketinstruments generally do

not have secondarymarkets.

5. Development banks and

Insurance companies playa dominant role in thecapital market.

6. Capital marketinstruments generally

have secondary markets.




7. Transactions mostly take

place over-the- phone andthere is no formal place.

8. Transactions have to beconducted without thehelp of brokers.

7. Transactions take place at

a formal place i.e. stockexchange.

8. Transactions have to beconducted only throughauthorized dealers.



THANK YOU

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4 Capital Market Reforms