Reforms of Capital Marketby Sree Rama Rao on July 1, 2009The 1991-92 securities scam prompted the governments to increase the pace of reforms in the capital maret! Several reform measures have been undertaen since then in both the primary and secondary segments of the e"uity maret! #rimary $apital %aret1& The Securities and '(change )oard of *ndia +as set up in early 19,, as a non-statutory body under an administrative arrangement! *t +as given statutory po+ers in January 1992 through the enactment of the S')* -ct, 1992 for regulating the securities maret! The t+o ob.ectives mandated in the S')* -ct are investor protection and orderly development of the capital maret!2& The $apital *ssues /$ontrol& -ct, 1901 +as repealed in %ay 1992, allo+ing issuers of securities to raise capital from the maret +ithout re"uiring the consent of nay authority either for floating an issue or pricing it! Restrictions on right and bonus issues +ere also removed! The interest rate on debentures +as freed! 2o+ever, the ne+ issue of capital has no+ been brought under S')*3s purvie+ and issuers are re"uired to meet the S')* guidelines for disclosure and investor protection, +hich are being strengthened from time to time to protect investor interest!4& The re"uirement to issue shares at a par value of Rs 10 and Rs 100 +as +ithdra+n! This gave companies the freedom to determine a fi(ed value per share! This facility is available to companies +hich have demateriali5ed their shares! %oreover, the shares cannot be issued in the decimal of a rupee! The companies +hich have already issued shares at Rs 10 or Rs 100 per value also eligible for splitting and consolidating the share values!0& To reduce the cost of issue, under+riting by issuer +as made optional, sub.ect to the conditionthat if an issue +as not under+ritten and in case it failed to secure 90 per cent of the amount offered to the public, the entire amount so collected +ould be refunded!6& 7ne of the significant steps to+ards integrating the *ndian capital maret +ith the international capital marets +as the permission given to foreign institutional investors such as mutual funds, pension funds, and country funds, to operate in the *ndian maret! 8oreign institutional investors +ere initially allo+ed to invest only in e"uity shares9 later, they +ere allo+ed to invest in the debt maret, including dated government securities and treasury bills! The ceiling for investment by foreign institutional investors +as increased from 00 per cent to 09per cent in 2000-01! This increase can be made +ith the approval of shareholders through a special resolution in the general body meeting!:& *ndian companies have also been allo+ed to raise capital from the international capital marets through issues of ;lobal