3 min readNew DelhiFeb 18, 2014 11:37 AM IST
First published on: Feb 18, 2014 at 02:08 AM IST
The Interim Budget FY15 has proposed to overhaul the rules related to the issuance of foreign listed securities, the American Depository Receipts or ADRs and the Global Depository Receipts or GDRs. The government would also liberalise rupee-denominated corporate bond market and would also iron out the procedures for international investors looking to invest in Indian bonds.
“To deepen the Indian financial markets, (the government would) comprehensively revamp the ADR/GDR scheme and enlarge the scope of Depository Receipts,” said finance minister P Chidambaram in his FY15 Budget speech .
Earlier, the MS Sahoo panel had submitted its report on the review of ADR/GDR schemes. Sources close to the development told The Indian Express that the committee had recommended bringing in a new scheme in place of the old scheme of 1993.
“An important recommendation was that the government should allow depository receipts to be issued on underlying instruments other than equities, such as debentures, mutual funds etc and that they should allow it to be issued only in jurisdictions that are well regulated and comply with International Organization of Securities Commissions (IOSCO) norms,” said the source.
The finance minister also called for liberalising the rupee-denominated corporate bond market in order to make it easier for Indian companies to raise funds from retail investors and high networth individuals. Currently, the corporate debt market is relatively under developed and companies usually rely on bank debt or external commercial borrowings.
Chidambaram also spoke of strengthening the currency derivatives market to enable companies to fully hedge against foreign currency risk. During the period from May-August 2013, the rupee depreciated by over 20 per cent against the US dollar. Companies who did not hedge their foreign currency risk adequately took a huge hit on their books on account of forex losses.
He also made a mention of streamlining an individual’s financial records by having one record of all financial assets. This is in line with the earlier pronouncements of moving towards a single demat account for all financial assets.
In the wake of the Rs 5,600-crore payment crisis at the National Spot Exchange Limited (NSEL), Chidambaram also proposed to amend the Forward Contracts (Regulation) Act to strengthen the regulatory framework of the commodity derivatives market.
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