Currently, GDR trading is possible in overseas stock exchanges in London and Luxembourg. Indian companies have floated 64 GDR issues and 9 bond issues in overseas markets and they are currently traded abroad. However, the difference is that only foreign investors are allowed to participate in the deals in the GDR market.

A committee set up by the Federation of Indian Chambers of Commerce and Industry (FICCI) has demanded that a market for GDRs should be set up within India and the right of conversion of GDRs into local shares that belongs to foreign investors should be given to investors in India.

Yet another demand is that conversion of domestic shares into GDRs should be allowed up to the limit of GDR issueoriginally approved. GDR issues in other foreign markets should be allowed to be traded in India as well. ``Why should only foreign investors get a chance for trading in GDRs. Domestic investors should also be given a chance,'' said a leading businessman.

The Reserve Bank of India and the government will have to change the rules and regulations to start GDR trading in India. ``With the National Stock Exchange all set to start derivatives trading, permission for GDR trading in the domestic market will be a good back-up,'' said the former chairman of a public sector bank. Industry associations like CII and Assocham have also seconded the proposals.

After a host of GDR issues in the 1994-94 period, mobilisation through this route has come down drastically. In fact, no Indian company has floated a GDR issue, thanks to the poor response by foreign investors to Indian papers.

``Global Depository Receipts issues have also made the companies familiar with the foreign markets and issue practices and forced themto raise accounting standards to meet the requirements abroad,'' a Federation of Indian Chambers for Commerce and Industry release said.

But GDRs and ECBs have certain serious shortcomings. First, they are available only to a handful of Indian issuers. Second, the performance of earlier issues affect the issues to be floated. The bitter experience of foreign investors with the earlier issues has reduced the demand for further issues by Indian companies.

Third, the issue costs abroad were much lower than in India. This was a disadvantage to companies which could not tap foreign capital markets. But transaction costs in the Indian markets have fallen considerably after computerisation of stock exchanges and dematerialisation of scrips. Hence the domestic market could now be efficiently be used for making foreign currency issues, it is felt.