NEW DELHI, JAN 13: Heads of financial institutions, banks and finance companies in a pre-Budget meeting with the finance minister Yashwant Sinha have urged the government to take steps to ensure investor protection in a bid to revive the primary market.They have qualified their demand for improving sentiment in the primary market by pleading for relaxed entry barriers for companies. They have asked the government to ensure that speculation is discouraged while industry be encouraged to mobilise funds. Tax incentives are necessary to boost mutual funds, many felt.
They were also of the view that the government do away with PAN requirement for sale and purchase of shares. It was suggested in addition that efforts be made to regulate short sales in the market.
President of the Bombay Stock Exchange, J C Parekh told newspersons after the meeting that a safety net could be formed for small investors. The safety net will ensure that promoters buyback their shares from investors in the event of the market price shares falling below the issue price, he said. ``The small investor is primarily disillusioned with how IPO stocks have performed, hence it is important that confidence in IPO stocks be built-up,'' he remarked.
The major suggestions by the representatives of financial institutions were:
tax problems arising from ambiguity as in the case of section 10 (23G) needs to be removed
scope of section 10 (23G) needs to extended to cover transmission companies apart from interest, dividends and capital gains, other elements of financial package like fees/commission on guarantee
FIs be encouraged to raise bonds
deterrent action against fraudulent companies
small investors be encouraged to invest in mutual funds.
benefits of carry-forward be encouraged in case of mergers of loss making companies
tax deduction under section 88 be enhanced to Rs 60,000
2 per cent interest tax be abolished
small savings interest rate be linked to bank rate
deep discount bonds be introduced by government
set limit for subscription to PFs
interest limit of Rs 10,000 on bank deposits be reconsideredManaging director, ICICI, K V Kamath, said that the meeting discussed ways and means of kick-starting various infrastructure projects, as large projects can go a long way in boosting various industry sectors. It was also suggested in the meeting that lending to infrastructure projects be categorised as priority sector.
Managing director, Kotak Mahindra, Uday Kotak told the media that the discussion debated the possibility of giving tax concessions to mutual funds and venture capital funds. If the mutual fund industry and the venture capital industry are given tax reliefs the beneficial impact will have an immediate impact on the stock market, Kotak said. ``Tax rationalisation in the mutual fund area can attract higher funds in the area,'' he added.
Earlier, in his introductory remarks, finance minister Yashwant Sinha expressed concern over the low level of mobilisation from the primary market. Referring to the lowering of interest rates on small savings, Sinha said the step was a signal for moving towards a low interest rate regime in the country.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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