The capital markets regulator, the Securities and Exchange Board of India (Sebi), is firming up a host of reform measures it could launch in a few weeks, including a possible "safety-net mechanism" for retail investors buying IPOs or a company's first stocks.
Sebi is also planning to reduce the gap between allotment of shares and the time when these start trading on stock exchanges from 12 days to a week, making the process simpler and faster for millions of investors.
Finance minister P Chidambaram is likely to address Sebi's board meeting on Saturday in Mumbai, triggering speculation about an action-packed 'scene II' of India's reforms opera, with a slew of initiatives to boost fund flow into the capital markets.
Moreover, if a government plan proceeds as intended, investors will be able to avoid the lengthy process of filling up know-your-customer (KYC) registration forms, each time they buy a financial product or service.
Once the plan is implemented, they will be able invest in mutual fund units, trade in equity shares, buy insurance policies and open bank accounts through a common KYC registration.
KYC registration contains information about a person's personal details, address, permanent account number (PAN) and photographs, among others.
Sources said Sebi is pitching for an early implementation of common KYC norms. Earlier this week, Chidambaram had announced that insurance companies will not carry out additional KYC checks for people who already have bank accounts.
The Sebi board is likely to discuss a series of steps covering a wide spectrum of issues, including allowing foreign institutional investors (FIIs) to offer bank guarantees and mutual fund holdings as collateral against trade, sources told HT.
The move will spur markets because it would open up large amount of funds for FIIs to invest in Indian equities. Under current rules, foreign funds can offer only cash as security against the value of trades in Indian stock markets, locking up resources that otherwise can be deployed in equities.
The Sebi board meeting will take place a day after a flash 900-point crash in NSE Nifty due to concerns over the government's ability to pass some of the big-ticket reforms, such raising FDI cap in insurance, in Parliament. BSE Sensex fell 120 points to close at 18,938.46.
Sources told HT that the Sebi board on Saturday will also discuss the framework for bringing down settlement of securities transaction time to one day.
This would ensure that shares come into an investor's demat account within a day of the transaction, against at least two days it takes at present.
Sebi is also examining the option to make it mandatory for companies to offer a "safety-net mechanism" that will offer retail investors the option to get a guaranteed price if a share price falls below a certain level within a specific time period after an issue gets listed on the stock exchange.
This move, however, may have to wait for a few weeks for final implementation, sources told HT.