Question

Explain the reforms introduced in the capital market of India.

Answer 1

Following are some of the important reforms introduced in the capital market:

1. Establishment of SEBI: The Securities and Exchange Board of India (SEBI) was established in 1988 but given statutory powers in 1992 to protect the interest of the investors and promote the development of the securities market.
2. Establishment of Stock Exchange: The National Stock Exchange (NSE), the largest stock exchange in India, was founded in 1992 with the goal of enhancing capital market activities in the country.
3. Adoption of a computerised system: The Computerized Screen Based Trading System (SBTS) was introduced as a part of modernization.
4. DEMAT account facility: The Demat account has been introduced since 1996 to facilitate the easy purchase and sale of shares by investors through the electronic method.
5. Increased access to global funds: Increased access to global funds by Indian companies was permitted through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).
6. Establishment of Investor Education and Protection Fund: The Investor Education and Protection Fund (IEPF) was established in 2001 to promote investors’ awareness and protect the interests of investors.