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PM calls for steps to protect small investor

By Our Special Correspondent

NEW DELHI JAN. 17. The Prime Minister, Atal Behari Vajpayee, today exhorted the small investor to return to the stock market. At the same time, he called upon market regulators and intermediaries to make the capital market in India the safest place in the world to invest.

Launching the Securities Market Awareness Campaign organised by the Securities and Exchange Board of India (SEBI) at a function here, Mr. Vajpayee said the prolonged quiet in the stock markets had tested the confidence of the small investor who was the backbone of the securities market. "If investors are not attracted, then companies will not be able to raise money through the capital market. The Indian household investor, of late, has been putting much of his savings in non-financial assets. Even with financial assets, most of the savings are going to the banking system. This is not the best or the most productive use of our savings,'' he said.

Putting his finger on the pulse of the problem, the Prime Minister said that in recent years, there had been many instances of companies raising money from the market by creating a hype and then defrauding the investor. "Many of them issued shares at hefty premiums; most of their scrips are now trading well below their face value. Stock market scams brought a bad name to the Indian business community. This is how boom became bust and hopes turned to dust for many gullible investors. And that is how the investor community lost confidence in the market, leading to prolonged stagnation.''

Against this background, the Prime Minister called upon the market regulator and the intermediaries to "learn the right lessons from our experience of the past few years. We need markets that are known for their safety and integrity". To build investor confidence, it was necessary to make people aware of the different options available in the market and also about the regulatory safeguards put in place to protect their legitimate interests, including ensuring SEBI's independence and professionalism.

Mr. Vajpayee said that while technology and the regulatory framework of capital markets had improved, the standards of corporate governance had not kept pace. "Of course we have many companies that have become role models of good corporate governance... but there are many more companies that often use questionable and even illegal means to achieve their ends".

The Prime Minister rounded off by saying that a high rate of domestic savings, channelled into productive investments, was important to achieve the eight per cent economic growth set in the Tenth Five Year Plan. "Indian industry needs large capital to attain this growth rate. For that, we need to encourage present savers to save more and also to bring in new savers."

Mr. Vajpayee also drew attention to another important aspect. Pointing to the diversity of the country with different languages, he said most Indians did not know English but had investible savings. "Many of our rural areas have become thriving centres of prosperity. Therefore, you need to introduce this financial literacy campaign in all regional languages and in Hindi," he told the organisers of the function.

The Union Finance Minister, Jaswant Singh, said the strengthening of the SEBI and enhancing penalties for irregularities would deter evaders and improve the confidence of investors in the capital market. "The SEBI Act has been amended to further strengthen the regulator. It is our expectation that a strong regulator and enhancing the penalty limits would deter evaders and bolster the confidence of investors," he said.

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