Tighter disclosure norms for unlisted firms likely

Subhomoy Bhattacharjee

The government is expected to outline stronger disclosure norms and enhanced transparency standards for unlisted companies in the budget. This is part of the twin agenda to regularise the functioning of the capital markets and to bring regulation up to international standards.

The latter will be in line with steps that have been taken for the banking sector. In banking, the government has pushed for aligning domestic practices with the Basle Accord.

The issue has also been flagged by the joint parliamentary committee in the course of its hearings on the stock market scam.

The government is expected to visit the issue of companies increasingly getting themselves delisted from exchanges. Delisting takes a company out of the purview of the Securities and Exchange Board of India, but the government feels there is a need to ensure they adhere to better disclosure standards, which at present are not regulated. Finance minister Yashwant Sinha is likely to announce the modalities in the budget.

The stock market upheaval almost immediately after last year's budget was a severe embarrassment for the government. It is expected to dominate Sinha's announcements on the capital markets in this budget.

For the government, the lessons that have emerged are the loopholes in regulation that have allowed companies and rogue elements to manipulate markets. In several areas it was found the regulators were not sure on whose turf the offences lay.

While several steps have been taken in the course of the year, the government is of the view that a long-term solution will need all the arms of the government to examine where the problems can emerge and take pre-emptive action.

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