After the National Stock Exchange and the Bombay Stock Exchange, foreign stock exchanges are now eyeing equity stake in the Over the Counter Exchange of India, as the government is planning to throw a lifeline to the now defunct bourse for small and medium companies.

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Sources said the government wanted to position the OTCEI on the lines of London's Alternative Investment Market by allowing easier corporate governance norms for the exchange. Besides, the government is likely to encourage foreign stock exchanges to buy a strategic stake in the bourse.

Recently, officials from the China Shanghai Stock Exchange visited the OTCEI and it is learnt that the Chinese may be willing to buy 5 per cent in the exchange as permitted under current guidelines. It is also learnt that London's AIM and the South Korean stock exchange may be willing to buy stakes in the exchange.

Sources said the government, in addition to relaxing the listing norms on the OTCEI, was also likely to increase the eligibility criteria for companies coming out with IPOs.

The OTCEI was incorporated in early 1991, even before the establishment of the NSE in 1994. The forthcoming Budget is likely to name it exclusivity for listing by small and medium enterprises.

"There is a possibility that foreign investors will pick up stakes in the OTCEI. But things will materialise once our proposal is approved in the Budget. We have asked for exclusivity for our exchange in our proposal to the ministry of finance and we are expecting a nod this time," a senior official of the OTCEI said.

It is also learnt that the Securities and Exchange Board of India has appointed a sub-committee to study the revival of the OTCEI. A churning in the portfolio of the OTCEI's promoters is also likely soon because some of them are planning to sell.

Sebi chairman M Damodaran has stated in public that the revival of the OTCEI will happen at the right time because of crucial role of small and medium enterprises.