Tighten capital markets, Left tell govt

New Delhi, Oct 7 (UNI) Rubbishing as ''retrograde and illogical'' the move of SEBI relaxing the restrictions on the Participatory Notes (PNs), the Left parties today demanded that the Manmohan Singh government withdraw the decision and instead tighten regulations in the financial markets.

''SEBI has summarily removed all its earlier restrictions in one stroke in order to woo the FIIs,'' they said, ading that the UPA government did not seem to have learnt any lesson from the global meltdown.

The CPI(M) Polit Bureau said SEBI's efforts to appease the FIIs reflected a desperate attempt to shore up the Indian Stock market against the backdrop of a global financial meltdown.

CPI National Secretary D Raja reminded how the issue was raised in Parliament wherein the goverment had ''no convincing answer on the issue. The government is out to liberalise the country's financial sector,'' he added.

The Left parties' harsh reaction came a day after SEBI lifted the October 2007 restrictions on issue of PNs by foreign institutional investors with immediate effect, a move perceived to bring in more funds to lift the sagging capital markets.

The CPI(M) said the Reserve Bank of India has been advocating a ban on these non-transparent derivative instruments used by the FIIs to invest money in the Indian capital market on behalf of undisclosed entities and individuals.

SEBI, while refusing to prohibit PNs, had applied a 40 per cent cap on total assets held by FIIs under PNs in October 2007. With the stock market witnessing yet another crash yesterday due to the pullout of funds by the FIIs, SEBI had summarily removed all its earlier restrictions in one stroke in order to woo the FIIs back.

''Such an intervention by SEBI to favour a set of players, who are holding the market to ransom, is grossly violative of the role of a market regulator,'' the Left party said.

Mr Raja, the Rajya Sabha MP, wondered how the SEBI could take a decision in this way when the world financial crisis was haunting the USA and the European Union (EU).

The CPI(M) said even the RBI had also cut the CRR to ease the credit flow to the capital market. The Indian policy establishment seems to have drawn the worst lessons from the financial crisis in the US.

While Governments and policymakers everywhere are discussing ways and means to tighten regulation of financial markets following the crisis, the Indian policymakers seem to be moving in an entirely opposite direction, it added.

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