The Reserve Bank of India wants the finance ministry to formulate a policy on foreign direct investment in stock and commodity exchanges.
The banking regulator recently sent a note to the ministry in this regard. It has also told some of the exchanges that it wants "policy guidance" from the ministry on the matter.
This clearly signals the RBI's reservations on the issue of 100 per cent FDI in exchanges. If the ministry revisits the issue, it will have a huge impact on the exchanges.
In February this year, Fidelity picked up about 9 per cent stake in the Multi Commodity Exchange of India for Rs 220 crore (Rs 2.2 billion).
Last month, Goldman Sachs bought a 7 per cent stake in the National Commodity and Derivatives Exchange of India for over Rs 100 crore (Rs 1 billion). Fidelity picked up a stake in MCX as a financial investor, while Goldman Sachs became a stakeholder in NCDEX as a strategic investor.
The Bombay Stock Exchange, the country's premier equity bourse, has been planning to invite strategic investors to the exchange.
The merchant banking community is believed to have short-listed eight investors, including some global exchanges, as prospective strategic stakeholders in the BSE.
The exchange may now have to go slow on its plan, and wait till the ministry firms up the FDI policy for exchanges.
BSE officials did not comment on the issue.
At present, there is no codified policy for FDI in exchanges. A commerce ministry notification has listed the industries in which FDI is restricted, and it is presumed that all industries not covered by the list are allowed 100 per cent FDI under the automatic route. Stock and commodity exchanges fall in this category.
Sources in Delhi said the RBI was comfortable with foreign investors being broker-members, but not owners of the exchanges. Since the exchanges are not profit-making bodies in the conventional sense, no purpose was served by owning an exchange, they added.
Moreover, expertise and technology could be shared through training and buying of software, and did not necessarily require sale of stakes.
However, exchange sources felt trading by foreign investors alone would not benefit the exchanges.
"When foreign investors are allowed to pick up stakes in banks, what's the harm in allowing them entry into exchanges? This is the only way we could build global exchanges in India," said a source.
As present, 100 per cent foreign investment under the automatic route is allowed in non-banking finance companies.
In banks, a foreign stake is allowed subject to the RBI's clearance. Sources close to the central bank pointed out that stock and commodity exchanges were sensitive sectors, where strategic investments could have a systemic impact.
"There should be a debate and discussion on this and a policy (for FDI in exchanges)," they said.