Capital Market Access to SMES in India

Abstract

The Over The Counter Exchange of India (OTCEI) was setup with the astute vision of providing equity market access to SMEs in India. However, it failed to stand the tests of time. OTCEI was hailed to be ahead of its times yet it was eventually a failure in financial institution building. Years after OTCEI was setup, the original motivation for setting up such a platform still holds good. With abounding enablers for the success of the idea, the design merits attention. The paper reinforces the significance of SMEs, the need to setup capital market access for SMEs and delves particularly into the case for equity market access. A solution is sought to reinvent the equity market access for SMEs. OTCEI is revisited; lessons are also drawn from similar successful international experiments- in particular, AIM and NASDAQ. Keen attention to the required market microstructure has been paid, policy issues have been looked into and an overall strategy for resurrecting the equity market platform for SMEs in India has been formulated.