Capital market experts deposing before the JointParliamentary Committee probing the stock scam said on Friday that the badla system aspractised in the country has been grossly "misused" leading to totalerosion of small investors' confidence in the bourses.
Briefing newsmen on Friday's proceedings, JPC chairman,Shriprakash Mani Tripathi said two experts, S.C. Gupta and Aji Dey, formerCalcutta Stock Exchange president, felt the badla system (forward trading) inIndia had a lot of scope for misuse, which brokers took advantage of.
Though the experts view on whether the Indian StockExchanges should have badla system or not was divergent, they were unanimous onthe total misuse leading to erosion of investors' confidence particularly thatof small investors, he said the badla system was banned in the country from 1994to 1996 after the 1992 multi-crore securities scam. It was reintroduced afterD.R. Mehta took over as SEBI chairman. It is now being banned from July 2 in theface of the recent stock scam.
The banning of badla system, no doubt, reduced thevolatility of the capital markets, but at the same time it also grossly reduced thevolume of trading, Tripathi quoted the experts as having said.
The experts were also critical of SEBI for not beingalert and felt the market regulator had failed to take timely action to preventthe stock scam.
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