Financial institutions reform and expansion project [FIRE]

The project"s three components, to be implemented by two management support service contractors, will improve the regulatory and operating environments for capital markets, and use Housing Guaranty (HG) funds to develop debt markets as a means of financing urban infrastructure. The project will improve the regulatory environment for capital markets in three ways. (1) To strengthen the Securities and Exchange Board of India (SEBI), the nation"s capital market regulatory agency, the project will: provide TA and training in such areas as regulatory functions, automation, and organizational and human resource development; upgrade SEBI records management systems; and assist SEBI in establishing regional investors" associations, and in developing a licensing and certification program for stockbrokers. (2) The project will provide experts from U.S. groups such as the National Association of Stock Dealers to assist Indian groups of brokers, exchange managers, accountants, and bankers in their efforts to establish self-regulatory organizations (SROs). (3) Policy dialogue between capital market participants and regulators will be facilitated through conferences and seminars on such issues as futures and options, the role of the small investor, and corporate takeovers. The second component will promote a smoother operational environment for capital markets. (1) The project will help to establish a National Stock Exchange (NSE), which will allow anyone to trade shares from anywhere in India, and a National Market System (which ideally will eventually be folded into the NSE); the project will promote use by regional exchanges of reporting systems modeled after those of the U.S. Securities Industry Automation Corporation. (2) The project will help to design and implement a national clearing and depository system and will train SEBI staff and market participants in its use. (3) The project will begin the process of automating India"s capital market system by helping to automate one exchange, the Over the Counter Exchange of India, and possibly others. The final component will provide $120 million in HG funds (under 386HG04) to stimulate development of a debt market to finance demonstration urban environmental infrastructure projects in 2-3 states. A financial intermediary will channel the HG funds (under 386HG04), along with a matching amount of locally raised funds or debt to municipalities, state development agencies, or private borrowers to finance water, sewer, and solid waste projects. Preference will be given to commercially viable projects, including those developed by private entities using Build/Operate/Transfer or Build/Own/Operate (BOT/BOO) techniques. Participating state/municipal agencies will be selected on the basis of their willingness to pursue policies of commercial viability, increased private sector participation, improved local capacity, and decentralization. This component will also help to create a long-term basis for urban infrastructure financing by strengthening two public agencies -- initially the Infrastructure Leasing and Finance Services and then the Housing and Urban Development Company. Finally, TA and training will be provided to financial intermediaries, local governments, and the National Institute of Urban Affairs, the component"s implementing agency, in such areas as project selection, innovative financing, and sector policy. Training will include formal and informal training (short-term training, study tours, and conferences in the United States and India) for senior financial policymakers, senior state and municipality officials, regulators, underwriters, brokers, and those involved in institutional restructuring. All three project components will include an operations research and local training capacity strengthening subcomponent.