The Industrial Development Bank of India (IDBI) subsidiary is working on a plan to facilitate the smooth entry of small companies into the capital market by providing a full range of services like merchant banking, underwriting of IPOs along with functioning as a full time market-maker.

"Sidbi is prepared to undertake merchant banking, underwriting and other allied activities to help small scale industries to receive funds and financial support from the capital market," managing director Sailendra Narain said.

The bank's plans will, however, depend on the recommendations of the working group appointed by the institution for examining issues relating to the development of capital market for the small scale sector. The panel is headed by National Stock Exchange (NSE) managing director RH Patil.

"Sidbi has been a member of OTCEI since 1994. We have till now not been active in trading, as very few small scale industries are listed on the exchange. OTCEI has shown willingness to offer an exit route for venture capitalists and other investors in unlisted securities of small scale sector companies. This will be a good opportunity for Sidbi to function as a market maker to such securities and would aid in creating an active secondary market for securities of these companies," Sidbi officials said.

The Sidbi-appointed panel will also look into existing norms of the Securities and Exchange Board of India (Sebi) on merchant bankers. The working group is expected to suggest necessary changes in prevailing rules for merchant bankers to make the capital market more accessible to the small scale sector.

The group is expected to submit its recommendations to the finance ministry by end-January, 2000. "Many of the recommendations may be incorporated in next year's Union Budget," said Sidbi officials.

The Lucknow-based institution is planning to raise Rs 1,500 crore in early 2000 through public issue of bonds and the private placement channel.

Sidbi expects that economic sanctions imposed after India conducted nuclear tests in 1998 may be lifted by next year, which may enable re-activation of some lines of credit suspended by foreign lending institutions. According to Narain, some credit lines from KFW (Germany) and OSCF Japan) maybere-activatedallowing Sidbi to draw fundstoefinancesmall scale enterprises in thecountry. Sidbi officials said that OSCF may extend onemore line of credit to the instittion. u