The 10-member group will be headed by the National Stock Exchange (NSE) managing director RH Patil. The group is expected to submit its report by the January-end 2000 to the finance ministry.

The terms of reference of the group will be to analyse the existing hurdles faced by the SSIs in accessing the capital markets and identifying the gaps. The panel will recommend measures for changes needed in the present set-up of capital markets and making them accessible to the small scale sector, developing alternative markets for equity and debt tailored for this sector, development of products or funds which could be utilised in the existing set-up especially for unlisted companies, co-ordination between Sidbi and Over the Counter Exchange of India (OTCEI), measures to generate investor interest in SSI stocks, changes in the legal set-up including modification required in Sebi's rules and guidelines for merchant bankers, government policy and fiscal/financial incentives to the sector.

The panel will also suggest means of providing an exit route to equity providers to the SSIs.

Speaking to newspersons on Wednesday SIDBI managing director, Sailendra Narain, said that the setting-up of the panel was necessitated by the fact that ownership status of a vast majority of SSI units as proprietership firms impinges on their capacity to access funds from the capital market.

He said that only a vibrant capital market can satisfy the need for funds of several SSI companies engaged in fast-growing business of infotech and bio-technology. "The conventional route of collatoral or asset-based lending cannot satisfy this aspect," he stated.

According to Narain, 80 per cent of the SSI are proprietorship firms, 18 per cent are partnerships and only two per cent are limited companies. "

There is a need for greater corporatisation of the sector and encourage growth of limited companies, which are in a better position to access funds in the form of equity and debt," he said.

Narain further said that if the present requirement for funds of the 60,000 corporate SSIs was to be realised from the capital market, it will be around Rs 5,000 crore.

He said that SIDBI plans to establish a $50 million fund in the Silicon Valley for Indian SSIs. "A Rs 100 crore bio-technology fund is also on the anvil," he informed.

On the issue of delinking of SIDBI from its parent Industrial Development Bank of India (IDBI), Narain said that the issue will be placed before the Parliament soon.

"A public offer is a possibility if the delinking takes place," he added.