SEBI has suggested that public sector banks and financial institutions be considered as 'public shareholders' in stock exchanges. SEBI opined that imposing limitations on shareholding of banks and financial institutions by allowing them to hold shares in stock exchanges only as 'public shareholders' would adversely affect their levels of market participation. Three national stock exchanges namely, BSE, MCX-SX and United Stock Exchange will need to enhance their public shareholding while the public shareholding at NSE stands at 57.48% which is beyond the required level of 51%. However, the Finance Ministry has rejected the proposal on the ground that it would violate statutory provisions. Section 4B of the Securities and Contracts Regulation Act, 1956 mandates a recognized stock exchange to ensure that at least 51% of its equity share capital is held, within 12 months from the date of publication of the order approving the scheme of corporatization or demutualization, by the public excluding shareholders having trading rights. Therefore, banks could come in the public shareholding category if they did not have trading rights on the bourse. However, under the currency derivatives segment, trading members have to be banks and hence as per the existing rules banks cannot be included as public shareholders.

According to SEBI, the SCRA provisions intended to keep trading members separate from the management and ownership of the exchange to enhance transparency. Institutional investors such as banks and financial institutions are managed by independent professionals and are 'informed investors' who can help bring in good governance norms in the functioning of an exchange. The effect of the Finance Ministry's refusal of the suggestion is yet to be known.