Mumbai: The Securities Exchange Board of India (SEBI) has proposed raising the individual investment limit in stock exchanges to 15 per cent from the current 5 per cent for select institutional investors.

This will, however, be limited to stock exchanges, depositories, clearing corporations, banks and insurance companies only, market regulator SEBI said in a discussion paper.

The SEBI move could lead to foreign stock exchanges increasing their existing stakes in Indian bourses.

The National Stock Exchange (NSE), the country's largest stock exchange by traded volume, has sold stakes to NYSE Euronext and Goldman Sachs while rival Bombay Stock Exchange (BSE) has sold stakes to the Singapore Stock Exchange and Deutsche Boerse.

''SEBI has been receiving requests from certain quarters that the present limit of 5 per cent is acting as a deterrent for attracting long-term anchor/strategic investors in stock exchanges," the SEBI discussion paper pointed out.

Current regulations restrict foreign direct shareholding in recognised Indian stock exchanges by any person to not more than 5 per cent in the paid-up equity capital of a recognised stock exchange.

A person may acquire and/or hold, either individually or along with PACs, more than 1 per cent in the paid-up equity capital of a recognised stock exchange only with prior approval as ''fit and proper person'' from SEBI.

Foreign investment in stock exchanges, depositories and clearing corporations is restricted to a of maximum of 49 per cent, with FDI limit capped at 26 per cent and FII limit capped at 23 per cent.

At present, 18 recognised stock exchanges in India are corporatised and demutualised, ie, they are companies limited by shares and at least 51 per cent of their equity share capital is held by public other than shareholders having trading rights therein.

Apart from NSE and OTCEI, which were already corporatised and demutualised, 16 more stock exchanges have completed their corporatisation and  demutualisation process in the year 2007, in conformity with the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006; and  Government of India policy regarding foreign investments in infrastructure companies in securities markets, viz. stock exchanges, depositories and clearing corporations, according to SEBI.

As a part of the aforesaid corporatisation and demutualisation process, various investors like public sector banks, public sector insurance companies, PSUs, industrial development corporations, corporates and individuals have subscribed to the equity share capital of the stock exchanges. These investments are, however, subject to certain shareholding restrictions provided in the MIMPS Regulations and the foreign investment policy of the government, SEBI noted.

The MIMPS regulations have also been made applicable to NSE and OTCEI and SEBI has issued notice to NSE and OTCEI directing them to comply with the relevant provisions of the MIMPS Regulations within a year from the date of receipt of the SEBI letter.