“Sebi is looking at setting up an SME exchange and consultations have been going on for the last two months.

We will close the consultative window some time around end-May,” Mr Bhave said at a Small & Medium Enterprises conference here.

“The feedback from the consultative process will be forwarded to the Sebi Board for a final decision,” he added.

Listing various issues under discussion, he said there was a suggestion of appointing nominated advisors to provide comfort to investors about the credibility of the SME proposing to raise funds from the exchange.

“About 5-10 investment bankers, who have deep pockets and good processes could be entitled to act as nominated advisors,” he added. Mr Bhave said the biggest challenge before the market regulator was to balance the demand of the issuers and safeguarding the interest of investors.

He said SMEs have demanded a reduction in the high cost of transactions and regulatory compliance. Mr Bhave said there was also a demand to make the process of raising capital less expensive.