In December 1993, SEBI directed the stock exchanges to discontinue the traditional system of carry forward of transactions (badla). Subsequently, it proposed an alternative system in March 1994, but no agreement could be reached on implementing this system. In February 1995, SEBI set up the G. S. Patel Committee (GSPC) to review the system of carry forward transactions. The GSPC submitted its report in March 1995. SEBI adopted the system recommended by the GSPC with some modifications in its decisions of July 27, 1995 and October 5, 1995.

This Revised Carry Forward System (RCFS) was implemented in the BSE in January 1996, but the other exchanges in which the traditional carry forward system had been prevalent before December 1993 did not come forward to adopt the RCFS. A year after the implementation of RCFS, the President of the BSE wrote to SEBI in January 1997 requesting a relaxation of certain aspects of the RCFS to make it more practical and efficient. In its meeting of March 27, 1997, SEBI reviewed the entire sequence of developments relating to the RCFS and specifically noted that while introducing the RCFS in July 1995, SEBI had decided that "the implementation of the revised carry forward system would be reviewed periodically by the Board, the first review being after three months".

SEBI then decided to constitute a Group consisting of:

• Mr. M. G. Damani , President, Stock Exchange, Mumbai
• Mr. R. C. Gupta, Division Chief, SEBI (Co-ordinator)
• Mr. K. Kannan, President, Tamil Nadu Investors Association
• Mr. M. M. Kapoor, Executive Director, Unit Trust of India
• Dr. R. H. Patil, Managing Director, National Stock Exchange Limited
• Prof. J. R. Varma, Member, SEBI, (Chairman).