SEBI considering multiple steps to reboot economy: Chairman Ajay Tyagi
Development of the bond markets is essential to help the Centre achieve its investment target for the infrastructure sector, Tyagi said at the inaugural session of the 11th edition of the CII Financial Markets Summit, being held on 21-22 October.Updated: Oct 22, 2020, 05:45 IST
The Securities and Exchange Board of India (Sebi) is considering multiple steps to reboot the economy through financial market reforms, the capital markets regulator’s chairman, Ajay Tyagi, said on Wednesday.
Development of the bond markets is essential to help the Centre achieve its investment target for the infrastructure sector, Tyagi said at the inaugural session of the 11th edition of the CII Financial Markets Summit, being held on 21-22 October.
“It will be challenging to achieve the government’s ₹100 trillion investment target for infrastructure by 2024-25 unless the bond market is adequately developed,” he said.
The capital markets have recovered after the initial disruptions following the coronavirus outbreak, he said. “We have observed that recovery has been broad-based. Not only large-caps, but mid- and small-caps have also recovered since the lows hit in March,” Tyagi said.
The corporate bond market needs to become more robust as there is an urgent need to diversify funding requirements from the banking sector, the Sebi chairman noted. “Early settlement is in everyone’s interest and we are aware about the issues around it,” he said.
Sebi needs to bring down the settlement timeline for equity trading from the existing T+2 to T+1 (trading day) to reduce defaults by brokers. As such, the regulator has initiated talks with exchanges, clearing corporations, custodians, and participants, and has also met other stakeholders two weeks ago. All of them have agreed to the proposal, barring foreign portfolio investors (FPI), who said it creates unnecessary pressure on them. FPIs said this measure will curtail trading volumes in the cash segment, as they require more time for settlements, he said. FPIs account for more than 30% volumes in the cash market.
Sebi’s reform initiatives and policy measures have helped the working of both the primary and secondary markets during these uncertain times, especially for fundraising activity, Tyagi said.
Relaxation of the eligibility criteria, fast-tracking of issuances, rationalization of disclosures, and relaxation of the minimum subscription requirements also helped the markets.
“We also introduced permanent relaxation from the pricing norms for preferential allotment by stressed companies. The relaxation was accompanied by an exemption from open offer requirement, which reduced the funding pressure on the prospective investors in such companies,” Tyagi said.
“A well-functioning, deep and robust financial market is a must for economic development. Reform is a continuous process and is best brought in consultation with all stakeholders. Rather than believing that ‘crisis begets radical reforms’, we should continuously endeavour to keep improving our systems so that crisis, in fact, begets no radical reforms,” he said.