Addressing Indian Chamber of Commerce (ICC) Executive Committee Members and Industry Representatives at an exclusive interactive session on the "Role of Capital Market in putting the Indian Economy back on track" here on Tuesday, Sinha touched upon several critical issues pertaining to the Indian Capital Market and the economy in general.
He said the regulator is coming up with various pro-active measures aimed at boosting the Capital Market and the different industry sectors including the SMEs (Small and Medium Enterprises).
Sinha expressed concerns about the current trends in raising capital by Industry, and said that the amount raised by corporates in India in current fiscal is much lower than what was raised last fiscal mainly because of dampened growth expectations and sentiments.
Retail investors must also develop more faith in the market, he felt, and said that the SEBI wants more retail investors in the primary market.
Sinha emphasised upon the point that though raising capital from the market is extremely important, it is necessary that all activities related to raising funds from the market through IPOs , are monitored properly, and they go through a rigorous background check.
Money raised should be utilised for the purpose for which it is raised, he said.
SEBI is trying to put in place measures for effectively checking the raising of illegitimate money, he added.
Sinha said that the SME sector is crucial as it can really act as the country's engine of growth, and said that SEBI is planning to roll out measures like listing of SMEs without IPO s in a couple of months.
This would be particularly beneficial for the East and the North-East where many SMEs have their plants, the SEBI chairman said.
Talking to the members about Corporate Governance, Sinha said that the regulator will finalise its Corporate Governance norms soon, after the new Company Law gets passed, and said that SEBI's Corporate Governance Discussion Paper will deal in detail crucial issues like Board-level Governance, Role of Independent Directors and Senior Executives' compensation packages.
Talking specifically on the Mutual Fund Industry, the SEBI chairman said that it is important for Fund Houses to strengthen their distribution channels and tap smaller towns and remote markets.
If any Mutual Fund company goes beyond the top 15 cities in the country, it will get an extra commission, he informed.
For the Mutual Fund industry, the Regulator is taking a number of growth-boosting measures, he emphasised and talked about 'product labelling' which SEBI is planning to introduce in consultation with AMFI.
For raising Investor awareness, SEBI is also constantly organising campaigns aimed at educating the Investor and bringing him into the market, said the Chairman.
Among other important new measures that the Regulator will be coming up with, Sinha mentioned about the new Buy-Back Regulation, and also added that SEBI will come up more stringent measures to check and control Insider Trading.
Responding to questions from the members on how to increase the depth of the Indian Capital Market, the SEBI chairman said that apart from increasing retail participation in the Capital Market and putting effective checks on raising illegitimate money, it is extremely important to create avenues for investment of Pension money in the Capital Market, which currently is not allowed by the Employees' Provident Fund Organisation (EPFO).
Investment of pension money in Capital Markets is allowed in many other countries where the Market is more mature and deep, he said and suggested that this norm should change.
Talking on the importance of and need for Regional Stock Exchanges, Sinha said that it is not necessary that every region or city has it's own Stock Exchange, and felt that regional Stock Exchanges mostly evolved in the past due to a sense of provincial / regional pride, and in many cases, they do not make much business sense, as many of them have no or little trading going on.
SEBI would take strong measures against Stock Exchanges which have no or less trading , and which do not abide by SEBI's set of Regulations for regional Stock Exchanges rolled out in 2012, Sinha cautioned.
Emphasising upon the importance for companies of getting listed on National Stock Exchanges like the BSE or NSE, Sinha said that SEBI may choose to close down ineffective regional Stock Exchanges, and said that if these Exchanges close down, SEBI would help the companies listed in these Exchanges by flashing information about them through bulletin boards in BSE and NSE, to spread interest about them among national-level buyers and investors.
Reacting to a complain that PSU-funded Mutual Fund companies and private Mutual Fund Houses do not have a level-playing field in India, the SEBI chairman said that they should be given equal treatment, and the SEBI will put concrete recommendations forward with regard to this issue, to the Govt. of India.
The exclusive interactive session witnessed the participation of industry captains from varied sectors like infrastructure, real estate, tea, financial services, manufacturing, textiles, etc.
--IBNS (Posted on 26-03-2013)