National Convention on Capital Market Regulation & Development - Gopal Krishna Agarwal
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This document discusses capital market regulation and development in India. It summarizes the recommendations of the Financial Sector Legislative Reform Commission (FSLRC) to reform financial regulation, including merging several financial regulators and establishing new agencies. It also discusses the proposed Indian Financial Code, recent regulatory developments, and the state of the Indian capital markets and economy.
National Convention on Capital Market Regulation & Development - Gopal Krishna Agarwal
- 1. Capital Market Regulation & Development 1 17-Dec-2015 National Convention on Gopal Krishna Agarwal Member Central Council, ICSI [email protected]
- 2. Financial Sector Legislation Reform Commission (FSLRC) • The financial framework governing the financial markets has been built up over century. These are 60 acts multiple rules and regulations. • Unintended consequences include regulatory gaps, overlaps, inconsistencies & regulatory arbitrage. • Fragmented regulatory architecture • Has led to a loss of scale and scope that could be available from seamless financial markets with all its attendant benefits of minimizing the intermediary cost. [email protected] 2
- 3. Indian Financial Code (IFC) • Financial regulating architecture featuring seven agencies and not unified financial regulator • Seven Agencies RBI to continue SEBI/FMC/IRDA/PFRDA to be merged SAT to be subsumed in FSAT Deposit Insurance and Credit Guarantee Corporation (DICGC) to be subsumed into Resolution Corporation New Financial Redressal Agency (FRA) will be created A new debt management office for government created Public Debt Management Agency (PDMA) FSDC to continue in the statutory framework. [email protected] 3
- 4. FSLRC Recommendations… Recommendation on regulation making process • Regulator would be required to Articulate the objective of regulation A statement of market failure that the regulation seeks to address Analyze the cost and benefit associated with the regulation A systematic public consultation process Subjecting the regulation to Judicial review [email protected] 4
- 5. Financial Sector Development Council (FSDC) • Constitution – Chairman of RBI/SEBI/FM/IRDA/PFRDA and Secretaries of Ministries • Role Supervision of Economy Lead regulator - Functioning of Large Conglomerates Inter regulatory coordination Financial sector development issues Financial Literacy Financial inclusion Early warning group [email protected] 5
- 6. Union Budget 2015-16 Task Force on • Financial Data Management Center (FDMC) • Financial Sector Appellate Tribunal (FSAT) • The Resolution Corporation • Public Debt Management Agency (PDMA) • Financial Redressal Agency (FRA) [email protected] 6
- 7. FMC MERGER with SEBI – Expectations Post Merger • New Products Freight Weather Electricity • Options Trading • Participation of Banks and Financial Institutions [email protected] 7
- 8. FMC MERGER with SEBI – Challenges • Regulatory Vaccum Spot Market • Government primary aim is to regulate commodity prices and not leave it to market forces • Policy Adopted are complex MSP (Minimum Support Price) APMC Act Essential Commodity Act Hoarding and black marketer Sales Tax Stamp Duty Octray Cash market of securities are highly organized [email protected] 8
- 9. Recent Developments • Signing MOU with European Regulators - 27 Members State on 28th July 2014 • Multilateral Competent Authority Agreement (MCAA) on Automatic exchange of information on 3rd June 2015 • Foreign Accounts Tax Compliance Act (FATCA) with US on July 09, 2015 for international tax compliance • SEBI - International Financial Services centers (IFSC) Guidelines 2015 • SEBI’s Complaint Redressal System (SCORES) - platform to approach concerned companies or SEBI • SEBI guidelines on Foreign Portfolio Investment (FPI) and Foreign Institutional Investors (FII) - simplification • SEBI issue and listing of Debt securities by municipalities • SARAL account opening form [email protected] 9
- 10. Macroeconomic Outlook • Projected GDP growth rate in 2015-16: 7.8% . • India to be the fastest growing major economy in the world- IMF. • Inflation expected to be under the target 6% for the year 2015-16. • A double-digit growth trajectory for the Indian economy over the medium term is very likely. • Successful auction of coal blocks and passing of Mines and Insurance Bills have given hope of continued action on the reform front. 10 [email protected]
- 11. • India a bright spot in a slowing world economy: IMF. • India occupies the topmost position globally in terms of greenfield foreign direct investment (measured by estimated capital expenditure) in the first half of 2015. • In doing so it has beaten countries like USA and China, the long time global favourites for FDI. • In the World Bank’s ‘Ease of Doing Business’, India has jumped 12 places. India in Global Economy 11 [email protected]
- 12. • In the latest global competitiveness ranking of the World Economic Forum (WEF) India is ranked 55 out of 140 countries, an improvement of 16 places over last year. • Moody’s changed its outlook for Indian banking sector from negative to stable in Nov’ 2015. • Similar opinion expressed by Fitch and S&P. • India is the eighth best country in the world when it comes to protecting the interests of minority investors. (Source : World Bank) India in Global Economy 12 [email protected]
- 13. Indian Capital Market: Overview • Largest number of listed companies in the world–5624 as of 31st Mar’ 2015 (BSE). • 1st (NSE) and 5th (BSE) most liquid exchange globally for Index Options. • 3rd (NSE)and 9th (BSE) largest exchange in the world in terms of number of trades in Equity Shares • 2nd and 3rd largest in the world in terms of number of currency futures contracts traded (NSE and BSE resp). • Number of Investor Accounts (March-15): 13.71 million (NSDL) and 9.61 million (CDSL). Market Intermediaries 2011-12 2012-13 2013-14 2014-15 Brokers (Cash Segment) 10,268 10,128 9,411 6,147 Corporate Brokers (Cash Segment) 4,877 5,113 4,917 3,757 Sub-brokers (Cash Segment) 77,141 70,242 51,885 42,351 13 [email protected] Indian Capital Market Overview
- 14. Indian Capital Market - Some selected figures Year/ Month Capital Raised from the Primary Market through Public and Rights Issues Foreign Portfolio Investment Foreign Portfolio Investment: Cumulative Assets with Mutual Funds at the End of Period Market Capitalization of NSE 2008-09 3.48 -9.84 59.08 89.61 621.91 2009-10 12.20 30.25 89.33 130.20 1274.26 2010-11 14.88 32.23 121.56 130.33 1475.01 2011-12 9.79 18.92 140.48 118.56 1230.88 2012-13 5.98 31.05 171.53 129.35 1150.48 2013-14 9.56 8.88 180.41 141.82 1250.66 2014-15 3.16 45.70 226.10 178.33 1635.50 In billion $ 14 [email protected]
- 15. Investor Education Initiatives in India Investor education initiatives in India are at 5 levels. • SEBI (Securities and Exchange Board of India) • Exchanges • Ministry of Corporate Affairs • Other Financial Institutions like RBI, IRDA & PFRDA. • ANMI (Association of National Exchanges Members of India) 15 [email protected]
- 16. THANK YOU 16 Gopal Krishna Agarwal Member Central Council, ICSI [email protected]