Following the Budget announcement by Finance Minister Arun Jaitley that Securities and Exchange Board of India (Sebi) will consider mandating large companies to meet 25 per cent of their finance needs from the bond market, Sebi Chairman Ajay Tyagi on Saturday said that it will come out with “light-touch regulations” on corporate bond market by September this year.
Tyagi added that markets are likely to remain volatile for sometime because of external factors such as hardening of US bond rates, oil price movement and rising employment in America. Commenting on the impact of the stock market volatility on small investors, he stated that mutual funds — through which small investors largely invest in stock market — is not a substitute for bank returns.
“About the market security, I can assure you that there are some exogenous factors and there are some endogenous factors. Exogenous factors which have been happening for last ten days in terms of hardening of bond rates in US and their consequences, or in the terms of oil prices. This is something which everyone has to deal with as it is a globalised connected market,” he stated.
Currently, the country has 42 mutual fund players with assets under management of over Rs 22 lakh crore. In the wake of concerns raised in some quarters about the re-introduction long-term capital gains tax (LTCG) in Budget, Tyagi said Sebi has not received any representation from investors so far against this.
“Corporate bond markets have been a very good story in the last two years. In 2016-17, around Rs 6.7 lakh crore was invested in corporate bonds. This year it is likely to be surpassed. We are taking a lot of other steps to see that the story continues…We will come out with regulations on this by September of this year. These regulations will be ‘light touch regulations’ because it is to encourage corporates towards bond market,” Tyagi said after the Sebi board meeting in Delhi.
In his Budget speech this year, Jaitley said, “Reserve Bank of India has issued guidelines to nudge corporates access bond market. Sebi will also consider mandating, beginning with large corporates, to meet about one-fourth of their financing needs from the bond market.”
On crypto-currency, Tyagi said the finance minister has already made it clear that these are not legal tenders in India and a committee is already looking into the whole issue. He said the recommendations of the committee should come out soon and then it would be known what role Sebi has to play.
On the long-pending Kotak committee proposals for overhaul of corporate governance rules, Tyagi said Sebi has already got the public feedback on the proposals and the final norms should be placed for consideration in the next board meeting of the regulatory body.
On algo trades, Tyagi said Sebi is keeping a watch on the issue and there is no reason for panic as risk management systems are quite robust. For 2018 and next year, a priority would be on putting in place facilities to encourage raising funds from the primary market, Tyagi said, adding that the regulator would look at listing time, IPO process and further simplification of norms. “want to facilitate that as the capital are raised for development,” he added.