national convention on capital market regulation & development - gopal krishna agarwal

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Capital Market Regulation

& Development

17-Dec-2015

National Conventionon

Gopal Krishna AgarwalMember Central Council, ICSIgopalagarwal@hotmail.com

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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.

gopalagarwal@hotmail.com

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Indian Financial Code (IFC)• Financial regulating architecture featuring seven agencies

and not unified financial regulator

• Seven AgenciesRBI to continueSEBI/FMC/IRDA/PFRDA to be mergedSAT to be subsumed in FSATDeposit Insurance and Credit Guarantee Corporation (DICGC) to

be subsumed into Resolution CorporationNew Financial Redressal Agency (FRA) will be createdA new debt management office for government created

Public Debt Management Agency (PDMA)FSDC to continue in the statutory framework.

gopalagarwal@hotmail.com

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FSLRC Recommendations…Recommendation on regulation making process

• Regulator would be required to Articulate the objective of regulationA statement of market failure that the regulation seeks to addressAnalyze the cost and benefit associated with the regulation A systematic public consultation processSubjecting the regulation to Judicial review

gopalagarwal@hotmail.com

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Financial Sector Development Council (FSDC)

• Constitution – Chairman of RBI/SEBI/FM/IRDA/PFRDA and Secretaries of Ministries

• RoleSupervision of EconomyLead regulator - Functioning of Large ConglomeratesInter regulatory coordinationFinancial sector development issuesFinancial LiteracyFinancial inclusionEarly warning group

gopalagarwal@hotmail.com

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Union Budget 2015-16Task Force on

• Financial Data Management Center (FDMC)• Financial Sector Appellate Tribunal (FSAT)• The Resolution Corporation• Public Debt Management Agency (PDMA) • Financial Redressal Agency (FRA)

gopalagarwal@hotmail.com

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FMC MERGER with SEBI – Expectations Post Merger

• New Products Freight Weather Electricity

• Options Trading

• Participation of Banks and Financial Institutions

gopalagarwal@hotmail.com

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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 complexMSP (Minimum Support Price)APMC ActEssential Commodity ActHoarding and black marketerSales TaxStamp DutyOctrayCash market of securities are highly organized

gopalagarwal@hotmail.com

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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

gopalagarwal@hotmail.com

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.

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gopalagarwal@hotmail.com

• 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 Economy11

gopalagarwal@hotmail.com

• 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 Economy12

gopalagarwal@hotmail.com

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 6,147Corporate Brokers (Cash Segment) 4,877 5,113 4,917 3,757Sub-brokers (Cash Segment) 77,141 70,242 51,885 42,351

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gopalagarwal@hotmail.com

Indian Capital Market Overview

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 Capitalizatio

n of NSE

2008-09 3.48 -9.84 59.08 89.61 621.912009-10 12.20 30.25 89.33 130.20 1274.262010-11 14.88 32.23 121.56 130.33 1475.012011-12 9.79 18.92 140.48 118.56 1230.882012-13 5.98 31.05 171.53 129.35 1150.482013-14 9.56 8.88 180.41 141.82 1250.662014-15 3.16 45.70 226.10 178.33 1635.50

In billion $

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gopalagarwal@hotmail.com

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)

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gopalagarwal@hotmail.com

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THANK YOU

Gopal Krishna AgarwalMember Central Council,

ICSIgopalagarwal@hotmail.co

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