sebi annual report 2013

1This Report is in conformity with the format as per the Securitiesand Exchange Board of India (Annual Report) Rules, 1994,

5MEMBERS OF THE BOARD(As on March 31, 2013)

Appointed under Section 4(1) (a) of the SEBI Act, 1992 (15 of 1992)

U. K. SINHACHAIRMAN

Appointed under Section 4(1) (d) of the SEBI Act, 1992 (15 of 1992)

PRASHANT SARANWHOLE TIME MEMBER

RAJEEV K. AGARWALWHOLE TIME MEMBER

S. RAMANWHOLE TIME MEMBER

V. K. JAIRATHPART TIME MEMBER

P. C. CHHOTARAYPART TIME MEMBER

Nominated under Section 4(1) (b) of the SEBI Act, 1992 (15 of 1992)

DR. ARVIND MAYARAMSecretaryMinistry of FinanceGovernment of India

NAVED MASOODSecretaryGovernment of India

Nominated under Section 4(1) (c) of the SEBI Act, 1992 (15 of 1992)

ANAND SINHADeputy Governor

7MEMBERS OF THE SEBI BOARD(As on March 31, 2013)

U. K. SINHAChairman

PRASHANT SARANWhole Time Member

RAJEEV K. AGARWALWhole Time Member

S. RAMANWhole Time Member

V. K. JAIRATHPart Time Member

P. C. CHHOTARAYPart Time Member

DR. ARVIND MAYARAMSecretary

Ministry of FinanceDepartment of Economic

Government of India

NAVED MASOODSecretary

Ministry of Corporate

Government of India

ANAND SINHADeputy Governor

Reserve Bank of India

9CHAIRMAN, WHOLE TIME MEMBERS ANDEXECUTIVE DIRECTORS

Left to Right :

: Shri S. Raman, Whole Time Member; Shri Prashant Saran, Whole Time Member; Shri U. K. Sinha, Chairman; Shri Rajeev K. Agarwal, Whole Time Member.

Standing : Shri S. Raman, Executive Director; Shri R. K. Padmanabhan, Executive Director; Shri SVMD Rao, Executive Director; Shri Ananta Barua, Executive Director; Shri S. Ravindran, Executive Director; Shri J Ranganayakulu, Executive Director; Shri P K Nagpal, Executive Director.

10

CONTENTS

Page No.

iCONTENTS

Page No.

List of Boxes ..................................................................................................................................... vii

List of Tables..................................................................................................................................... viii

List of Charts ................................................................................................................................... xiii

List of Abbreviations ....................................................................................................................... xiv

PART ONE: POLICIES AND PROGRAMMES

1. GENERAL MACRO-ECONOMIC ENVIRONMENT .................................................... 1

2. REVIEW OF POLICIES AND PROGRAMMES.............................................................. 11

I. Primary Securities Market................................................................................................. 11

II. Secondary Securities Market............................................................................................. 18

III. Corporate Debt Market...................................................................................................... 33

IV. Mutual Funds ..................................................................................................................... 34

V. Alternative Investment Funds ......................................................................................... 41

VI. Investment Advisers ......................................................................................................... 41

VII. Foreign Institutional Investors ........................................................................................ 41

VIII. Takeovers.............................................................................................................................. 44

IX. Investor Assistance and Education.................................................................................. 45

X. Legal Framework................................................................................................................ 45

XI. Retrospect and Prospects................................................................................................... 46

PART TWO: TRENDS AND OPERATIONS IN SECURITIES MARKETS

1. PRIMARY SECURITIES MARKET ................................................................................... 51

I. Resource Mobilisation through Public and Rights Issues ........................................... 51

II. Resource Mobilisation through QIP and IPP................................................................. 57

III. Resource Mobilisation through Preferential Allotment ............................................... 58

IV. Resource Mobilisation through Private Placement in Corporate Debt ..................... 59

2. SECONDARY SECURITIES MARKET............................................................................. 60

I. Equity Market in India ...................................................................................................... 60

II. Performance of Major Stock Indices and Sectoral Indices........................................... 64

III. Turnover in the Indian Stock Market .............................................................................. 66

IV. Market Capitalisation......................................................................................................... 68

V. Stock Market Indicators..................................................................................................... 70

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CONTENTS

Page No.

VI. Volatility in Stock Markets................................................................................................ 73

VII. Trading Frequency ............................................................................................................. 75

VIII. Activities of Stock Exchanges ........................................................................................... 76

IX. Dematerialisation................................................................................................................ 77

X. Derivatives Segment........................................................................................................... 80

3. TRENDS IN THE BOND MARKET .................................................................................. 89

I. Corporate Bond Market..................................................................................................... 89

II. Wholesale Debt Market ..................................................................................................... 91

4. MUTUAL FUNDS.................................................................................................................. 92

5. PORTFOLIO MANAGEMENT........................................................................................... 98

6. FOREIGN INSTITUTIONAL INVESTMENT................................................................. 99

7. ALTERNATIVE INVESTMENT FUNDS.......................................................................... 104

8. CORPORATE RESTRUCTURING ..................................................................................... 105

PART THREE: REGULATION OF SECURITIES MARKET

1. INTERMEDIARIES ............................................................................................................... 107

I. Streamlining of Registration Process of Intermediaries............................................... 107

II. Registered Intermediaries Other than Stock Brokers and Sub-brokers..................... 107

III. Registration of Stock Brokers............................................................................................ 108

IV. Registration of Sub-brokers............................................................................................... 112

V. Recognition of Stock Exchanges....................................................................................... 112

VI. Memorandum of Understanding (MoU) between Stock Exchanges ......................... 113

VII. Registration of Foreign Institutional Investors and Custodians of Securities.......... 113

VIII. Registration of Collective Investment Schemes............................................................. 114

IX. Registration of Mutual Funds........................................................................................... 114

X. Registration of Venture Capital Funds............................................................................ 115

XI. Fees and Other Charges .................................................................................................... 115

2. CORPORATE RESTRUCTURING ..................................................................................... 117

I. Substantial Acquisition of Shares and Takeovers.......................................................... 117

II. Buy-back............................................................................................................................... 117

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CONTENTS

Page No.

3. SUPERVISION ....................................................................................................................... 118

I. Promotion and Regulation of Self Regulatory Organisations..................................... 118

II. Inspection of Market Intermediaries ............................................................................... 119

III. Inspection of Depositories................................................................................................. 120

IV. Inspection of Stock Exchanges.......................................................................................... 121

V. Prevention of Money Laundering.................................................................................... 121

4. SURVEILLANCE .................................................................................................................... 124

I. Market Surveillance Mechanism...................................................................................... 124

II. Integrated Market Surveillance System .......................................................................... 125

III. Data Warehousing and Business Intelligence System .................................................. 125

............................................................. 125

V. Surveillance Actions ........................................................................................................... 125

VI. Surveillance Measures........................................................................................................ 126

VII. Enforcement Actions .......................................................................................................... 127

5. INVESTIGATION.................................................................................................................. 130

I. Initiation of Investigation .................................................................................................. 130

II. Process of Investigation ..................................................................................................... 131

III. Trends in Investigation Cases........................................................................................... 131

IV. Regulatory Action............................................................................................................... 132

V. Follow-up of Investigations .............................................................................................. 136

6. ENFORCEMENT OF REGULATIONS.............................................................................. 136

I. Enforcement Mechanisms ................................................................................................. 136

II. Enquiry and Adjudication ................................................................................................ 139

III. Regulatory Actions against CISs ...................................................................................... 140

7. PROSECUTION ..................................................................................................................... 143

I. Trends in Prosecution ........................................................................................................ 143

II. Nature of Prosecution ........................................................................................................ 146

III. Disposal of Prosecution Cases.......................................................................................... 146

8. LITIGATIONS, APPEALS AND COURT PRONOUNCEMENTS.............................. 146

iv

CONTENTS

Page No.

9. CONSENT AND COMPOUNDING ................................................................................. 148

10. INVESTOR ASSISTANCE AND EDUCATION ............................................................. 148

I. Redressal of Investor Grievances ..................................................................................... 148

II. SEBI Complaints Redress System .................................................................................... 150

III. Regulatory action against companies and their directors for Non-redressal of investor grievances .............................................................................. 150

................................................................................ 151

V. SEBI Toll Free Helpline .................................................................................................... 152

VI. Investor Assistance ............................................................................................................ 153

VII. Investor Education Multimedia Campaign................................................................. 153

VIII. Investor Awareness Programs/ Workshops .................................................................. 153

IX. Visit to SEBI ........................................................................................................................ 156

11. RESEARCH ACTIVITIES ................................................................................................... 156

I. Research Inputs................................................................................................................... 157

II. Market Interactions............................................................................................................. 157

III. Risk Management .............................................................................................................. 158

PART FOUR: REGULATORY CHANGES

1. REGULATORY DEVELOPMENTS ................................................................................. 159

I. New Regulations................................................................................................................. 159

II. Amendments to Existing Rules/ Regulations ................................................................ 163

2. SIGNIFICANT COURT PRONOUNCEMENTS............................................................. 168

I. Supreme Court .................................................................................................................... 168

II. High Court........................................................................................................................... 170

III. Securities Appellate Tribunal ........................................................................................... 173

PART FIVE: ORGANISATIONAL MATTERS

1. SEBI BOARD .......................................................................................................................... 178

2. AUDIT COMMITTEE ........................................................................................................... 178

3. ORGANISATION RESTRUCTURING CELL ................................................................. 179

vCONTENTS

Page No.

........................................................................................................................ 179

II. Redesigning SEBI's Role .................................................................................................... 180

4. HUMAN RESOURCES ......................................................................................................... 180

.................................................................. 181

................................................................................................................................. 181

III. Promotions .......................................................................................................................... 181

................................................................................... 181

V. Job Rotation ......................................................................................................................... 181

........................................................................................................... 182

VII. Training and Development ............................................................................................... 182

VIII. Internship ............................................................................................................................. 183

IX. Extracurricular activities within SEBI ............................................................................. 183

X. Prizes won............................................................................................................................ 183

XI. Initiatives in the realm of corporate social responsibility............................................ 183

XII. Scheme for recognizing and rewarding academic excellence of children of employees........................................................................................................ 183

5. NATIONAL INSTITUTE OF SECURITIES MARKETS ............................................... 183

I. School for Securities Education and School for Securities Information and Research ................................................................................................ 183

II. School for Investor Education and Financial Literacy ................................................. 185

III. School for Regulatory Studies and Supervision............................................................ 186

...................................................................... 186

....................... 188

6. VIGILANCE CELL................................................................................................................. 189

7. PROMOTION OF OFFICIAL LANGUAGE .................................................................... 189

I. Bilingualisation .................................................................................................................. 189

II. Rajbhasha Competitions and Functions Correspondence in Hindi.......................... 189

III. Aaj Ka Shabd...................................................................................................................... 189

IV. Hindi Noting and Hindi Quotes..................................................................................... 189

V. Rajbhasha Meetings and Seminars ................................................................................. 190

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CONTENTS

Page No.

VI. Hindi Magazine ................................................................................................................. 190

VII. Information Technology and Hindi................................................................................ 190

VIII. Investor Website and SCORES ........................................................................................ 190

................................................................................................................... 190

8. INFORMATION TECHNOLOGY ...................................................................................... 190

I. Strengthening IT Security.................................................................................................. 190

II. Implementation of New Web-Mail .................................................................................. 190

III. Implementation of two factor authentication for secured access to SEBI Web applications ....................................................................................................... 191

IV. Internet Connectivity to Disaster Recovery Site Chennai .......................................... 191

.......................................... 191

VI. Enterprise Wide Portal .................................................................................................... 191

9. INTERNATIONAL CO-OPERATION ............................................................................... 191

I. Association with IOSCO................................................................................................... 192

II. Association with G20/FSB ................................................................................................ 196

III. Joint Forum......................................................................................................................... 196

IV. Bilateral Engagements ...................................................................................................... 167

V. Ministry References- Contribution to various International Treaties and Dialogues ..................................................................................................... 197

VI. Participation in the International Programs.................................................................. 197

VII. MMoU and MoU Requests .............................................................................................. 198

VIII. Foreign Delegations/Dignitaries to SEBI ....................................................................... 198

IX. Study Tours for Overseas Regulators ............................................................................ 198

10. PARLIAMENT QUESTIONS .............................................................................................. 198

11. RIGHT TO INFORMATION ACT ..................................................................................... 199

CHRONOLOGY OF MAJOR POLICY INITIATIVES BY SEBI........................................... 202

vii

1.1 Business Responsibility Report .................................................................................... 13

1.2 Public issues in electronic form and use of nationwide broker ............................. 15

1.3 Single One Time KYC.................................................................................................... 19

1.4 Dedicated Debt segment on stock exchanges............................................................ 28

1.5 Pre-trade Risk Controls ................................................................................................. 30

1.6 Periodic Call Auction for Illiquid scrips and Extension of Pre-Open Call Auction Session .................................................................................... 31

2.1 Impact Analysis of policy measures introduced in Primary Market .................... 56

............................................. 123

LIST OF BOXES

Box No. Name Page No. Page No.

viii

LIST OF TABLES

Table No. Name Page No. Page No.

1.1 National Income (at 2004-05 prices) .......................................................................... 2

1.2 GDP (at Factor Cost) by Economic Activity (at 2004-05 prices) ........................... 3

1.3 Index of Industrial Production................................................................................... 4

1.4 Gross Domestic Savings and Investment ................................................................. 6

1.5a Demat Statistics............................................................................................................. 10

1.5b No. of Listed Companies............................................................................................. 10

1.6 Growth of Turnover in Various Segments in Indian Stock Markets ................... 10

1.7 Assets under the Custody of Custodians................................................................. 11

2.1 Resource Mobilisation through Public and Rights Issues ..................................... 51

2.2 SME Platform ................................................................................................................ 52

2.3 Sector-wise Resource Mobilisation ............................................................................ 53

2.4 Size-wise Resource Mobilisation................................................................................ 54

2.5 Mega Issues in 2012-13 ................................................................................................ 55

2.6 Industry-wise Resource Mobilisation........................................................................ 57

2.7 Resource Mobilisation through QIP and Conforming to MPS through IPP...... 58

............ 58

2.9 Resource Mobilisation through Preferential Allotment ......................................... 59

2.10 Private Placement of Corporate Bonds Reported to BSE and NSE...................... 59

2.11 Major Indicators of Indian Stock Markets................................................................ 62

2.12 Major Stock Indices and their Percentage Variation............................................... 64

2.13 Sectoral Stock Indices and their Returns .................................................................. 65

2.14 Exchange-wise Cash Segment Turnover ................................................................. 66

2.15 Turnover at BSE and NSE: Cash Segment................................................................ 67

2.16 City-wise Turnover of Top 20 Cities in Cash Segment during 2012-13 .............. 68

2.17 Market Capitalisation at BSE...................................................................................... 69

2.18 Market Capitalisation at NSE..................................................................................... 70

2.19 Select Ratios Relating to Stock Market ..................................................................... 71

2.20 Price to Earnings Ratio ................................................................................................ 71

2.21 Price to Book-Value Ratio............................................................................................ 72

2.22 Average Daily Volatility of Benchmark Indices ...................................................... 73

2.23 Trends in Daily Volatility of International Stock Market Indices during 2012-13 74

ix

LIST OF TABLES


2.24 Trading Frequency of Listed Stocks.......................................................................... 75

2.25 Share of Brokers, Securities and Participants in Cash Market Turnover ............ 76

2.26 Trading Statistics of Stock Exchanges....................................................................... 77

2.27 Turnover of Subsidiaries of Stock Exchanges.......................................................... 78

2.28 Depository Statistics..................................................................................................... 78

2.29 Depository Statistics: Debenture/Bonds and Commercial Paper ......................... 79

2.30 Cities According to Number of DP Locations: Geographical Spread ................. 79

2.31 Trends in Turnover and Open Interest in Equity Derivatives Segment ............. 81

2.32 Product-wise Derivatives Turnover at NSE and BSE............................................. 82

2.33 Trends in Index Futures at NSE and BSE ................................................................ 83

2.34 Trends in Single Stock Futures at NSE and BSE..................................................... 84

2.35 Trends in Index Options at NSE and BSE................................................................ 84

2.36 Trends in Stock Options at NSE and BSE ................................................................ 85

2.37 Shares of Various Classes of Members in Derivatives Turnover at NSE and BSE. ............................................................................................................... 85

2.38 Trends in Currency Derivatives Segment ................................................................ 87

2.39 Product-wise Market Share in Currency Derivatives Volume ............................. 88

2.40 Trends in Interest Rate Derivatives at NSE.............................................................. 88

2.41 Secondary Market: Corporate Bond Trades............................................................. 90

.................................................................................. 90

2.43 Business Growth on the Wholesale Debt Market Segment of NSE..................... 91

2.44 Instrument-wise Share of Securities Traded in Wholesale Debt Market Segment of NSE ............................................................................................. 91

2.45 Share of Participants in Turnover of Wholesale Debt Market Segment of NSE ............................................................................................................ 92

2.46 Mobilisation of Resources by Mutual Funds........................................................... 93

2.47 Sector-wise Resource Mobilisation by Mutual Funds during 2012-13................ 94

2.48 Scheme-wise Resource Mobilisation and Assets under Management by Mutual Funds as on March 29, 2013.................................................................... 95

2.49 Number of Schemes by Investment Objective as on March 29, 2013.................. 96

2.50 Trends in Transactions on Stock Exchanges by Mutual Funds............................ 97

.......................... 98

xLIST OF TABLES


as on March 31, 2013.................................................................................................... 98

2.53 Assets Managed by Portfolio Managers................................................................... 99

2.54 Investment by Foreign Institutional lnvestors......................................................... 100

2.55 Investments by Mutual Funds and Foreign Institutional lnvestors ................... 100

2.56 QFI Investments during 2012-13................................................................................ 101

2.57 Allocation of Debt Investment limits to FIIs and Sub-accounts during 2012-13 101

2.58 Debt Utilisation Status as on March 31, 2013 .......................................................... 102

2.59 Notional Value of Open Interest of Foreign Institutional investors in Derivatives during 2012-13..................................................................................... 103

2.60 Notional Value of Participatory Notes (PNs) Vs Assets Under Management of FIIs ..................................................................................................... 103

2.61 Cumulative Net Investments by VCFs and FVCIs ................................................. 104

2.62 Category-wise Investors in VCFs............................................................................... 105

2.63 Trends in Corporate Restructuring ........................................................................... 106

3.1 Registered Intermediaries other than Stock Brokers and Sub Brokers ............... 108

3.1a Intermediaries other than Stock Brokers & Sub-brokers in the Process of Registration ............................................................................................... 108

3.2 Registered Stock Brokers............................................................................................. 109

3.2a Stock Broker and Sub-Broker Applications under the Process of Registration . 109

... 110

3.4 Number of Registered Members in Equity Derivatives Segment ........................ 111

3.5 Number of Registered of Members in Currency Derivatives Segment............... 111

3.6 Registered Sub-Brokers................................................................................................ 112

3.7 Stock Exchanges with Permanent Recognition........................................................ 113

3.8 Renewal of Recognition Granted to Stock Exchanges during 2012-13................ 113

3.9 Number of Registered FIIs, Sub-accounts and Custodians................................... 114

3.9a Status of Registration of FII, Sub-accounts and Custodians during 2012-13 ..... 114

3.10 Mutual Funds Registered with SEBI ......................................................................... 115

3.11 Registered Venture Capital Funds............................................................................. 115

3.12 Fees and Other Charges .............................................................................................. 116

xi

LIST OF TABLES


............................................ 117

....................................................... 117

3.15 Buyback cases during 2012-13.................................................................................... 118

3.16 Inspection of Stock Brokers/Sub-brokers/Clearing Members ............................... 119

3.16a Inspection by Stock Exchange/Clearing Corporation............................................. 119

3.17 Inspection of other Market Intermediaries .............................................................. 120

3.18 Actions against AML/CFT Violations/Discrepancies.............................................. 123

3.19 Surveillance Actions during 2012-13 ......................................................................... 126

3.20 Investigations by SEBI ................................................................................................. 132

3.21 Nature of Investigations Taken up and Completed ............................................... 133

3.22 Type of Regulatory Actions Taken ............................................................................ 133

3.23 Age-wise Analysis of Enforcement Actions - U/S 11, 11B and 11D of SEBI Act as on March 31, 2013 ................................................................................... 137

3.23a Age-wise Analysis of Enforcement Actions - Enquiry Proceedings as on March 31, 2013.................................................................................................... 138

3.23b Age-wise Analysis of Enforcement Actions - Adjudication Proceedings as on March 31, 2013.................................................................................................... 138

3.23c Age-wise Analysis of Enforcement Actions - Prosecution Proceedings as on March 31, 2013.................................................................................................... 139

3.23d Age-wise Analysis of Enforcement Actions Summary Proceedings under SEBI Act as on March 31, 2013 ...................................................................... 140

3.24 Enquiry and Adjudication Proceedings Initiated during 2012-13........................ 140

3.24a Enquiry and Adjudication during 2012-13............................................................... 140

3.24b Pending Enforcement Actions as on March 31, 2013 ............................................. 140

3.25 Enquiry and Adjudication Proceedings Initiated against other Intermediaries during 2012-13 ................................................................................... 141

3.26 Prosecutions Launched................................................................................................ 144

3.27 Region-wise Data on Prosecution Cases as on March 31, 2013............................ 144

3.28 Nature of Prosecutions Launched as on March 31, 2013....................................... 146

3.29 Number of Prosecution Cases decided by the Courts as on March 31, 2013 .... 146

.......................................... 147

3.30a Status of Court Cases where SEBI was a Party (Judicial Forum) ........................ 147

xii

LIST OF TABLES

Table No. Name Page No.

3.31 Status of Appeals before the Securities Appellate Tribunal.................................. 147

3.31a Disposals of Appeals by Securities Appellate Tribunal......................................... 147

3.32 Status of Appeals Before the Honble Supreme Courts ......................................... 148

3.32a Status of Appeals Before the Honble High Courts................................................ 148

3.33 Receipt and Disposal of applications under Consent and Compounding Process................................................................................................. 149

........................................... 149

during 2012-13............................................................................................................... 149

3.36 Status of Investor Grievances Received and Redressed......................................... 150

3.37 Failure to Redress Investor Grievances: Order passed under section 11B ......... 151

3.38 Failure to Redress Investor Grievances: Adjudication Proceedings .................... 151

3.39 Companies Restrained From Accessing the Securities Market............................. 151

3.40 Companies Penalised For Their Failure to Redress Investor Grievances ........... 151

3.41 Trends in Awareness Programs/ Workshops Conducted by SEBI ...................... 153

3.42 Regional Seminars Conducted by SEBI during 2012-13 ........................................ 154

3.43 School Programs Conducted by SEBI during 2012-13 ........................................... 155

3.44 Trends in Financial Education Programs through Resource Persons ................. 155

5.1 Board Meetings during 2012-13 ................................................................................. 178

........................................................................................ 181

5.3 Parliament Queries received/ raised.......................................................................... 198

5.4 Session-wise Parliament Queries received and replied by SEBI during 2012-13 199

..... 199

5.6 RTI applications and First Appeal to SEBI Appellate Authority.......................... 201

5.7 Appeal before Central Information Commission.................................................... 201

xiii

LIST OF CHARTS

Chart No. Name Page No.

1.1 Share of Components of GDP (at Factor Cost)........................................................ 52.1 Share of Broad Category of Issues in Resource Mobilisation ............................... 522.2 Sector-wise Resource Mobilisation ............................................................................ 532.3 Movement of Benchmark Stock Market Indices .................................................... 612.4 Value traded in Secondary Market............................................................................ 612.5 Year-on-Year Returns of International Indices......................................................... 632.6 Movement of Sectoral Indices of BSE ...................................................................... 652.7 Movement of Sectoral Indices of NSE ..................................................................... 662.8 P/E Ratio of International Stock Market Indices .................................................... 722.9 Annualised Volatility of International Stock Market Indices ..............................2.10 Derivatives Turnover vis--vis Cash Market Turnover.......................................... 802.11 Product-wise Share in Equity Derivatives Turnover at NSE and BSE ................ 822.12 Participant-wise average share in F&O equity turnover in 2012-13 ................... 862.13 Participant-wise share in equity derivative open interest at NSE

at end of the period...................................................................................................... 862.14 Share of Corporate Issuances in Domestic Debt Securities (percent).................. 892.15 AUM - GDP Ratio (percent) ....................................................................................... 933.1 Percentage Share of Stock Brokers (as on March 31, 2013) ................................... 1103.2 Percentage Share of Stock Brokers (As on March 31, 2012) .................................. 1113.3 Investigation Cases....................................................................................................... 1313.4 Nature of Investigation Cases Taken Up.................................................................. 1323.5 Investigation Completed ............................................................................................. 1333.6 Type of Regulatory Actions Taken during 2012-13 ................................................ 1343.7 The trends of phone calls received in SEBI Toll Free Helpline ........................... 1523.8 The trends of feedback of call received in SEBI Toll Free Helpline .................... 1523.9 Trends in Financial Education Programs through Resource Persons ................ 1563.10 The trends of Educational Visit at SEBI.................................................................... 157

Conventions used in this Report

` : Rupees Billion : Thousand million/hundred crore

Lakh : Hundred thousand NA : Not Available

Crore : Ten million Na : Not Applicable

Million : Ten lakh p.a. : Per annum

hundred per cent.Source of Charts and Boxes where not mentioned, is SEBI.

xiv

ABBREVIATIONS

AA Appellate Authority ADB Asian Development BankADR American Depositary ReceiptAD(s) Authorised Dealer(s)AGM Assistant General ManagerAI(s) Anchor Investor(s)AIF(s) Alternative Investment Fund(s)AMC(s) Asset Management Company/CompaniesAMFI Association of Mutual Funds in IndiaAML Anti-Money Laundering AP(s) Authorised Person(s) ARN AMFI Registration NumberASBA Application Supported by Blocked AmountATR(s) Action Taken Report(s)AUM Assets Under Management BCP Business Continuity PlanBMC Base Minimum Capital BRLM(s) Book Running Lead Manager(s)BSDA Basic Services Demat AccountBSE Bombay Stock Exchange LimitedBTI Bankers to an Issue CAF(s) Composite Application Form(s)CAGR Compounded Annual Growth Rate CBI Central Bureau of InvestigationCC Clearing CorporationCBLO Collateralized Borrowing And Lending ObligationCBSE Central Board of Secondary EducationCCI Competition Commission of India CDS Credit Default Swaps

xv

ABBREVIATIONS

CDSL Central Depository Services (India) Limited CETTM Centre for Excellence in Telecom Technology and Management CFFEX China Financial Futures ExchangeCFA Charted Financial AnalystCFT Combating Financing of TerrorismCGM Chief General ManagerCIC Central Information CommissionCIS Collective Investment SchemesCM Clearing Member CMIE Centre for Monitoring Indian EconomyCPE Continuing Professional EducationCPF Customer Protection Fund CP(s) Commercial Paper(s)CRA(s) Credit Rating Agency/Agencies(s) CRR Cash Reserve Ratio CSO Central Statistical OrganisationCSX Coimbatore Stock ExchangeDC(s) Division Chief(s)DFIs Development Finance InstitutionsDGM Deputy General ManagerDIP Disclosure and Investor ProtectionDJIA Dow Jones Industrial AverageDLP Data Leakage ProtectionDMA Direct Market AccessDMS Document Management SystemDP(s) Depository Participant(s)DRS Disaster RecoveryDRS Disaster Recovery SiteDSE Designated Stock ExchangeDT(s) Debenture Trustee(s)DWBIS Data Warehousing and Business Intelligence System

xvi

ABBREVIATIONS

EAG Eurasian Group on Combating Money Laundering and Financing of Terrorism ECS Electronic Clearance ServicesED Executive Director/Enforcement Directorate EFD Enforcement DepartmentELSS Equity Linked Saving Scheme EMDE(s) Emerging Market and Developing Economy/EconomiesEPFO Employee Provident Fund Organisation ESOP Employee Stock Ownership PlanESOS Employee Stock Option SchemeESPS Stock Purchase SchemeETF(s) Exchange Traded Fund(s)ETN(s) Exchange Traded Note(s)EURO EuropeanEWP Enterprise Wide PortalF&O Futures and OptionsFAQ(s) Frequently Asked Question(s)FATF Financial Action Task ForceFCCB(s) Foreign Currency Convertible Bond(s)FDI Foreign Direct InvestmentsFEMA Foreign Exchange Management ActFIA Futures Industry AssociationFII(s) Foreign Institutional Investor(s)FIMMDA Fixed Income Money Market and Derivatives Association of IndiaFINRA Financial Industry Regulatory AuthorityFMP(s) Fixed Maturity Plan(s) FRRB Financial Reporting Review BoardFRTI Financial Regulators Training InitiativeFSAP Financial Sector Assessment ProgrammeFSB Financial Stability BoardFSDC Financial Stability and Development CouncilFSLRC Financial Sector Legislative Reforms CommissionFSR Financial Stability ReportFSRB FATF-Style Regional Body

xvii

ABBREVIATIONS

FSS Financial Supervisory Service, South KoreaFY Financial YearFVCI(s) Foreign Venture Capital Investor(s)HFC(s) Housing Finance Company/CompaniesHFT High Frequency TradingHNIs High Net Worth IndividualsHRD Human Resource DevelopmentG20 Group of TwentyGAAP(s) Generally Accepted Accounting Principle(s)GBP British Pound SterlingGC Global CustodianGCC Gulf Co-operation CouncilGDCF Gross Domestic Capital FormationGDP Gross Domestic ProductGDR(s) Global Depository Receipt(s)GDS Gross Domestic Savings/Gold Deposit SchemeGETF(s) Gold Exchange Traded Fund(s)GM General ManagerGNI Gross National IncomeGoI Government of IndiaGIZ German Society for International CooperationGSE Gauhati Stock ExchangeG-Sec Government SecuritiesIA Investment AdvisersIAD Investor Awareness DivisionIAIS International Association of Insurance SupervisorsIBT Internet Based TradingICAI Institute of Chartered Accountants of IndiaICAI-FRRB Financial Reporting Review Board of the Institute of Chartered Accountants of

IndiaICCL Indian Clearing Corporation LimitedICDR Issue of Capital and Disclosure RequirementsICSI The Institute of Company Secretaries of IndiaICWAI The Institute of Cost and Work Accountants of IndiaIDF Infrastructure Debt FundIDR(s) Indian Depository Receipt(s)IFCF India Focus Cardinal Fund

xviii

IIP Index of Industrial ProductionIMF International Monetary FundIMSS Integrated Market Surveillance SystemIMD Investment Management DepartmentIPF Investor Protection FundIPP Institutional Placement ProgrammeINR Indian RupeeIOSCO International Organisation of Securities CommissionsIPEF Investor Protection and Education FundIPF Investor Protection FundIPC Indian Penal Code IPS Intrusion Detection and Prevention System IRDA Insurance Regulatory and Development AuthorityIRM Information Rights ManagementIRS Indian Revenue ServiceISD Integrated Surveillance DepartmentISE Inter-Connected Stock Exchange IT Information TechnologyITeS Information Technology Enabled ServicesITF Implementation Task ForceJF Joint ForumJPY Japanese YenJSE Jaipur Stock ExchangeKIM Key Information MemorandumKRA KYC Registration AgencyKYC Know Your ClientLAF Liquidity Adjustment FacilityLECS Local ECSLES(s) Liquidity Enhancement Scheme(s)LLP Limited Liability Partnership LSE Ludhiana Stock ExchangeMAS Monetary Authority of SingaporeMB(s) Merchant Banker(s)

ABBREVIATIONS

xix

ABBREVIATIONS

MCR Monthly Cumulative ReportMCX-SX MCX Stock ExchangeMF(s) Mutual Fund(s)MIDC Maharashtra Industrial Development CorporationMII(s) Market Infrastructure Institution(s)MIMPS Manner of Increasing and Maintaining Public Shareholding in Recognised Stock

ExchangesMMoU Multilateral Memorandum of UnderstandingMoF Ministry of FinanceMoU Memorandum of UnderstandingMPS Minimum Public ShareholdingMPSE Madhya Pradesh Stock Exchange LimitedMQSOS Median Quarter Sigma Order SizeMSE Madras Stock ExchangeMWPL Minimum Market Wide Position LimitNASDAQ National Association of Securities Dealers Automated QuotationsNAV Net Asset ValueNCAER National Council of Applied Economic ResearchNCD Non Convertible DebentureNCFE National Centre for Financial EducationNECS National ECSNEFT National Electronic Fund TransferNDP Net Domestic ProductNGO Non-Government OrganisationsNHB National Housing BankNII(s) Non-Institutional Investor(s)NISM National Institute of Securities MarketsNNI Net National Income NRI(s) Non-Resident Indian(s) NSCCL National Securities Clearing Corporation LimitedNSDL National Securities Depository LimitedNSE National Stock Exchange of India LimitedNSFE National Strategy for Financial EducationNSMD Network for Securities Markets Data

xx

OECD Organisation for Economic Co-operation and DevelopmentOFCD(s) Optionally Fully Convertible Debenture(s) OMO Open Market OperationsOTC Over the CounterOTCEI Over the Counter Exchange of IndiaP.A. Per AnnumPAN Permanent Account NumberP/B Ratio Price to Book-Value RatioP/E Ratio Price to Earnings RatioPCD Partly Convertible DebenturePCI Press Council of IndiaPF(s) Provident Fund(s)PFI Public Financial InstitutionPFUTP Prohibition of Fraudulent and Unfair Trade Practices relating to Securities

Market PGPSM Post Graduate Programme in Securities MarketsPIT Prohibition of Insider Trading PFRDA Pension Fund Regulatory and Development AuthorityPMLA Prevention of Money Laundering Act PoS Points of ServicePID Public Interest DirectorsPN Participatory Notes PSE Pune Stock ExchangePSUs Public Sector Undertaking(s) RAIN Registrars Association of IndiaRBI Reserve Bank of India RDDBFI Recovery of Debts due to Banks and Financial Institutions

ABBREVIATIONS

xxi

RE Revised EstimateRECS Regional ECS RGESS Rajiv Gandhi Equity Savings SchemeRHP Red Herring ProspectusRII Retail Individual Investors RI Rigorous ImprisonmentRP(s) Resource Person(s)RRD Regulatory Research DivisionRSE(s) Regional Stock Exchange(s)RTI/STA(s) Registrar to an Issue and Share Transfer Agent(s)RTI Right to InformationSA(s) Sub Account(s)SAARC South Asian Association for Regional Co-operationSARFAESI Securitization and Reconstruction of Financial Assets and Enforcement of

Security Interest ActSAT Securities Appellate TribunalSAST Substantial Acquisition of Shares and Takeovers SC(R)A Securities Contracts (Regulation) ActSCRR Securities Contracts (Regulation) RulesSCORES SEBI Complaints Redress SystemSCM Self Clearing MemberSCN Show Cause NoticeSEBI Securities and Exchange Board of IndiaSEBON Securities Board of NepalSEC Securities and Exchange CommissionSECC Stock Exchanges and Clearing CorporationsSI Simple Imprisonment SID Scheme Information DocumentSIEFL School for Investor Education and Financial LiteracySLB Securities Lending and BorrowingSLR Statutory Liquidity Ratio SME Small and Medium EnterprisesSOP Statement of PurposeSPV(s) Special Purpose Vehicle(s)

ABBREVIATIONS

xxii

SRO(s) Self Regulatory Organisation(s)SRSS School for Regulatory Studies and SupervisionSSE School for Securities EducationSSIR School for Securities Information and ResearchSTT Securities Transaction TaxSTWT Securities Trading using Wireless TechnologySWF Sovereign Wealth Funds T-Bills Treasury Bills TER Total Expense RatioTM Trading Member T to T Trade-to-TradeUAT User Acceptance TestUCC Uniform Commercial Code UIN Unique Identity NumberUK United Kingdom USA United States of AmericaUSD United States DollarUSE United Stock ExchangeUSIBC US-India Business CouncilUTI Unit Trust of IndiaUTI MF UTI Mutual FundVaR Value at RiskVPN Virtual Private NetworkVCF(s) Venture Capital Fund(s)WDM Wholesale Debt MarketWFE World Federation of ExchangesWGFI Working Group on Foreign InvestmentWPI Wholesale Price Index WTM Whole Time MemberXBRL eXtensible Business Reporting Language

ABBREVIATIONS

1Part One: Policies and ProgrammesPART ONE: POLICIES AND PROGRAMMES

The Annual Report of the Securities and Exchange Board of India (SEBI) for the year 2012-13 encompasses the developments in capital markets in the wake of early deterioration and later recovery of the global SEBI Annual Report for 2012-13 keeps in view the developments in the world economy while aligning them with the stated objectives of SEBI. As per the format prescribed by the Securities and Exchange Board of India (Annual Report) Rules, 1994, SEBI Annual Report for 2012-13 elaborates on the policies and programmes undertaken during the year to strengthen the Indian regulatory framework of Capital markets. SEBI continued to ensure its commitment (a) protection of the interests of investors in securities, (b) promotion of the development of the securities market and (c) regulation of the securities market.

SEBI achieves its objectives through proactive supervision and policy measures. The major policy issues are discussed in public domain through discussion papers. The decisions arrived pursuant to a thorough examination are placed on the website along with the agenda papers of the Board. The various quasi-judicial orders passed by the Board are also posted on the website.

In line with the stated objectives, this Report provides the manner in which SEBI discharged its responsibilities and exercised its powers during the year in furtherance of the objectives enshrined in (a) the Securities and Exchange Board of India Act, 1992, (b) the Securities Contracts (Regulation) Act, 1956 (c) the Depositories Act, 1996 and (d) the relevant provisions of the Companies Act, 1956. It also takes a view of the global background relevant to these developments.

1. GENERAL MACRO-ECONOMIC ENVIRONMENTAfter the setback in 2011-12, the

early 2012-13 marked a more pronounced deterioration in activity across the globe. The recovery however became imminent as credit markets healed in US and short term risks in the Euro area trimmed. While investment dipped, consumption picked up across the globe in varied measures slowly in advanced economies and steadily in emerging markets. Prudent macroeconomic policies have been leading the way to recovery across the economies.

Financial markets have boosted the economic activity and the broad markets have rallied in late 2012-13. Rate cuts have been induced to combat slowdown by many central banking authorities. Back at home, weakening of growth in industrial and services sector earmarked one of the lowest growth rates in recent times. The ushering of

The growth rate which had declined in 2011-12 to 6.2 percent continued further southward in 2012-13 and the provisional estimates put it at a decadal low rate of 5.0 percent. Gross Domestic Product (GDP) estimates at factor cost at constant (2004-05) prices for FY13 is likely to be ` 55,05,437 crore as against ` 52,43,582 crore for FY12 and the growth is expected to be 5.0 percent as compared to 6.2 in FY12. (Table1.1)

While the previous year witnessed Services sector supporting the growth rate amidst the stagnation prevailing in year saw all the three sectors losing the domestic concerns seem to have dampened

2Annual Report 2012-13

the economic expansion much in the 2012-13 as compared to the previous year. Agriculture growth rate fell from 3.6 percent in 2011-12 to 1.9 percent in 2012-13. Industry recorded a growth of 1.2 percent in 2012-13 as compared year. Services sector recorded sluggish growth on account of falling export of IT/ITeS and is expected to be 6.8 percent for 2012-13 while it stood at 7.9 percent for 2011-12.

Agriculture

Agriculture is expected to show a growth of 1.9 percent in 2012-13 as opposed to a growth of 3.6 percent seen in 2011-12. The deceleration in the sector may be a result

of an expected decline in production of food grains around by 2.8 percent this year as compared to a growth of 5.2 percent in the of monsoon has hit the production of rabi and kharif crops alike. The agriculture sector in India today stands at a point where the further development depends upon the reforms undertaken to improve efficiency and productivity along with investments in agriculture. (Table 1.2)

The share of agriculture in the GDP is further expected to reduce from 14.1 percent in 2011-12 to 13.7 percent in 2012-13. The 11th growth rate of 3.3 percent against the target

Table 1.1: National Income (at 2004-05 prices)*(` crore)

2010-11** 2011-12 2012-13Item (2nd Revised (1st Revised (Provisional

Estimate) Estimate) Estimate)1 2 3 4

A. Estimates at Aggregate Level1. National Product

1.1 Gross National Income (GNI) at factor cost 4,882,249 5,196,848 5,449,1048.8% 6.4% 4.9%

1.2 Net National Income (NNI) at factor cost 4,310,195 4,572,075 4,766,7548.7% 6.1% 4.3%

2. Domestic Product2.1 Gross Domestic Product (GDP) at factor cost 4,937,006 5,243,582 5,505,437

9.3% 6.2% 5.0%2.2 Net Domestic Product (NDP) at factor cost 4,364,952 4,618,809 4,823,087

9.3% 5.8% 4.4%B. Estimates at Per Capita Level1. Population (million) 1,186 1,202 1,217

1.4% 1.35% 1.25%2. Per Capita NNI at factor cost (`) 36,342 38,037 39,168

7.2% 4.7% 3.0%3. Per Capita GDP at factor cost (`) 41,627 43,624 45,238

7.8% 4.8% 3.7%

Note: Figures in the parentheses are percentage change over the previous year.* As per revised CSO nomenclature of Annual GDP Estimates** Growth rates in 2010-11 are based on growth calculated over 3rd revised estimates of 2009-10

3Part One: Policies and Programmes

sets the agricultural growth at 4.0 percent, the crucial factors underpinning the same would be investments in farm research, rural (Chart 1.1)

Industry

The growth rate in Industry is further expected to fall to 1.2 percent in 2012-13 from the 2.7 percent as witnessed in 2011-12. High interest rates yielded lower investments, which accompanied with the power cuts, has inhibited the rise of output. Mining sector continued registering a downfall of manufacturing fell from 2.7 percent in 2011-12 to a mere 1.0 percent growth in 2012-13.

The IIP figures (Index of Industrial Production) showed sluggish growth of a

mere 1.0 percent in 2012-13 when compared with 2.9 percent as recorded in 2011-12. The sector seems to be grappling with the dearth of investments in light of tightened monetary stance. (Table 1.3) The index of eight core industries (37.9 percent weight in IIP) grew by 3.2 percent in 2012-13 as compared to 5.0 percent in 2011-12.

Mining registered a decline of 2.5 percent in 2012-13 as against a decline of 1.9 percent in 2011-12 and has been largely at the root of contraction of industrial output (index for 11 out of 12 months has shown negative growth) on account of the domestic issues of allocation, production and pricing of minerals. Reforms in the areas of auctioning, fuel supply agreements and grading of coal as per international standards are expected to usher in the much needed impetus to the sector.

Table 1.2: GDP (at Factor Cost) by Economic Activity (at 2004-05 prices)*(` crore)

2010-11 2011-12 2012-13 Percentage Change overIndustry (2nd Revised (1st Revised (Provisional Previous Year

Estimate) Estimate) Estimate) 2011-12 2012-13

1 2 3 4 5 6

1. Agriculture, Forestry & Fishing 7,13,477 7,39,495 7,53,610 3.6 1.92. Mining and Quarrying 1,08,938 1,08,249 1,07,619 -0.6 -0.63. Manufacturing 8,01,476 8,23,023 8,31,648 2.7 1.04. Electricity, Gas and Water Supply 92,773 98,814 1,02,918 6.5 4.2

Industry (2+3+4) 10,03,187 10,30,086 10,42,185 2.7 1.2

5. Construction 3,90,692 4,12,412 4,30,277 5.6 4.36. Trade, Hotels, Transport and

Communication 13,45,660 14,40,312 15,32,034 7.0 6.47. Financing, Insurance, Real Estate

and Business Services 8,49,632 9,48,808 10,30,684 11.7 8.68. Community, Social and Personal Services 6,34,358 6,72,469 7,16,645 6.0 6.6

Services (5+6+7+8) 32,20,342 34,74,001 37,09,640 7.9 6.8

GDP at Factor Cost 49,37,006 52,43,582 55,05,437 6.2 5.0

* As per revised CSO nomenclature of Annual GDP Estimates


Manufacturing, which contributes 75 and showed a growth of 1.2 percent for 2012-13 as against 3.0 percent in 2011-12.While power outages have hampered the sector recently, the growth in the sector is imminent and desired to improve the contribution of the sector from a current 15-16 percent of the GDP to 25 percent of the GDP by 2022 as laid out in the National Manufacturing Policy.

Electricity posted a lower growth of 4.0 percent in 2012-13 while the growth in 2011-12 was 8.2 percent, thus interrupting the growth trajectory of over seven years displayed by the sector. The sector seems to be affected by the supply constraints. E l e c t r i c i t y g e n e r a t i o n a l o n g w i t h manufacturing leads the path for industrial expansion and the reforms in power sector may be requisite to address the growing gaps.

Services

Services sector has over a decade remained at the forefront of Indias growth rate. Its share in the GDP has risen from 65.2 percent in 2010-11 to 66.3 percent in 2011-12 and further to 67.4 percent in 2012-13. The growth in the sector is expected to be 6.8

percent in 2012-13 as compared to 7.9 percent in 2011-12.

The Community, Social & Personal Services sub sector is anticipated to grow at 6.6 percent in the current year compared to 6.0 percent of the last year. The Financing, Insurance, Real Estate and Business Services, meanwhile, is poised to show a 8.6 percent growth as compared to 11.7 percent exhibited While Community, Social & Personal Services contributes 13.0 percent to the GDP, the Financing, Insurance, Real Estate and Business Services contributes 18.7 percent. (Chart 1.1)

T r a d e , H o t e l s , T r a n s p o r t & Communication sub sector posted a growth of 6.4 percent in 2012-13 as opposed to 7.0 percent in 2011-12, while its share in the GDP remains roughly at 27 percent. The decline comes as a result of fall in passenger and cargo handled in civil aviation along with cargo handled at major sea ports. Commercial vehicles too have seen a slump in sales as a result of faltering growth. Construction sub sector is expected to grow at 4.3 percent in 2012-13 against 5.6 percent in the previous

Table 1.3: Index of Industrial Production (Base: 2004-05=100)

Mining Manufacturing Electricity GeneralMonth (141.57) (755.27) (103.16) (1000.00)

2011-12 2012-13 2011-12 2012-13 2011-12 2012-13 2011-12 2012-13

AverageApr-Mar 128.5 125.3 181 183.1 149.3 155.2 170.3 172

Growth over thecorresponding period ofprevious yearMar -1.1 -2.9 -3.6 3.2 2.7 3.5 -2.8 2.5

Apr-Mar -1.9 -2.5 3 1.2 8.2 4 2.9 1


they exhibit on global scenario.

Savings & Investments

The latest data of CSO points to a decrease in Indias Gross Domestic Savings as a percentage of GDP at market prices from 34.0 percent in 2010-11 to 30.8 percent assets in Household savings decreased to 8.0 percent in the 2011-12 from 10.4 percent in the previous year. This is the lowest when a decade. Financial Savings since 2000 have always contributed over 10 percent barring the year 2004-05, which saw a share of 9.8 percent. In light of the decreased share of that the share of savings in physical assets is currently the highest since 2000 at 14.3 percent. The saving pattern seems to be growing growth concerns that has resulted

savings. Investors have hence chosen to invest in physical assets like gold that seems to be a safe haven for investment by households. With the share of Household Savings being of investors to physical assets always seem to indicating that some substitution takes place between the two kinds of savings. (Table 1.4)

While its not only the Household Savings that have declined, the Private Corporate and Public Sector Savings have also reduced in 2011-12. While the Private Corporate Savings have decreased marginally from 7.9 percent in 2010-11 to 7.2 percent in 2011-12, public sector savings have halved to 1.3 percent in FY12 when compared with 2.6 percent in FY11. A slowdown in industrial sector along with high interest payments and high input costs impact the level of Private Corporate Savings and consequently its industrial revival may be a pre condition to the improvement in the rate of Private Corporate Savings.


In absolute terms, Gross Domestic Saving (GDS) at current prices in 2011-12 stood at ` 27,65,291 crore as against ` 26,51,934 crore in 2010-11, registering a growth of 4.3 percent. Household savings increased by 9.3 percent from ` 18,32,901 crore in 2010-11 to ` 20,03,720 crore in 2011-12. While absolute Savings in Physical Assets increased by 25.3 percent from ` 10,24,567crore in 2010-11 to ` 12,84,191 crore in 2011-

12, the Financial Savings shrunk by 11.0 percent from ` 8,08,334 crore to ` 7,19,529 crore for the corresponding time period. Private Corporate Savings moved up by 4.1 percent in absolute terms from ` 6,19,370 crore in 2010-11 to ` 6,44,473 crore in 2011-12. Public Sector Savings dwindled to ` 1,17,097crore in 2011-12 from ` 1,99,662 crore in 2010-11 registering a decline of 41.4 percent.

Table 1.4: Gross Domestic Savings and Investment

Amount in ` crore (Percent of GDP at currentS. market prices)

No. Item 2008-09 2009-10 2010-11 2011-12 2008-09 2009-10 2010-11 2011-12 (3rd RE) (2nd RE) (1st RE) (3rd RE) (2nd RE) (1st RE) 1 2 3 4 5 6 7 891 Household Saving 13,30,872 16,30,799 18,32,901 20,03,720 23.6 25.2 23.5 22.3

of which :a) Financial Assets 5,71,026 7,74,753 8,08,334 7,19,529 10.1 12.0 10.4 8.0b) Physical Assets 7,59,846 8,56,046 10,24,567 12,84,191 13.5 13.2 13.1 14.3

2 Private CorporateSaving 4,17,467 5,40,955 6,19,370 6,44,473 7.4 8.4 7.9 7.2

3 Public Sector Saving 54,280 10,585 1,99,662 1,17,097 1.0 0.2 2.6 1.34 Gross Domestic Saving 18,02,619 21,82,338 26,51,934 27,65,291 32.0 33.7 34.0 30.8 6 Gross Domestic Capital

Formation 19,31,379 23,63,132 28,71,649 31,41,465 34.3 36.5 36.8 35.07 Total Consumption

Expenditure (a+b) 38,64,617 44,78,717 52,40,922 60,98,896 68.6 69.1 67.2 68.0a) Private Final

Consumption Expenditure 32,49,284 37,07,566 43,49,889 50,56,219 57.7 57.2 55.8 56.3

b) Government Final Consumption Expenditure 6,15,333 7,71,151 8,91,033 10,42,677 10.9 11.9 11.4 11.6

Memo ItemsSaving-InvestmentBalance (4-6) -1,28,760 -1,80,794 -2,19,715 -3,76,174 2.3 2.8 2.8 4.2Public Sector Balance# -4,77,450 -5,82,203 -4,54,297 -5,88,111 8.5 9.0 5.8 6.6Private Sector Balance# 3,52,179 5,29,599 3,86,653 4,14,944 6.3 8.2 5.0 4.6a) Private Corporate

Sector -2,18,847 -2,45,154 -4,21,681 -3,04,585 3.9 3.8 5.4 3.4b) Household Sector 5,71,026 7,74,753 8,08,334 7,19,529 10.1 12.0 10.4 8.0


The savings-investment gap has widened to 4.2 percent of GDP at market prices in 2011-12, up from being 2.8 percent in the decreased, there has not been a proportionate decrease in investment in recent times, a result of which has been heavy reliance to be reduced to stimulate public savings, domestic savings would also need to be channelized to meet the growing investment

India currently encounters the dilemma in the stride of growth as nation progressed, lately the burgeoning number has posed a number of problems both for the economy and polity alike. Given the Indian economys resurgent nature, a comfortable level of both is desired as well essential.

Current Account Deficit (CAD) was 4.8 percent (USD 87.8 billion) of GDP, way above its comfortable range of 2.5 3.0 percent. However, Financial Inflows to the tune of USD 85.4 billion during the exchange reserves. It may be noted that flows have increased when compared to the corresponding period of previous year (USD 80.7 billion). The surge in portfolio investments has outperformed the decline in direct investment hence causing the net

The burgeoning CAD has been fuelled by soaring Oil and Coal Imports, Gold Rush and Slowdown in exports. Oil bill contributes

majorly to the imports. With oil marketing prices along with the move to cap the number of subsidized cylinders during the year would ensure some relief in the near future. Hike in Gold Import duties is a stepping stone to contain Indias increasing appetite of gold. With respect to Coal imports, it would be interesting to note that while India ranks 5th with 7.0 percent of global coal reserves, it remains the fourth biggest importer of the fuel. An upturn in the mining sector is hence not only imperative for the import bill to decline but also for the manufacturing sector to gain momentum in India from the current lag.

High CAD may also symbolize the gap in Savings and Investments in the country. While Savings in general and financial savings in particular have decimated, the investment has not decreased proportionately. This in turn has been at the root of higher to higher demand which is being viciously supported by imports instead of domestic capacity development and exports.

As against the Revised Estimates 2012-13 ` for 2012-13 constituted 94 percent and as a at 4.9 percent of GDP as against the Revised Estimates of 5.2 percent. Revenue Deficit points to a higher revenue expenditure. Over the years while revenue expenditure has been increasing as proportion of GDP (12.8 percent of GDP as per Revised Estimates 2012-13), the Capital Expenditure seems to have shrunk. This combined with dependence of CAD a potential cause of concern for the policy makers. Interest payments and subsidies add


and an improvement seems to be due.

The foreign exchange reserves stood at USD 292.6 billion in end March 2013 compared to USD 294.4 billion as of end March 2012.

Indian scene in the wake of these two deficits is apprehensive of the financial instability in the economy. CAD in absolute terms pose no risk of any kind but when seen against the backdrop of varied factors may be a potential weak spot. In Indian context, the situation remains balanced but given the any adverse global development may trigger abrupt stoppage in inflows which would affect the Consumption, Investment and Expenditure. Notwithstanding the fact that foreign exchange reserves, depreciated but stable currency and healthy credit growth, it still remains crucial for the economy to be proactively monitoring the developments.

Liquidity

Liquidity conditions altered during the year 2012-13 that started with tighter liquidity conditions prevalent in the economy. The past measures of policy rate cuts in the previous fiscal yielded results in the latter part of Q1 2012-13 through Q2 but the liquidity conditions tightened again in November 2012 driven by buildup of government cash balances and the gap in credit and deposits growth. The global fears of tighter liquidity in the event of withdrawal of any quantitative easing have also added to the prevalence of tighter liquidity predictions ahead. The

in the policy rates apart from the 100 basis points cut undertaken in 2012-13.

In absence of policy cuts, the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) have been tuned to adjust the state of liquidity. In 2012-13, CRR was reduced by 75 basis points while SLR was reduced by 100 basis points. The open market operations (OMO) injected primary liquidity of ` 1.5 trillion.

Credit Growth

Non food credit growth registered a growth of 14.0 percent in 2012-13 when compared with 16.6 percent recorded in 2011-12, indicating a slower pace of credit growth. The credit to Industry slowed to 15.7 percent in 2012-13 from 20.3 percent in 2011-12 on by the industry. Credit to the Agriculture meanwhile increased by 8.1 percent in FY 13 as compared to 13.3 percent in FY 12 while that to the Services sector increased by 13.6 percent as compared to 14.4 percent in the respective periods.

Tighter liquidity conditions along with the slowdown in economic activity have prevented the credit growth to pick up. Deposit growth falling short of the RBI projections.

Post the monetary tightening measures, the wholesale price index (WPI) showed some for 2012-13 was at 7.3 percent as against 8.9 percent registered for 2011-12.

at 9.8 percent in 2011-12 as well as 2012-13. declined from 7.3 percent in 2011-12 to 5.4


percent in 2012-13. The fuel group meanwhile showed a decrease in inflation from 13.9 dropped.

2013 stands at 10.4 percent compared to 9.4 percent as of March 2012. The index is demand pressures which are currently

Along with these developments in the path of taming inflation, the sticky food the policymakers. The figure for March 2013 was as high as 8.7 percent. Persistent distribution, storage and productivity hold the key to the issue in the medium and long term.

Trade Balance

Exports for 2012-13 stood at USD 300.6 billion, with a decline of 1.8 percent when compared with a growth of 21.3 percent recorded in the same period of the previous year when the exports were USD 305.9 billion. During 2012-13, Imports registered a mild increase of 0.4 percent compared with a in FY12.

Fall in exports occurred on account of the global uncertainties. Demand from the advanced as well as the Emerging market and developing economies (EMDEs) fell in wake of the subdued economic activity in these regions. Import growth softened

with decreasing gold and non-gold non-oil imports coming steadily at the back of a hike in customs duty on gold from 4 to 6 percent.

Exchange Rate

The exchange rate declined to ` 54.39 per USD on March 28, 2013, depreciating 6.32 percent over March 30, 2012 when the rate was ` 51.16 per USD which was a further decrease from ` 44.65 per USD in March 31, 2011. The average value of rupee per USD touched an all-time low of ` 57.22 on June 27, 2012.

the Indian rupee vulnerable amidst the Euro zone uncertainties and modest recovery in the US.

Capital markets

Indian securities market started the year 2012-13 on a low note following the global economic signals of 2011-12. The reform measures undertaken by the government as well as slender improvements visible in the global economic condition have however uplifted the mood in the domestic securities market. The Sensex which closed at 17,404 on March 30, 2012 reached 18,836 as on March 28, 2013. It touched the 20,000 mark during the year, which was last seen in October 2010. Nifty, too, touched the 6,000 mark while closing at 5,683 on March 28, 2013 while the Sensex registered a growth of 8.2 percent, Nifty recorded a growth of 7.3 percent. Indian markets also witnessed the establishment of a third stock exchange in the country with nationwide terminal with MCX-SX going live in equities and equities derivatives segment on February 11, 2013. The benchmark index, SX40, is however yet to be disseminated. The development is testimony to the expanding Indian markets and their potential and would

10

Annual Report 2012-13

help in further strengthening the participation of investors across the country.

The market capitalisation of BSE stood at ` 63, 87, 887 at end-March 2013 compared to ` 62, 14,941 crore as of end-March 2012 while its ratio to GDP stood at 63.7 percent for 2012-13. The market capitalisation of NSE was ` 62,39,035 at end-March 2013 compared to ` 60, 96,518 crore as of end-March 2012 while its ratio to GDP stood at 62.2 percent for 2012-13 The number of demat accounts at the two depositaries grew by over 5 percent companies at NSE and BSE continued to rise. (Table 1.5)

The turnover in the Equity derivative segment displayed an increase of 20.4 percent and reached ` 3,87,04,572 crore in 2012-13. The Currency derivative segment however declined by 12 percent to ` 87,10,504 crore in 2012-13 despite volatile rupee. (Table 1.6)

The derivative segment developments may be seen in the light of the Futures Industry Association (FIA) Annual Volume Survey 2012 which has reported the biggest and broadest decline in at least a decade in the global listed derivatives market. The total number of futures and options contracts traded on the exchanges world over in calendar year 2012 has declined by 15.3 percent. The survey, nonetheless, highlights the BSEs volume explosion, which moved from just three million contracts in calendar year 2011 to 243.76 million contracts in calendar year 2012. NSE meanwhile is ranked third among the top thirty derivative exchanges in terms of number of contracts traded or cleared in the calendar year 2012. Nifty Options have retained their rank as the worlds second most traded option in calendar year 2012 as well. In the category Foreign Exchange Futures & Options Contracts the U.S. Dollar/Indian Rupee and second position respectively.

The foreign investments in India contributed by the FII and FDI own assets under custody valued at ` 15, 77,288 crore for 2012-13, up from ` 13, 39,240 crore in 2011-12. (Table 1.7).

Table 1.5 (a): Demat Statistics

NSDL CDSL Demat Demat

Year Quantity Quantity (million shares) (million shares)

2010-11 4,71,304 1,05,310

2011-12 5,79,801 1,33,570

2012-13 6,86,476 1,51,792

Source: NSDL & CDSL

Table 1.5 (b): No. of Listed CompaniesYear NSE BSE

No. of No. ofCompanies Companies

listed listed

2010-11 1,574 5067

2011-12 1,646 5133

2012-13 1,666 5,211

Source: NSE & BSE

Table 1.6 : Growth of Turnover in Various Segments of Indian Stock Market

Turnover (` crore)

Cash Equity CurrencyYear Segment Derivatives Derivatives

(All India) (NSE+BSE+ (NSE+MCX-MCX-SX) SX+USE)

2010-11 46,82,437 2,92,48,375 76,43,805

2011-12 34,78,391 3,21,58,208 98,96,413

2012-13 32,57,087 3,87,04,572 87,10,504

Source: BSE, NSE, MCX-SX & USE

11

Part One: Policies and Programmes

Investor protection has been at the forefront of the objectives of SEBI and policy measures have been undertaken in this regard during the FY13. Framework for registration and regulation of Investment Advisors has been notified, SME platforms for equity reforms in FII investments and many other policy measures which are discussed in the forthcoming section.

2. REVIEW OF POLICIES AND PROGRAMMES

ever changing, the need for an active and evolving regulatory regime is integral. SEBI has initiated many policies and programmes in FY13 which are presented in this Section.

The developments are categorized under eleven major heads viz., Primary Securities Market, Secondary Securities Market, Corporate Debt Market, Mutual Funds, Alternative Investment Fund, Investment Advisors, Portfolio Managers, Foreign Institutional Investors, Takeovers, Investor Assistance and Education and Legal Framework. The section concludes with Retrospect and Prospects.

I. Primary Securities MarketPrimary markets play the role of

mobilizing the capital to the corporate both

stability that further accentuates the investor markets have seen a revival in the activity the global scenario. Resources mobilized in the primary market have risen by around 20 percent in the wake of the renewed economic fervor. A total of ` 15,474 crore of Equity capital has been raised in 2012-13 through 49 issues, compared with ` 12,857 crore raised through 51 issues in 2011-12. Certain reforms in policies have been undertaken to major policy initiatives related to the primary

A. Manner of Dealing with Audit Reports Filed by Listed Companies

A mechanism has been put in place to process qualified annual audit reports filed by the listed companies with stock exchanges and annual audit reports where accounting irregularities have been pointed out by the Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB). In order to enhance the companies, it has been, inter-alia,

a. Listed companies would be required to

Table 1.7: Assets under the Custody of Custodians

FIIS/SAs Foreign FDI Foreign VentureYear Depositories Investments Capital Investments

Amount (` crore) Amount (` crore) Amount (` crore) Amount (` crore)

2010-11 11,06,550 1,85,931 1,46,231 24,002

2011-12 11,07,399 1,43,370 2,31,841 35,041

2012-13 13,36,557 1,57,159 2,40,731 54,144

Source: SEBI

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exchanges along with the applicable Subject To / Except For Audit Report).

b. After preliminary scrutiny and based on materiality, the stock exchanges would

c. QARC represented by ICAI, stock exchanges, etc. shall review the cases received from the stock exchanges and annual audit reports referred by the stock exchanges

d. Cases, wherein the qualifications are significant and explanation given by the company is unsatisfactory, would be referred to the Financial Reporting Review Board of ICAI (ICAI-FRRB). If financial accounts by way of revised to the shareholders through stock exchange(s). However, the financial in the annual accounts of the subsequent

B. Mandating Inclusion of Business Responsibility Report as Part of Annual Report

SEBI has mandated the top 100 listed companies to include Business Responsibility Report as part of Annual Reports with a focus on the Environmental, Social and Governance issues. The report would also include compliance with the nine principles for business responsibility reporting to assess compliance with Environmental,

Social and Governance norms. The said reporting requirement is in line with the National Voluntary Guidelines on Social, Environmental and Economic Responsibilities July 2011. (Box 1.1 may be referred for details)

Listed companies have been mandated to update their disclosures in the prospectus on an annual basis and to ensure that the same is available in public domain. Such consolidated public disclosures can be used through appropriate hyper-links without requiring a repetition of such disclosures.

D. Revised Timeline for Disclosing Financial Information Prior to Issue Opening

Disclosure of price band along with relevant financial information shall be published by way of an advertisement at days prescribed earlier in order to ensure the issue before investing. This information forms available for download from websites of the stock exchanges.

E. Revised Requirements for the Stock Exchanges and Listed Companies in Respect of Scheme of Arrangement under the Companies Act, 1956

Pursuant to a scheme of reconstruction or amalgamation being sanctioned by the Honble High Court under sections 391-394 or 101 of the Companies Act, 1956, the companies desirous of getting their equity shares listed after merger/de-merger/

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Part One: Policies and Programmes

amalgamation, etc. without making an to seek an exemption from SEBI from the requirements of rule 19(2) (b) of Securities Contracts (Regulation) Rules, 1957. In terms of rule 19(7) of SCRR, SEBI has been granting to the public under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 to such listed companies on a case to case basis.

However, in the recent past, SEBI has received certain applications, seeking exemption, containing, inter alia, (a) inadequate disclosures, (b) convoluted schemes of arrangement, (c) exaggerated valuations, etc. In order to avoid such situations and in the interest of investors, the requirements have been streamlined by mandating, inter alia, requirements of obtaining comments of SEBI on the draft

Box 1.1 : Business Responsibility Report

At a time and age when enterprises are increasingly seen as critical components of the social system, they are society which is also its stakeholder. Hence, adoption of responsible business practices in the interest of the social

Considering the larger interest of public disclosure regarding steps taken by listed companies from a Environmental, Social and Governance (ESG) perspective, SEBI, vide circular dated August 13, 2012, mandated inclusion of Business Responsibility Reports (BR Reports) as part of the Annual Reports, initially for top 100 listed companies based on market capitalization as on March 31, 2012. Other listed companies may voluntarily disclose BR Reports as part of their Annual Reports.

details of the company, details about subsidiaries, details of directors responsible for BR and also compliance with

Businesses should conduct and govern themselves with Ethics, Transparency and Accountability

Businesses should provide goods and services that are safe and contribute to sustainability throughout their life cycle

Businesses should promote the wellbeing of all employees

Businesses should respect the interests of, and be responsive towards all stakeholders, especially those who are disadvantaged, vulnerable and marginalized

Businesses should respect and promote human rights

manner

Businesses should support inclusive growth and equitable Development

Businesses should engage with and provide value to their customers and consumers in a responsible manner

The companies are required to report their compliance with the above principles.

stakeholders based on internationally accepted reporting frameworks need not prepare a separate report for the purpose of these guidelines but only furnish the same to their stakeholders along with the details of the framework under which their BR Report has been prepared and a mapping of the principles contained in these guidelines to the disclosures made in their sustainability reports.

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schemes of arrangement, disclosure of draft schemes and observation letters of stock exchanges on websites for wider dissemination, furnishing a report on complaints received on draft schemes, to the stock exchanges prior to obtaining

F. Manner of achieving Minimum Public Shareholding Requirements

In accordance with the provisions of Securities Contracts (Regulation) Rules, 1957, SEBI had specified certain means for the listed companies to achieve minimum public shareholding requirements. Additionally, rights or bonus issues to public shareholders, with promoters/promoter group shareholders forgoing their entitlement for the purpose of achieving compliance. Further, it has also been prescribed that listed entities desirous of achieving the minimum public shareholding requirement through other means / relaxation from the available methods may approach SEBI with appropria

sebi annual report 2013

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