Sebi not worried about retail surge in stocks

The r ecent s urge in par ticipation by first-time retail investors in the domestic equity market is not a cause of concern, Securities a nd Exchange Boar d ofI ndia Chairman Ajay Tyagi said.

However, they should be encouraged to invest in government securities first before v enturing into ris kier assets like equities, he said.

"It w ould be id eal if they (first-time r etail in vestors) began their j ourney in riskfree G-Secs (government s ecurities)," Tyagi said.

Tyagi said efforts should be made to mak e go vernment securities available in dematerialised f orm so tha t they can be easil y accessed by retail investors.

Retail par ticipation in the domestic sto ck mar ket has risen since March likely due to lack of other investible options, the shar pr ally i n stocks since A pril and the advent of work-from-home leading to mor e time in the hands of individuals.

As many as 1 mln ne w dematerialised accounts we re opened in J une, w hich was double the monthly average of 500, 000 prior to the outbreak of COVID-19.

Tyagi said he does not doubt the wisdom of new individual investors in directly participating in equities from the get-go.

State-owned banks need to be recapitalised or given the alternative of capital conservation as one-year suspension under insolvency and bankruptcy code (IBC) provisions will affect the resolution of stressed accounts, says an SBI research report.

It said while raising capital is important for banks, capital conservation will also be crucial as the moratorium ends on August 31 and banks will start recognising stress.

"The problem is given the one-year freeze in IBC, resolution cannot happen at the same time and it is thus imperative that public-sector banks (PSBs) are either recapitalised or given the alternative of capital conservation, as it is not certain how much fiscal space the government might have for recapitalisation," the SBI reportEcowrap said.

Earlier this month, Reserve Bank of India (RBI) Governor Shaktikanta Das had said both public and private sector banks need to raise capital on an anticipatory basis to build up adequate capital buffers to mitigate risks arising out of the outbreak of coronavirus.

"In such a situation, it has become a lot more important that the banks have to improve their governance, sharpen their risk management skills and banks have to raise capital on an anticipatory basis instead of waiting for a situation to arise," Das had said.

The SBI report said as per the regulatory requirement, banks in the country need to have a regulatory capital of 9% of risk weighted assets (RWA) along with additional Capital Conservation Buffer (CCB) of 1.875%, which was slated to increase to 2.5% by March 20.

Considering the potential stress on account of COVID19, RBI correctly deferred the implementation of the last tranche of 0.625% of the CCB from March 31, 2020 to September 30, 2020, it said.