‘Strengthening debt market on Sebi agenda’

New products, tax proposals on the regulator’s anvil, says Narayan

The Securities and Exchange Board of India (Sebi) is working on strengthening the debt market in India through the introduction of new products, mitigating segment risks, and pursuing certain tax proposals, said whole-time member Ananth Narayan, in his first public address after joining the capital markets regulator.

Speaking at the 9th SBI Banking & Economics Conclave, the former banker said the debt segment growth in India has been slow and mired in accidents, and it is trust that the regulator is trying to develop for investors.

“We have seen many accidents between 2017 and 2019, particularly in the debt market. It is nice to say that capital formation is easy at this point in time, but if we have two to three large shocks, the confidence can dissipate,” said Narayan.

He added that there is only ~4 trillion investment from foreign portfolio investors in the debt market, against ~48-trillion investment in the equity market.

The market capitalisation of the equity market is almost ~290 trillion, but the corporate outstanding is at ~40 trillion, indicating more traction is needed on the debt side.

This year, Sebi has brought in various regulations to increase accessibility and transparency on bond dealings and trades.

A stockbroker licence (debt segment) has been mandated for online bond platforms. Moreover, brokers registered with the exchanges for the debt segment will be allowed to place bids on the request for quote platform on behalf of their clients, effective January 1, 2023.

“We have had some announcements on the bidding platforms. We are trying to reduce the size of individual bonds which retail investors can subscribe to, and there are some tax proposals we hope the government will look at favourably,” added Narayan.

Narayan also said that Sebi will soon come out with some new consultation papers on environmental, social, and governance (ESG) norms and ratings. The rising investment base for ESG and the inclination to green debt securities has brought a need for clearer disclosures.

In the midst of rising risk of ‘greenwashing’, Sebi has taken the view that investors are looking for credible disclosures for the ESG segment. It even took action in one of the cases of misrepresentation.

Earlier a consultation paper floated by Sebi had proposed ESG rating products such as ESG Corporate Risk Ratings, ESG Financial Risk Ratings, and ESG Impact Ratings.

Under the proposed norms, credit rating agencies and research analysts with a minimum of ~10 crore networth and with standard infrastructure and manpower will be eligible to be accredited by Sebi.

WE HAVE HAD SOME ANNOUNCEMENTS ON BIDDING PLATFORMS, WE’RE TRYING TO REDUCE THE SIZE OF INDIVIDUAL BONDS WHICH RETAIL INVESTORS CAN SUBSCRIBE TO, AND THERE ARE SOME TAX PROPOSALS WHICH WE HOPE THE GOVT WILL LOOK AT FAVOURABLY

ANANTH NARAYAN,

Whole-time member, Sebi