Securities and Exchange Board of India (SEBI) approved a framework for international financial centres (IFCs) to get the Indian Financial hubs at par with the ones in Dubai or in Singapore.
With the main aim to reverse the export of India’s financial markets, some of the various guidelines proposed were:
• Allowing listing and trading of municipal bonds, also referred to as ‘muni’ bonds, to aid the government’s smart-city initiatives. This is a first. These are a debt instrument issued by a state or municipality to finance its capital expenditure for construction of highways, bridges, etc. There is a huge market for these bonds, as these offer higher coupon rates than government securities.
• Easing the pricing formula for financial institutions to convert debt to distressed borrowers into equity.
• It issued a framework to enable local fund managers to simultaneously manage foreign funds.
• It provides for listing and trading of equity shares issued by companies incorporated outside of India, depository receipts, debt securities, currency and interest-rate derivatives, index-based derivatives and other such securities as might be specified by Sebi from time to time.
• Non-resident Indians, foreign investors, institutional investors, and resident Indians eligible under the Foreign Exchange Management Act (Fema) can participate in IFCs.
• Disclosure for listed firms to be made first to stock exchanges not later than 24 hours after an event.
Other than the above a number of other key initiatives have been planned for the approaching financial year.
• Extensive use of technology to ease investing process (eIPO, eKYC)
• New framework to help start-ups, young entrepreneurs in financing, listing needs
• Augmenting investor awareness & education initiatives, use of social media
• Improving enforcement processes, upgrading website
National Stock Exchange (NSE) and BSE — have agreed, in principle, to set up international exchanges at the Gujarat International Finance Tec-city (GIFT), an equal joint venture between the Gujarat government and IL&FS that is likely to be the country’s first IFC.
Managing Director, GIFT (India’s first IFC to be), Mr Prakash Jha informed the government is working on a liberal tax regime and a more efficient legal system comparable with Singapore and Dubai and hoped that other regulators like the Reserve Bank of India and the Insurance Regulatory and Development Authority of India will also frame rules by the end of this month.
Both Sebi and RBI have been working together to arrive at a new framework to provide a balance to both lenders and the existing shareholders of companies.