Coordination between India’s banking and securities markets regulators has increased, leading to better norms for foreign portfolio investors (FPIs) and the bond market, Securities and Exchange Board of India (Sebi) chairman Tuhin Kanta Pandey said on Wednesday.
“There is much more active interregulatory coordination… say for RBI and Sebi. We have been working very closely and we’ve been able to sort out many issues,” Pandey said at the 3rd annual conference of the Association of Portfolio Managers in India (APMI).
He added that the RBI and Sebi are collaborating closely to streamline registration for foreign portfolio investors. “For example, on FPI onboarding, Sebi and RBI are currently engaged very actively on ironing out many issues so that we are able to see very fast onboarding of FPIs,” the Sebi chief said.
The market regulator is aiming to slash FPI onboarding times to just five days, down from the current timeline that can stretch past a month. On 11 September, Citi became the first designated depository participant (DDP) to achieve this five-day turnaround following the launch of its eFPI service.
The framework is being rolled out in phases, with the first phase covering regulated public funds. These include mutual funds and unit trusts from the US, Ireland and Luxembourg.
Bond liquidity
Additionally, both regulators are working on a framework for bond indices. “One of the points that we are working on is bond indices… how we can have bond indices trading on exchanges,” Pandey said.
The move is aimed at improving liquidity in a segment that has always struggled to attract retail participation. In August, the market regulator proposed a framework for a new network of fixed-income distributors to take online bond investing beyond big cities, alongside tighter advertising rules for online bond platforms to curb mis-selling and misleading claims. Such fixed-income channel partners (FICPs) would help investors access fixed-income securities through online bond platform providers (OBPPs).
More recently, the market regulator launched a pilot project for tokenized bonds. Tokenization refers to converting a real-world financial asset into a digital token that can be recorded and traded electronically. In this case, corporate bonds would be represented digitally through tokens that investors can buy and hold. The system is based on distributed ledger technology (DLT), commonly associated with blockchain systems. DLT enables decentralized infrastructure that allows multiple participants to securely record and share digital data across a network without a central authority or single point of failure.
