The Securities and Exchange Board of India (Sebi) will look into representations by stockbrokers seeking a rethink of new norms issued by the Reserve Bank of India (RBI) that require banks to tighten funding to proprietary traders under capital market exposure rules.
Sebi chief Tuhin Kanta Pandey said at an event on Monday, “We have received a representation. I saw it on Friday, and we will see what we need to do on that because RBI had initially issued draft guidelines and sought their opinion, and many of them would have done it.” He added, “There are three or four issues. So basically it is a matter with the Reserve Bank of India.”
However, RBI governor Sanjay Malhotra ruled out any further relaxation of the lending rules for proprietary trading by capital markets players on Monday. He said the central bank had already watered down the proposal as the original draft norms had proposed a complete ban on such lending.
Mint reported on 19 February that the National Stock Exchange brokers’ forum had approached Sebi, seeking its intervention and a deferment of the new framework. In a letter to the regulator, the Association of NSE Members of India (ANMI) said the RBI’s October consultation paper had not proposed increasing bank guarantee collateral requirements to 100% from the current 50%, raising concerns over a potential tightening beyond what was initially indicated. The RBI norms will come into effect from 1 April.
Trouble within Sebi
Speaking at the ‘Conclave for portfolio managers’, Pandey also addressed concerns of a misdemeanor within Sebi’s ranks. A BW Businessworld report on 21 February said a Sebi general manager had been suspended for a “sensitive vigilance matter” within the regulator’s corporate finance department (CFD). “The evidence was egregious enough for us to act,” said Pandey. “It is important that if there is any such case, we will get to the bottom of it.”
For the portfolio management services (PMS) industry, the market watchdog will review the PMS regulations 2020, as it did for mutual funds and stockbrokers last year. “We propose to carry out a comprehensive review of Sebi portfolio managers regulations, 2020 so that the framework remains effective, adaptable, and aligned with evolving market dynamics,” Pandey said. “I believe the work has already started and we have already done a lot of groundwork and we should really be targeting perhaps June in terms of changing the regulations.” Sebi will issue a consultation before its June board meeting, he added. PMS regulations have not undergone a comprehensive review in six years.
The Sebi chief also said the regulator planned to introduce oversight for the unlisted sector, specifically targeting companies preparing for an IPO. Rather than regulating all private firms, Sebi will focus on those entering the ‘to-be-listed’ space via exchange mechanisms, with formal operational guidelines and consultation papers to follow, he said.
