SEBI Board Looks To Promote Mutual Funds, Commodities Trading
Ajay Tyagi chairs his first board meeting at SEBI.
The market regulator on Wednesday decided to allow options contracts in the commodity derivatives market and redemption of liquid mutual funds up to Rs 50,000, among other measures to deepen the capital markets.
The board of Securities and Exchange Board of India (SEBI) met earlier in the day under new chairman Ajay Tyagi.
Here are the highlights of the key decisions:
1. SEBI allowed options contracts in the commodity derivatives market, it said in a media statement issued after the board meeting. This is in keeping with Finance Minister Arun Jaitley’s announcement in Union Budget 2017-18 to allow new derivative products in the commodities market, Tyagi said at the media briefing.
“Participation is expected to grow manifold with the launch of options in commodity derivatives market... This product not only helps hedge against downside risk but also allows traders to generate more volume with the same capital,” Mrugank Paranjpe, the managing director of India’s largest commodity exchange, MCX told BloombergQuint.
2. Mutual funds have been given the option to allow investors to redeem their investments through an “instant access facility”, for liquid schemes. The cap on such redemptions has been set at Rs 50,000 per day or up to 90 percent of the folio value, whichever is lower. Funds can also sell their products through digital wallets and payments banks worth up to Rs 50,000 per scheme in a financial year. The purchase can be made through cash, debit card or internet banking and no credit can be advanced for such a transaction.
Both the measures will help the mutual fund industry in customer acquisition. Allowing instant redemption from money market mutual funds is in line with industry expectation. Additionally, e-wallets are growing in size and this move will encourage people to consider liquid funds as an option compared to savings account.A Balasubramanian, Chief Executive Officer, Birla Sun Life Asset Management
3. “Systematically important non-banking financial institutions with net worth of more than Rs 500 crore” will now be classified as Qualified Institutional Buyers (QIBs) by SEBI. This, the market regulator said, will allow them to participate in initial public offerings (IPOs) under the category specifically set aside for such institutions.
4. Banks dealing with mounting bad loans have been given the option to receive preferential issuances made to them by an entity under corporate debt restructuring or strategic debt restructuring which sold equity shares of the issuer in the last six months. The earlier regulation laid down a six month lock-in period before any entity could receive preferential allotment after selling equity shares in the listed company.
5. The market regulator has also tightened the screws on IPOs, making it mandatory for any company with an issue size of more than Rs 100 crore to appoint a monitoring agency to ensure that funds raised are used for the specified purpose. The earlier cap for such a mandatory appointment was Rs 500 crore.
6. Indian citizens including non-resident Indians will be barred from subscribing to offshore derivative instruments.
7. Brokers in the commodity derivatives segment have now been allowed to trade in other securities.