Trust is the first element of market foundation; risk management is important for building this trust: Madhabi Puri Buch

Speaking at the Global Economic Policy Forum 2023 organized by the Confederation of Indian Industry (CII) in partnership with Department of Economic Affairs, Ministry of Finance in New Delhi on 8 December, Ms Madhabi Puri Buch, Chairperson, Securities and Exchange Board of India (SEBI) said it is very crucial to earn the trust of investors in the market and risk mitigation through technology has facilitated in building that trust. She was speaking at the session ‘Building Resilient Capital Markets: Strategies and Way Forward’.

“Up until now we had the potential, but we did not have tools to manifest that potential. Today with the technology, we have the tool to manifest this potential and take it to the farthest corner of our country. Technology enables us to make businesses viable,” she added.

“Our belief is markets need to have a strong foundation. The deeper the foundation, the taller the superstructure can be. The role of the regulator is to create that depth and foundation. The first element of this foundation is trust,” Ms Buch emphasized.

She elaborated that it is important to build this trust whether “it is the trust of the individual investor, retail investor, foreign investor, anybody who is giving the capital to grow. Without that trust there can be no business. It is our responsibility to co-create that trust. To build this trust, risk management has to be strong. We have created huge risk mitigation measures in the market.”

Explaining how risk is mitigated, the SEBI chief talked about T+1 regime that has been implemented in the market. “It takes two things to make this happen. First is technology and second is co-creation. We are now moving to T+0 which will happen before the end of this financial year and one year from there we will have instantaneous settlement, that is optional. When we do this, risk in the system comes down.”

“The two reasons why we have been able to bring T+1 to the people are stellar technology - the technology and market stack in India are unparalleled and have been acknowledged as one of the best in the world. Second being the co-creation with the institution and creating a methodology of regulations with them,” she said.

She said world over markets are a B2B business. “With the technology that we have developed, our markets have become a B2B to C business. Our clearing corporations now have direct visibility and control over the last beneficial account, DMAT account as well as bank account of every investor of our country. There is no other market in the world that has achieved this.”

She emphasised that transparency and disclosure are critical for the listed companies. “Being transparent in the IPO document or subsequent documents protect companies. The beauty of transparency is it helps companies and investors.”

Sanjiv Bajaj, Immediate Past President, Confederation of Indian Industry and Chairman, CII Economic Affairs Council said, “We are in a phase of recovery since the global pandemic hit us three years ago. We have seen that this phase has been very uncertain all around the world. India is not insulated from that. However, we are all surprised at India’s resilience, especially in the last 18 months.”

“We know the importance of capital markets. Capital markets play a significant role in the development of any nation. They are a tool for small and large investors alike to invest in their future. This is why we also require a high level of proactive regulations. SEBI over the last few years has been involved in these proactive regulations, supporting minority investor rights and also facilitating industries to grow,” he added.

Chandrajit Banerjee, Director General, Confederation of Indian Industry said, “India has seen a significant increase in the number of individual investors accessing the capital market, apparent in the significant rise in the number of Demat accounts. What was achieved in the last two decades has been achieved in the last two-and-a-half years. It was achieved on the back of significant adoption of technology by market intermediaries and market infrastructure in institutions.

8 December 2023

New Delhi