SEBI Takes Small Steps To Boost Retail Investments
DSIJ Intelligence / 03 Sep 2012
Capital market regulator Security & Exchange Board of India (SEBI) has been taking baby steps to boost the confidence of retail investors so that they can invest their savings in the equity market. According to media reports, SEBI will soon ask the companies to make the public offering period short. They would be required to complete the IPO bidding process within a maximum of five days and also list the security on the exchange in another five days. This would be much lesser than the current norms in which bidding is completed in a minimum of three and maximum of 10 working days. The report suggests that this will result in higher efficiency and help enhance investor confidence.
Further, around a week ago SEBI came up with the concept of a ‘no frills’ demat account for retail or small investors. There would be no demat charges (annual maintenance charges) for holding of investments of up to Rs 50,000. For those with investments in the range of Rs 50,000 to Rs 1,00,000 the charges would be a maximum of Rs 100 a year. Currently investors are charged anywhere in the range of Rs 225 to Rs 900 per year. Investors can hold shares, mutual funds and other securities and this will be effective from October 1, 2012.
In the past SEBI had, in a move to increase the participation of retail investors, modified the share allotment system, irrespective of the application size. The minimum application size for all investors is also being increased to Rs 10,000-15,000 as against the existing Rs 5,000-7,000. To reduce time taken from issue closure to listing, the reach of application supported by blocked amount (ASBA) would be enhanced by mandating all the ASBA banks to provide the facility in all their branches.
Steps have also been taken to boost the mutual fund industry whereby an increasing number of participants can invest and help the industry expand. SEBI has now permitted cash transactions in mutual fund schemes to the extent of Rs 20,000 for small investors who do not pay tax or do not have a bank account or a PAN card. Further, AMCs are allowed to charge additional total expense ratio (TER) of up to 30 basis points in case they have new inflows of funds from locations which are beyond the top 15 cities. This will improve the geographical reach of mutual funds and bring in long-term money from smaller towns.
In the Union Budget 2012 the government had announced the Rajiv Gandhi Equity Saving Scheme (RGESS) in order to boost retail participation. This is a new scheme which allows retail investors to invest up to Rs 50,000 directly into equity shares and avail tax benefit on 50 per cent of the investments. However, there are conditions which need to be satisfied by the investors.
We at Dalal Street Investment Journal believe that these kinds of schemes and measures have very little positive impact on retail investors since not many are attracted to avail of such benefits. The macro-economic concerns that include inflation, interest rate, rupee depreciation, twin account deficits, etc are quite huge and cannot be overruled through such minor initiatives.
Further, around a week ago SEBI came up with the concept of a ‘no frills’ demat account for retail or small investors. There would be no demat charges (annual maintenance charges) for holding of investments of up to Rs 50,000. For those with investments in the range of Rs 50,000 to Rs 1,00,000 the charges would be a maximum of Rs 100 a year. Currently investors are charged anywhere in the range of Rs 225 to Rs 900 per year. Investors can hold shares, mutual funds and other securities and this will be effective from October 1, 2012.
In the past SEBI had, in a move to increase the participation of retail investors, modified the share allotment system, irrespective of the application size. The minimum application size for all investors is also being increased to Rs 10,000-15,000 as against the existing Rs 5,000-7,000. To reduce time taken from issue closure to listing, the reach of application supported by blocked amount (ASBA) would be enhanced by mandating all the ASBA banks to provide the facility in all their branches.
Steps have also been taken to boost the mutual fund industry whereby an increasing number of participants can invest and help the industry expand. SEBI has now permitted cash transactions in mutual fund schemes to the extent of Rs 20,000 for small investors who do not pay tax or do not have a bank account or a PAN card. Further, AMCs are allowed to charge additional total expense ratio (TER) of up to 30 basis points in case they have new inflows of funds from locations which are beyond the top 15 cities. This will improve the geographical reach of mutual funds and bring in long-term money from smaller towns.
In the Union Budget 2012 the government had announced the Rajiv Gandhi Equity Saving Scheme (RGESS) in order to boost retail participation. This is a new scheme which allows retail investors to invest up to Rs 50,000 directly into equity shares and avail tax benefit on 50 per cent of the investments. However, there are conditions which need to be satisfied by the investors.
We at Dalal Street Investment Journal believe that these kinds of schemes and measures have very little positive impact on retail investors since not many are attracted to avail of such benefits. The macro-economic concerns that include inflation, interest rate, rupee depreciation, twin account deficits, etc are quite huge and cannot be overruled through such minor initiatives.
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