The study highlights the increasing economic significance of Offshore Financial Centers (OFCs) in the global financial ecosystem, focusing on their critical role in driving economic growth, fostering the global integration of financial markets, and enabling financial innovation. It also underscores the emergence of India as a key player in the global financial markets and the strategic opportunity to "onshore the offshore" by attracting foreign funds and leveraging initiatives like GIFT IFSC to position India as a premier financial hub.  India’s GIFT IFSC is strategically positioned as a domestic OFC to attract foreign investment and align seamlessly with global financial flows. By offering tax-efficient structures, world-class infrastructure, and light-touch regulations, it provides an enabling environment for industries with high capital requirements, such as asset management, defense, shipping and aircraft leasing. This positioning not only enhances India’s competitiveness in the global financial ecosystem but also strengthens its role as a key player in integrating global financial markets, driving economic growth, and facilitating the onshoring of offshore financial activities to India.

The report provides a comparative analysis of regulatory and tax frameworks across prominent OFCs, including Singapore, Dubai, and Abu Dhabi, highlighting key differences in fund structures, investor eligibility, and tax incentives. It also evaluates the competitive positioning of GIFT IFSC, focusing on its growth trajectory, with notable increases in fund registrations and investment flows. The analysis underscores GIFT IFSC’s alignment with global standards and its ability to attract both inshore and offshore investments, driven by investor-friendly policies and government initiatives like “Make in India.”

Key challenges identified include regulatory complexity, talent acquisition issues, and infrastructure constraints, which hinder GIFT IFSC’s ability to compete with established OFCs. Insights from benchmarking studies and industry reports reveal these as critical pain points, emphasizing the need for targeted reforms. Despite data limitations, the findings highlight GIFT IFSC’s potential as a global financial hub, supported by its growing investor base, innovative regulatory approach, and strategic focus on ease of doing business. Addressing these challenges will further enhance GIFT IFSC's competitiveness in the international finance landscape.

The report examines retail investor participation (RII) in the Indian Securities Market, focusing on regulatory frameworks, participation trends, performance metrics, bottlenecks, global benchmarks, and policy recommendations. It offers actionable insights to enhance RII engagement, investment quality, and market inclusivity.

The analysis reveals inconsistencies in the regulatory framework, with SEBI lacking a clear Secondary Market definition and adopting ambiguous criteria for RIIs. In contrast, RBI provides a uniform definition, while NSE, BSE, and Commodity Exchanges use autonomous or absent definitions. A unified regulatory approach is essential for streamlined participation. Retail investor participation remains concentrated in Mutual Funds and equities, while engagement in Corporate Bonds, derivatives, and Government Bonds is limited. In Q2 2023-24, RIIs contributed 10.90 Lakh Cr. in AUM and 22.07 Lakh Cr. in demat custody, yet turnover data highlights declining RII share, particularly on NSE. Platforms like the Retail Direct Scheme show potential for increased RII engagement, especially in Sovereign Gold Bonds and State Government Securities.

The Quality Retail Participation Index (QRPI) is introduced to assess performance, normalizing data to measure engagement, investment quality, and policy impact. It provides a structured benchmark for evaluating regulatory effectiveness and RII trends.

Stakeholder consultations revealed bottlenecks, including regulatory complexity, lack of awareness, and infrastructure gaps. Based on global best practices, the report recommends 37 policies addressing these issues, focusing on unified definitions, investor education, and protection. These measures aim to foster inclusive growth and robust retail participation in the Indian Securities Market.

The Arun Jaitley National Institute of Financial Management, under the mandate of the Department of Economic Affairs (DEA), conducted an extensive analysis on the profit and loss trends of individual traders in India’s equity futures and options (F&O) market from 2019 to 2023.

This report aims to provide strategic recommendations to strengthen the financial market ecosystem and safeguard retail investors. Retail participation in the F&O segment has significantly surged, particularly during the COVID-19 pandemic. However, this increase has raised concerns about the financial well-being of retail investors.

The study reveals that 89% of individual traders incurred losses, with the majority trading in options. Factors contributing to the surge include increased accessibility to trading platforms, financial literacy initiatives, market volatility, regulatory support, and global market trends.

The report proposes several strategic recommendations: simplification of Securities Transaction Tax (STT) to enhance market efficiency and ensure tax neutrality, capping exchange transaction charges to lower costs for market participants, abolishment of SEBI turnover-based charges to reduce overall regulatory costs, elimination of dividend tax to prevent double taxation and promote investment, review of index construction methodology to prevent manipulation through heavy-weighted constituents, and reevaluation of permitted lot sizes to ensure alignment with global practices and market conditions.

The analysis emphasizes the need for a balanced regulatory approach to protect retail investors while fostering a robust and inclusive financial market. The report’s findings and recommendations aim to guide policy adjustments and improve market dynamics, ensuring sustainable growth and investor protection.

The report comprehensively analyzes the role of Regulatory Impact Assessment (RIA) as a tool for enhancing coherence and efficiency in regulatory policy. It explores RIA frameworks in major jurisdictions, highlighting best practices like rigorous cost-benefit analysis, stakeholder engagement, and transparent information dissemination to enhance regulatory effectiveness in India. These elements are essential for creating a business- friendly environment, reducing compliance burdens, and increasing public participation in the rule-making process.

In also examining the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations 2011, the report emphasizes protecting minority shareholders during takeovers and ensuring transparency and fairness in acquisition processes. The detailed analysis of these regulations’ costs and benefits reveals their impact on the ease of doing business in India.

The FPI Regulation segment discusses the amendments made to the SEBI FPI Regulations 2019, particularly in response to the evolving global financial landscape. The report analyses how these amendments have facilitated the growth of the FPI market by simplifying the on-boarding process, enhancing compliance with international standards, and expanding the category of eligible FPIs. It also evaluates the economic implications of these regulatory changes, demonstrating a positive trend in foreign investments and improved market access.

Finally, the T+1 settlement mechanism section outlines the transition from T+2 to T+1 settlement cycles, led by SEBI, to enhance market liquidity, reduce settlement risks, and improve market efficiency. It details procedural changes, stakeholder consultations, and risk management strategies, highlighting the benefits of shorter settlement cycles, such as faster fund availability and reduced counterparty risk, while addressing transition challenges.

In conclusion, the report offers a holistic view of India’s regulatory landscape, providing valuable recommendations to align it with global best practices. This alignment is crucial for fostering a more transparent, efficient, and investor-friendly market environment in India.

The report “Comparative Analysis of the Principles of Regulation Making” sets the context by discussing the shift from self-regulation to statutory regulation to ensure financial market stability and integrity. It discusses the global interconnectedness and the importance of International Regulatory Cooperation (IRC) to harmonize regulations, promoting transparency, stability, and efficiency. It emphasizes the transition from a “regulate and forget” approach to an “adapt and learn” strategy due to rapid technological and economic changes.

The report focuses on the systemic importance of securities regulations in maintaining market integrity, promoting innovation, and protecting investors. It highlights the critical role of securities regulations as essential guardrails in a globalized, technologically advanced financial landscape. The chapter also examines the influence of international regulatory bodies on India’s policies, emphasizing the need for continuous regulatory evolution to manage systemic risks effectively

The report further delves into the systemic changes within the Alternative Investment Funds (AIF), Business Trusts, and Mutual Funds sectors in India. It identifies key catalysts, such as regulatory updates, economic growth, and the role of private equity and venture capital in driving innovation. The chapter underscores the importance of aligning these sectors with global standards and practices to ensure a stable and sustainable financial ecosystem in India.

In conclusion, the report stresses the importance of a forward-looking regulatory approach to navigate the complexities of the global financial ecosystem. It advocates for comprehensive, adaptable regulatory frameworks that balance innovation with market integrity and investor protection. By leveraging insights from international best practices, India can enhance its regulatory landscape to support sustained economic growth and stability.

The report explores the impact of changes in cotton futures contracts on the MCX in India. A significant modification was the increase in the contract lot size from 25 bales to 48 candy (approximately 100 bales). This alteration led to decreased trading volume and open interest, negatively affecting market liquidity and participation, particularly from FPOs, VCPs, and hedgers who were more active with the smaller lot size.

The textile industry experienced notable fluctuations in input costs due to changes in cotton futures prices. Small and marginal farmers, although not directly participating in the futures market, were aware of price trends and used this information for selling decisions in physical markets. The larger contract size adversely impacted market liquidity and led to prolonged periods of backwardation, where futures prices were lower than spot prices, creating challenges for effective price discovery and market transparency.

The report suggests reconsidering the decision to increase the lot size to enhance the contracts’ utility for price discovery and hedging. It recommends introducing mini futures contracts with smaller lot sizes to attract more participants and improve market accessibility and liquidity. Establishing a standardized procedure for modifying contract specifications is crucial to ensure changes are transparent, justified, and systematically implemented. Additionally, the report emphasizes the importance of a collaborative effort involving the Ministry of Agriculture, SFAC, and other stakeholders to support FPOs. Strategic support and sustained handholding can address operational challenges and enhance the effectiveness of FPOs in supporting small farmers.

In conclusion, the report highlights the need for policy adjustments to improve market efficiency and stakeholder engagement in India’s cotton futures market. Implementing these recommendations can significantly benefit the agricultural and textile sectors, ensuring a more robust and effective cotton futures market.

The report aims to explore and analyze policy measures that can enhance the ability of Micro, Small, and Medium Enterprises (MSMEs) in India to raise funds through stock exchanges. It begins by outlining the mandate, focus, methodology, and limitations of the study. The focus is on understanding the journey of SMEs’ listings on stock exchanges, the benefits derived from such listings, and the regulatory frameworks involved.

The journey of SMEs’ listings is examined in detail, showcasing the background of capital raising through stock exchanges and the specific SME platforms of BSE and NSE. The study provides a comprehensive view of the companies listed on these platforms, including their geographical distribution, market capitalization, and sector-wise breakdown. The report highlights trends in SME listings, the capital raised, and the challenges faced by SMEs in accessing the stock exchanges.

The report also delves into the benefits of listing for SMEs, derived from surveys and financial analyses of listed companies. It highlights the positive impact of stock exchange listings on the financial metrics of SMEs, including improved cash flows, tax contributions, and overall business growth. The cost of listing, such as fees paid to merchant bankers and compliance costs, is also discussed, emphasizing the need for a balanced approach to make listings more accessible and affordable for SMEs.

Furthermore, the regulatory framework governing the listing and capital raising for SMEs is analyzed. The eligibility and migration criteria for the BSE and NSE SME platforms are detailed, alongside the regulatory requirements and procedural steps involved. The report suggests that simplification and rationalization of these regulations can significantly improve the ease of accessing stock exchanges for MSMEs.

In conclusion, the report underscores the importance of policy interventions to facilitate MSMEs’ access to stock exchanges. Recommendations include enhancing regulatory transparency, providing financial incentives, and improving awareness and support systems for SMEs. The study advocates for a collaborative effort between regulatory bodies, financial institutions, and the MSME sector to create a more conducive environment for small businesses to thrive through stock market participation.

The report explores the regulatory framework and mechanisms for financial redressal and the recovery of unclaimed private property in India. It emphasizes the need to protect investors and enhance financial literacy while addressing the challenges posed by unclaimed assets.

The report begins with an analysis of the Supreme Court judgment in Writ Petition (C) No. 162 of 2023, which scrutinized SEBI’s regulatory domain and its investigation into the Adani Group. It recommended strengthening the regulatory framework and protecting investor interests.

The report also includes a comprehensive study and analysis of the Justice Sapre Committee report. This report examined market volatility and investor protection measures, recommending the establishment of a Financial Redress Agency and a Central Unclaimed Property Authority. These entities would be responsible for technology-based solutions for handling grievances and managing Unclaimed Assets. Their primary roles would involve systematic management and reunification of unclaimed assets with rightful owners, thereby safeguarding investor rights and promoting financial inclusion.

The report further analysis the regulatory mechanism of unclaimed property among various financial regulators i.e., RBI, SEBI, PFRDA, and IRDA. The report underscores the need for a centralized approach to manage unclaimed assets effectively. The establishment of the Central Unclaimed Property Authority is deemed essential for reuniting unclaimed assets with their successors and preventing their absorption by the public exchequer.

Finally, the report advocates for leveraging technology to address challenges in the financial redressal system. It recommends implementing technology-based solutions for efficient verification, tracking, and recovery of unclaimed assets. It has been recommended that ‘DigiLocker,’ a digitization service operated by the Ministry of Electronics and Information Technology (MeitY) under the Digital India initiative, is ideally suited to serve as the Centralized Aggregator of Investor Financial Assets. A centralized Online Dispute Resolution (ODR) platform for all financial assets across various financial sectors may also be established to facilitate dispute resolutions. This balanced approach by leveraging technology aims to enhance transparency, accessibility, and overall efficiency in managing unclaimed property and addressing investor grievances.

The report provides a strategic roadmap for the growth and development of capital markets globally, with detailed case studies from countries like Malaysia, Kenya, Nigeria, Ghana, and Zambia. It examines international best practices in capital market development, focusing on governance, implementation frameworks, and key objectives of various master plans. The report includes a comparative analysis of these plans and offers policy recommendations for India.

The report outlines the critical components of a successful capital market master plan, drawing lessons from the examined countries. It emphasizes the importance of robust governance frameworks and clear implementation strategies to ensure the effective execution of these plans. The case studies highlight different approaches to achieving a well-regulated and efficient market.

The report further provides a comparative analysis of the master plans from the selected countries, identifying common themes and unique strategies. This analysis helps in understanding the diverse ways in which different countries have addressed similar challenges in capital market development. It also highlights the key factors that have contributed to the success of these master plans.

The report then offers specific policy recommendations for India, aimed at creating a well-regulated, diversified, and efficient capital market. These recommendations include establishing a dedicated research unit to support continuous improvement, implementing public consultation processes to gather stakeholder input, and ensuring transparency and accountability in the regulatory framework.

Finally, the report outlines the necessary regulatory structures and the role of dedicated research units in supporting the development and implementation of the master plan. It stresses the importance of public consultation and dissemination to ensure that the plan is well-received and effectively implemented. The goal is to create a capital market that supports economic growth, attracts investments, and fosters innovation, ultimately contributing to the overall development of the country’s economy.

The report explores the current state and potential improvements for cyber security in India’s securities markets. The first chapter outlines the evolution of cyber security, highlighting major global cyber attacks and detailing the types of cyber threats faced today. It emphasizes India’s growing involvement in cyber security and discusses options for combating cybercrime domestically, underscoring the need for a robust cyber security framework to protect financial markets from increasing threats.
The report delves into the statutory and regulatory provisions governing cyber security in India. It evaluates the Information Technology Act, the roles of the National Critical Information Infrastructure Protection Centre, and the Indian Computer Emergency Response Team. Additionally, it reviews SEBI’s circulars on cyber security and cyber resilience frameworks for Market Infrastructure Institutions (MIIs) and other market participants, identifying gaps in the current system and recommending enhancements based on global best practices.
The report analyzes various cyber security episodes in both Indian and international securities markets. It covers incidents involving stock exchanges, market regulators, and stock brokers, noting the common objectives and techniques used in these cyber attacks. This chapter highlights the vulnerabilities exposed by these incidents and emphasizes the need for strengthened cyber security measures.
The report also provides a comparative analysis of cyber security and cyber resilience regulatory practices across international securities markets, including those in the U.S., U.K., Saudi Arabia, Singapore, and Australia. It draws lessons from these global practices to inform recommendations for improving the cyber security framework in India, suggesting measures such as ethical hacking, red team exercises, and enhanced coordination between regulatory bodies.
Finally, the report offers specific suggestions and a roadmap for enhancing cyber security preparedness in the Indian securities market. Recommendations include implementing cyber surveillance, standardizing cyber security practices, and improving incident response protocols. The report aims to equip policy makers and market regulators with the insights needed to establish a robust and resilient cyber security infrastructure, ensuring the integrity and stability of India’s financial markets.

The report offers a thorough analysis of BRR filings by listed entities in India. It evaluates the quality of these disclosures, identifies gaps, and recommends improvements to align with global best practices, thereby enhancing the overall reporting framework.
The report begins by outlining the evolution of BRR in India, starting with the National Voluntary Guidelines (NVGs) and progressing to the National Guidelines on Responsible Business Conduct (NGBRC). It details the Nine Principles that guide responsible business practices, covering ethics, sustainability, employee well-being, stakeholder engagement, and human rights. Additionally, it introduces the concept of Business Responsibility and Sustainability Reporting (BRSR), set to become mandatory for the top 1,000 listed entities from the financial year 2022-23.
Analyzing the quality of BRR disclosures by a sample of 50 companies over three financial years, the report reveals an increasing trend of compliance and awareness among companies. However, it also identifies significant variations in disclosure quality. The findings highlight both incremental improvements and areas of decline, suggesting the need for a more structured and consistent approach to BRR to ensure comprehensive and accurate reporting.
The report also evaluates the value creation potential of BRR for stakeholders. While BRR disclosures aim to provide valuable non-financial information, many companies fall short of the desired transparency and rationality. This shortfall is attributed to knowledge gaps, lack of awareness, and a lax regulatory approach. The report emphasizes the need for enhanced capacity building and stronger regulatory enforcement to improve the quality of BRR disclosures.
Lastly, the report discusses the development of a BRR index and company ranking. Given the recent introduction of BRSR and the emergence of ESG indices by stock exchanges, it concludes that creating a separate BRR index may be redundant. Instead, it recommends integrating ESG factors into existing indices to better reflect companies’ responsible business practices. The report identifies deficiencies in the current BRR mechanism and draws lessons from international practices, proposing a roadmap to strengthen the BRR framework in India to enhance transparency, stakeholder engagement, and sustainable business practices.

The report examines the evolution, current practices, and future recommendations for MIIs in India. The report aims to provide a comprehensive framework that balances regulatory oversight with the entrepreneurial spirit necessary for MIIs to innovate and thrive.
The report begins by outlining the historical evolution of MIIs in India, tracing their development from member-owned entities to their current demutualized and corporatized structures. It emphasizes the importance of MIIs, such as stock exchanges, clearing corporations, and depositories, in providing essential infrastructure for trading, clearing, and settlement in the financial markets. The regulatory framework governing these institutions, primarily led by the Securities and Exchange Board of India (SEBI), is detailed to show the continuous evolution in response to market needs and global standards.
The analysis extends to the ownership and governance structures of MIIs in major international markets, including the U.S., U.K., Canada, and Europe. The report highlights the trend towards demutualization and corporatization, with many MIIs becoming publicly listed entities. It discusses the regulatory philosophies in different jurisdictions, balancing commercial interests with regulatory responsibilities. This comparative analysis provides valuable insights and lessons for shaping India’s MII framework.
The core of the report focuses on the current ownership structures of MIIs in India, identifying the need for harmonized shareholding limits and the removal of mandatory ownership requirements by stock exchanges in clearing corporations. The report argues that a more flexible ownership structure could attract entrepreneurial talent and investment, fostering innovation and competition in the MII space. Recommendations include allowing higher initial ownership stakes with phased dilution over time and enabling listing of clearing corporations to enhance transparency and efficiency.
Finally, the report addresses governance issues at MIIs, proposing enhancements to ensure high standards of ethical conduct and accountability. It suggests creating a pool of competent professionals for key governance roles, implementing performance evaluations, and introducing third-party assessments. These measures aim to strengthen the governance framework, ensuring that MIIs operate with integrity and effectively contribute to the stability and growth of India’s financial markets.

The report provides a thorough analysis of the regulatory discrepancies governing these financial instruments in India. The primary objective is to identify gaps and recommend measures to harmonize regulations, ensuring a level playing field.
The report begins by outlining the historical context of the regulatory frameworks for company deposits and debt securities, focusing on key legislative acts such as the Companies Act, 2013, and the SEBI Act, 1992. It highlights the fundamental differences between these instruments, including their regulatory requirements, compliance obligations, and their mechanisms for fund utilization, entry and exit, and interest payments.
A comparative study reveals significant disparities in the regulations. For instance, debt securities have market-driven interest rates, whereas company deposits are capped by the Companies Act. Additionally, the investor protection mechanisms differ markedly between the two, with debt securities generally offering more robust safeguards. These discrepancies create opportunities for regulatory arbitrage, where companies might exploit the more lenient regulations of one instrument over the other.
Empirical findings from a survey of companies illustrate practical implications of the current regulatory framework. The survey covers the volume of funds raised, interest rates, default instances, and enforcement actions by regulatory bodies like the Ministry of Corporate Affairs (MCA). The findings highlight trends and patterns, providing insights into how companies navigate and sometimes exploit these regulatory differences.
The report concludes with policy recommendations to harmonize regulations for debt securities and company deposits. It suggests revising the regulatory framework to reduce discrepancies, enhancing transparency in disclosures, and strengthening compliance enforcement. By adopting a more integrated regulatory approach and incorporating global best practices, the report aims to foster a balanced financial market environment that promotes growth, ensures investor protection, and minimizes opportunities for regulatory arbitrage.

The report provides a thorough analysis of the regulatory discrepancies governing these financial instruments in India. The primary objective is to identify gaps and recommend measures to harmonize regulations, ensuring a level playing field.
The report begins by outlining the historical context of the regulatory frameworks for company deposits and debt securities, focusing on key legislative acts such as the Companies Act, 2013, and the SEBI Act, 1992. It highlights the fundamental differences between these instruments, including their regulatory requirements, compliance obligations, and their mechanisms for fund utilization, entry and exit, and interest payments.
A comparative study reveals significant disparities in the regulations. For instance, debt securities have market-driven interest rates, whereas company deposits are capped by the Companies Act. Additionally, the investor protection mechanisms differ markedly between the two, with debt securities generally offering more robust safeguards. These discrepancies create opportunities for regulatory arbitrage, where companies might exploit the more lenient regulations of one instrument over the other.
Empirical findings from a survey of companies illustrate practical implications of the current regulatory framework. The survey covers the volume of funds raised, interest rates, default instances, and enforcement actions by regulatory bodies like the Ministry of Corporate Affairs (MCA). The findings highlight trends and patterns, providing insights into how companies navigate and sometimes exploit these regulatory differences.
The report concludes with policy recommendations to harmonize regulations for debt securities and company deposits. It suggests revising the regulatory framework to reduce discrepancies, enhancing transparency in disclosures, and strengthening compliance enforcement. By adopting a more integrated regulatory approach and incorporating global best practices, the report aims to foster a balanced financial market environment that promotes growth, ensures investor protection, and minimizes opportunities for regulatory arbitrage.

The report provides an extensive analysis of the existing margin systems in India. It reviews the current provisions, identifies gaps, and suggests reforms to align with global best practices, aiming to enhance the efficacy and robustness of the margin framework.
The report begins with a historical overview of the margin regulations in India, tracing developments from the first circular on equity derivatives in 1999 to the recent changes in commodity markets. It details the types of margins applicable in equity, equity derivatives, and commodity derivatives, and compares these with global standards. The analysis highlights the need for a balanced approach that ensures market safety without stifling trading activity.
The study identifies several key issues within the current margin framework. These include the lack of a standardized review frequency for margin models, the absence of concentration margins in the equity and equity derivatives segments, and the overly conservative nature of the Price Scan Range (PSR). Additionally, it points out the need for better dissemination of risk management information and the high damping factor (lambda), which is considered overly conservative.
To address these issues, the report recommends several policy changes. These include the reclassification of asset groups for margin estimation, the rationalization of PSR and Extreme Loss Margin (ELM), and the introduction of Anti-Procyclicality (APC) measures such as the Kurtosis Adjustment Factor (KAF) and Event Margin. It also suggests implementing real-time margin assessment at the client level to improve transparency and fairness.
The report concludes by emphasizing the importance of a dynamic and flexible margin framework that can adapt to changing market conditions while maintaining financial stability. The proposed changes aim to strike a balance between ensuring sufficient collateral to cover market risks and avoiding unnecessarily high margins that could hinder market liquidity. By adopting these recommendations, the report envisions a more resilient and efficient margin system that can support the growth and stability of India’s financial markets.
Executive Summary

The report examines the risk management framework and offers recommendations for enhancing industry practices. The study identifies recent trends and patterns, strengths, and weaknesses of the mutual fund industry. It emphasizes the vital role played by Corporates, HNIs, and retail investors in the industry, noting significant participation in ETFs and hybrid schemes, with increasing attention in states like Gujarat and Uttar Pradesh. The report underscores the popularity of Growth/Equity Oriented Schemes across various states.
A significant portion of the report is dedicated to analyzing various risks, including liquidity, contingency, market, and sales and distribution risks. It highlights recent events such as the Axis Mutual Fund, Franklin Templeton, and DHFL Pramerica episodes, identifying them as lessons for the industry to improve its risk management practices. The report observes that risk management in the mutual fund industry is often rule-driven rather than principle-driven, suggesting the need for a more proactive approach.
The regulatory framework for risk management, as prescribed by SEBI, is also scrutinized. The report finds gaps in SEBI’s provisions for managing key risks and suggests improvements based on global best practices. It compares the Indian regulatory framework with international standards, particularly focusing on the Chinese mutual fund industry.
The report culminates with several policy recommendations aimed at addressing the identified regulatory gaps and enhancing the risk management framework. These include suggestions for improving liquidity, market, and contingency risk management, and other policy recommendations to strengthen the overall framework.
By implementing these recommendations, the report aims to make the Indian Mutual Fund Industry more resilient and robust, ultimately protecting investors and ensuring sustainable growth in the sector.

The report evaluates global technological developments and their applicability to India. It examines the current technologies used by Indian Market Infrastructure Institutions (MIIs) such as the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE), highlighting their reliance on cloud computing, artificial intelligence, and machine learning to enhance operations and security.
The report explores recent technological advancements in international securities markets, discussing innovations like the Hong Kong Exchanges and Clearing Limited’s Fast Interface for New Issuance (FINI) platform and the European Central Bank’s (ECB) use of AI for improving management reviews. These advancements illustrate a global trend towards leveraging AI, machine learning, and cloud technologies to boost market efficiency, transparency, and security.
Regulatory challenges posed by the dynamic technological environment are also addressed. The report highlights the operational difficulties MIIs face in adopting new technologies and emphasizes adaptive, outcome-based, and collaborative regulatory approaches. It discusses regulatory sandboxes that facilitate innovation while ensuring compliance and risk management.
Furthermore, the report reviews the adoption of technology by global stock exchanges and financial intermediaries, focusing on the use of Application Programming Interfaces (APIs). It notes the importance of open-source languages like Python and Java for accessing these APIs and suggests that Indian securities markets could benefit from similar integrations to improve efficiency and market access.
The report concludes with case studies of stock exchanges that have implemented advanced technologies such as distributed ledger technology (DLT), AI, and cloud computing. These case studies provide insights into how Indian markets can adopt these technologies. The report ends with recommendations for policy interventions and possible technological adaptations, emphasizing the need for regulatory support and collaboration to develop a robust and advanced securities market in India.

The Report offers a comprehensive analysis of the essential factors for developing GIFT IFSC into a premier financial center. This supplementary report builds on the initial study by addressing additional points mandated by the Department of Economic Affairs (DEA). It outlines the critical elements needed to create a vibrant ecosystem and improve GIFT IFSC’s ranking in the Global Financial Centers Index (GFCI).
The report identifies the key factors for developing international financial centers. By reviewing anecdotal reports, research publications, and articles, the study highlights seven crucial pillars: Economic Freedom, Business Enablers, Geography of Finance, Macro-Economic Indicators, Taxation, Skilled Talent Market, and Social Environment. These pillars, comprising 46 variables, are analyzed over a decade across 54 countries. Key factors such as Control of Corruption, Political Stability, and Voice & Accountability are noted as vital for enhancing the GFCI ranking.
The report examines specific initiatives undertaken by various countries to boost their GFCI rankings. It highlights that countries like Singapore, Denmark, China, and Italy have enhanced their overall performance through reforms in economic freedom and business enablers. The importance of efficient contract enforcement, property registration, and tax payment processes is emphasized. Additionally, 14 critical factors, including brain drain, foreign highly-skilled personnel, cost of living, and health infrastructure, are identified as areas needing accelerated improvement in GIFT IFSC.
A comparative analysis of the regulatory sandbox of the International Financial Services Centres Authority (IFSCA) with other global systems is also provided. The analysis shows that while IFSCA’s sandbox framework aligns with global best practices, it is still developing and has significant growth potential. The study recommends leveraging the learning curve to implement improvements and maintain a regulatory environment conducive to innovation and development.
Overall, the report stresses the necessity of continuous incremental reforms in the GIFT IFSC ecosystem. By adopting best practices from other international financial centers and implementing focused policy recommendations, GIFT IFSC can elevate its global position and achieve a higher GFCI ranking. The study offers a detailed roadmap for policymakers to develop a robust and dynamic financial hub in India.

The report offers an in-depth analysis of the Know Your Customer (KYC) norms within the securities markets. Published on April 3, 2021, the report examines the historical evolution, current practices, challenges, and future directions of KYC processes, highlighting the necessity for streamlined and efficient mechanisms.
The introduction provides a historical overview of KYC norms globally and in India. It underscores the significance of digital identity onboarding and addresses the associated risks and challenges, including exclusion risks, privacy concerns, and sustainability. The objectives of KYC implementation are to prevent money laundering, enhance investor protection, and ensure market integrity through robust client identification and verification processes.
The report reviews the legislative and regulatory framework governing KYC in India, focusing on key legislation such as the Prevention of Money-Laundering Act (PMLA) and related rules. It also examines regulatory provisions set forth by the Securities and Exchange Board of India (SEBI) and other financial regulators, outlining the requirements and responsibilities of various market participants in adhering to KYC norms.
In-depth, the report explores existing KYC mechanisms in the securities markets, emphasizing the roles and functions of KYC Registration Agencies (KRAs), the Central KYC Registry (CKYCR), and SEBI’s proposed framework for e-KYC. It includes a comparative analysis of KYC processes before and after SEBI’s circulars, discussing how technological advancements like video-based KYC and Aadhaar-based e-KYC have simplified and enhanced the KYC process.
The report also identifies deficiencies and regulatory gaps in the current KYC mechanisms. It addresses issues related to the KRA and CKYCR processes, data privacy and protection, and the suspension of e-KYC. It discusses concerns of SEBI-registered intermediaries and compares KRA and CKYCR, emphasizing the need for a harmonized and efficient KYC ecosystem.
Lastly, the report proposes a roadmap for implementing a one-time simplified e-KYC process. It provides practical recommendations for regulators, CKYCR, and other stakeholders to improve market access, enhance investor convenience, and ensure robust safeguards. The report concludes by advocating for continuous regulatory updates and technological integration to achieve a seamless and efficient KYC regime in India’s securities markets.

The report explores the impact and potential reforms related to stamp duty in the Indian securities market. It begins with an overview of the current stamp duty structure, highlighting its complexities and the administrative challenges faced by market participants. The existing system is characterized by varied rates and procedures across different states, creating inefficiencies and compliance burdens.
The report delves into the economic implications of the current stamp duty regime. It discusses how the current setup affects market liquidity and transaction costs, with higher duties discouraging trading activity and increasing the overall cost of transactions. The analysis also includes a comparison with international practices, showing that Indian stamp duty rates are relatively high, which could be detrimental to market competitiveness.
The report also presents a detailed examination of potential reforms. The report advocates for the standardization of stamp duty rates and procedures across states to simplify compliance and reduce costs. It suggests adopting a centralized collection mechanism to enhance efficiency and ensure uniform application. Additionally, the report emphasizes the need for modernizing the infrastructure for stamp duty collection, leveraging digital technologies to streamline processes.
The report further focuses on the expected benefits of the proposed reforms. It anticipates that standardization and centralization would lead to increased market liquidity, reduced transaction costs, and enhanced ease of doing business. These changes are projected to attract more domestic and international investors to the Indian securities market, fostering growth and stability.
In conclusion, the report underscores the importance of reforming the stamp duty structure to align with global best practices. It calls for coordinated efforts between state and central authorities to implement the recommended changes. By doing so, the Indian securities market can become more competitive, efficient, and attractive to investors, contributing to the overall economic development of the country.

The report examines the impact of the Peak Margin system introduced by SEBI on the Indian stock and commodity markets. Implemented in December 2020, the Peak Margin system aims to enhance risk management by requiring higher margins during intraday trading based on peak positions. The report provides a comprehensive analysis of this system’s effects on market dynamics, including trading volumes, turnover, and open interest.
Initially, the report highlights the background and need for a robust margining system to ensure zero-default settlement of trades. It explains how the Peak Margin system differs from the erstwhile margin system, which calculated margins based on end-of-day positions. The new system uses random snapshots of trading positions throughout the day to determine the highest margin requirement, thereby reducing the potential for excessive leverage and client defaults during volatile market conditions.
The report includes a phased implementation plan for the Peak Margin system, rolled out in four phases over a year to allow market participants to adapt. The analysis reveals mixed impacts on various market parameters. For instance, while equity volumes showed a marginal decline, equity turnover and stock futures volume experienced an increase. Notably, stock options open interest saw a significant rise, indicating increased market confidence and a shift from cash and futures to options trading.
An empirical analysis of commodity markets, specifically NCDEX and MCX, showed divergent trends. NCDEX witnessed a substantial increase in both commodity futures volumes and open interest, suggesting higher participation in commodity derivatives. Conversely, MCX saw a decline in futures volumes but a sharp rise in open interest, reflecting increased trader confidence despite reduced trading activity.
In conclusion, the report finds that the Peak Margin system has generally strengthened the risk management framework of Indian exchanges. Although it has introduced complexities and trade hurdles, the system’s benefits in standardizing client services and reducing default probabilities outweigh the drawbacks. The report recommends further enhancements, such as linking client trading limits to real-time margin levels, to make the system more robust and effective.

The report focuses on the mechanics and roadmap for integrating the Government Securities (G-Sec) and Corporate Bond markets in India. The report begins with an analysis of the current structure and operational framework of both markets, highlighting the lack of interoperability and the distinct regulatory environments governed by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI). It emphasizes the need for a unified platform to enhance market efficiency and investor participation, drawing from global practices and experiences.
The report then delves into the participation levels of various investor groups in the Indian bond markets. It provides a detailed examination of turnover and holdings in both the G-Sec and corporate bond markets, using data from the National Stock Exchange (NSE), Clearing Corporation of India Limited (CCIL), and RBI. The analysis reveals significant discrepancies in participation and highlights the challenges faced by different investor categories in accessing these markets. This section underscores the importance of harmonizing regulatory frameworks to facilitate broader and more equitable market access.
Identifying key issues and bottlenecks forms a critical part of the report. It discusses concerns from regulators and market participants, focusing on regulatory overlaps, market fragmentation, and the high costs associated with bond market transactions. The report suggests that addressing these issues is essential for improving market liquidity and efficiency. It also highlights the need for a comprehensive cost-benefit analysis to assess the potential impacts of proposed reforms on various stakeholders.
The global experiences and learning practices section compares India’s bond markets with those of other countries. It identifies best practices and successful models from developed markets that could be adapted to the Indian context. The report suggests that integrating lessons from these international markets can help overcome existing challenges and foster a more robust and dynamic bond market in India.
Finally, the report outlines a phased roadmap for achieving the integration of the G-Sec and corporate bond markets. It proposes the establishment of an Integrated Debt Platform (IDP) that would streamline operations, reduce transaction costs, and enhance regulatory oversight. The suggested regulatory framework includes measures to ensure seamless interoperability, protect investor interests, and promote market development. The report concludes with actionable points and recommendations aimed at achieving the desired integration and fostering a more efficient bond market ecosystem in India.
Executive Summary

The report provides a comprehensive analysis of the evolution and impact of the Alternative Investment Fund (AIF) sector in India. As of March 31, 2021, the AIF industry has rapidly expanded, investing over ₹2.0 lakh crore into various Indian ventures. Over the past fifteen years, AIFs have provided nearly ₹10 lakh crore in risk capital, funding significant investments across numerous sectors, including industrial, retail, healthcare, digital consumer, banking, insurance, and other financial services. This growth trend is expected to continue, given the flexibility AIFs offer compared to other onshore vehicles like Non-Banking Financial Companies (NBFCs).
The report examines the dimensions of the AIF industry, including the sources of their funds and their deployment patterns. It also sought to provide recommendations on general policy measures to foster the AIF industry’s development. Despite the reluctance of AIFs and their investee companies to share data informally, the study utilized limited data from SEBI, presenting it alongside observations to provide a thorough analysis.
Key findings indicate that over 50% of the overall funds raised through AIFs are in individual fund sizes exceeding ₹500 crore. The funds are predominantly raised in Category II AIFs, which account for approximately 68% of the total AIF funds. This category includes equity and debt funds across various sectors, with sponsors ranging from the Government of India to private entities and foreign funds. Category I AIFs, which account for 11% of the total funds, are still gaining momentum, with a significant concentration of funds among the top sponsors.
The report highlights the need for focused education and outreach efforts, consistency in valuation and accounting aspects, and enhanced coordination among Funds of Funds (FOFs) set up by state and central governments. It also emphasizes the importance of establishing a digital nervous system for the AIF industry and creating a repository for AIF transactions to improve transparency and efficiency.
Overall, the report suggests that with the right policy measures and continuous evolution, the AIF industry can significantly contribute to the Indian economy by providing essential risk capital and driving investments across various sectors .

The report analyzes various International Financial Services Centres (IFSCs) and compares them with the International Financial Services Centres Authority (IFSCA) in India. The aim is to identify best practices, regulatory frameworks, and strategic initiatives that can enhance the operational efficiency and global competitiveness of IFSCA.
The report provides a detailed overview of the development and structure of several IFSCs, including those in Dubai, Singapore, Hong Kong, and London. It highlights their regulatory frameworks, business models, and key operational strategies. The section emphasizes the importance of a strong regulatory environment, robust infrastructure, and strategic geographical positioning in the success of these IFSCs.
The report also delves into the regulatory and governance structures of these global IFSCs. It outlines how these centres maintain financial stability, ensure investor protection, and promote market integrity. The report points out that the regulatory frameworks in these centres are often characterized by their adaptability, transparency, and alignment with international standards, which serve as benchmarks for the IFSCA.
The report further examines the financial products and services offered by these IFSCs. It discusses the diversity and innovation in financial instruments, including derivatives, commodities, and green finance products. The report underscores the need for IFSCA to diversify its product offerings and encourage innovation to attract a wider range of investors and financial institutions.
The report focuses on the operational and strategic initiatives that have been pivotal in the success of global IFSCs. These include tax incentives, ease of doing business, strategic partnerships, and marketing initiatives to attract global players. The report recommends that IFSCA adopts similar initiatives to enhance its attractiveness and competitiveness on the global stage.
Finally, the report provides a comparative analysis and strategic recommendations for IFSCA. It suggests implementing best practices in regulatory frameworks, enhancing operational efficiencies, diversifying financial products, and adopting strategic initiatives to attract international businesses. The report concludes that by learning from global IFSCs, IFSCA can position itself as a leading international financial hub, contributing significantly to India’s economic growth and global financial integration.

The report explores the need for uniform pricing norms for unlisted equity in India, emphasizing the growing significance of valuation in the start-up ecosystem. The study examines the current regulatory framework, international best practices, and the implications of various valuation methodologies on transactions, taxation, and pooled investment vehicles such as Alternative Investment Funds (AIFs).
The increasing focus on the valuation of unlisted equity is driven by the rapidly expanding start-up ecosystem in India, which boasts over 175,000 registered start-ups and numerous unicorns. This growth necessitates a coherent and simplified regulatory framework to facilitate large-scale investments and maintain alignment with international standards. The report stresses the importance of a principles-based fair value approach, involving arm’s length transactions between knowledgeable, independent parties.
The study critiques the existing fragmented valuation standards across different statutes such as the Income Tax Act, FEMA, SEBI regulations, and the Companies Act. It highlights the complexities and inconsistencies arising from using different valuation principles and methods under these statutes, calling for a unified valuation standard. The report suggests leveraging the work done by the Institute of Chartered Accountants of India (ICAI) on valuation standards and proposes that these standards be consulted, modified, and notified by the government for uniform application.
Key recommendations include adopting a unified valuation standard through a consultative process, ensuring consistency in valuation methodologies, and providing valuation infrastructure and resources to bridge the quality gap between small and large valuers. Additionally, it recommends integrating the concept of a Registered Valuer (RV) across all statutes, developing a robust regulatory framework for RVs, and ensuring the use of multiple valuation methods to enhance accuracy and mitigate risks of misvaluation.
The report concludes that a harmonized approach to valuation will not only facilitate better alignment among various regulatory frameworks but also improve the quality of valuation outputs, thereby supporting the vibrant start-up ecosystem and attracting more investments into the Indian market .

The report offers an in-depth review of the tax treatment for Alternative Investment Funds (AIFs) under Indian tax laws. It examines the existing tax provisions, identifies key issues, and provides recommendations for rationalization to boost the AIF industry’s growth in India. The report highlights the pivotal role AIFs play in channeling funds to businesses and supporting India’s burgeoning startup ecosystem.
The report starts with an overview of the regulatory and tax framework governing AIFs. It notes the significant growth of the AIF industry, driven by the need for alternative investments. Despite the introduction of investor-friendly tax reforms, the report underscores the need for further clarity and simplification in AIF taxation to attract both domestic and foreign investments. A consistent tax regime is deemed crucial for the effective functioning of AIFs.
In analyzing taxation issues, the report addresses the treatment of management fees, suggesting they should be deductible when computing capital gains or interest income for investors. It also discusses the tax implications of income accrued but not distributed by AIFs, proposing deferring taxability until income becomes due. Additionally, it recommends a framework for claiming deductions for income that is ultimately not realized, easing the tax burden on investors.
The report also tackles the tax treatment of ‘carried interest’ for investment managers, proposing it be treated as investment income or gains, similar to sweat equity, and thus exempt from GST. It calls for clarity on the characterization of various income streams from AIF investments to prevent litigation and ensure consistent tax treatment. This would provide much-needed certainty for investment managers and sponsors.
Finally, the report highlights disparities in tax rates for income earned from securitization trusts and advocates for a complete tax pass-through status for AIFs, eliminating the distinction between business and non-business income. It also emphasizes the need for exemptions from deemed taxation provisions under sections 56(2)(x) and 50CA of the Income Tax Act for AIFs and their investors. By aligning tax treatment with global best practices, these recommendations aim to enhance investor confidence and foster a more vibrant AIF ecosystem in India.

The report examines the practice of pledging shares, where promoters secure loans against their equity holdings. This practice, while offering liquidity, poses significant risks to both promoters and other shareholders. The study aims to analyze the mechanisms, legal frameworks, risks, and impacts associated with share pledging in India, providing insights and recommendations for improving regulatory practices.
Initially, the report explains the concept of share pledging and its prevalent use among Indian promoters to secure financing. It outlines the structure of the study, which includes a comparison with international practices, an examination of the impact on stakeholders, and an analysis of the current regulatory framework. The introduction sets the stage for understanding how share pledging, although beneficial for liquidity, can lead to potential market instability and governance issues.
The report explores institutional mechanisms and international comparisons, revealing the risks of share pledging. This section emphasizes the adverse effects on non-promoter shareholders and the broader market, highlighting how significant pledging can lead to stock price volatility and decreased investor confidence. It also discusses the perspectives of lenders and the implications for corporate governance, underscoring the need for robust risk management practices.
An analysis of the impact on company performance includes a review of literature and empirical data. It finds that high levels of share pledging can lead to volatile stock prices and negatively influence investment decisions, financing, and dividend policies. This volatility often stems from market perceptions of increased financial risk, which can erode investor confidence and lead to adverse outcomes for the company’s financial health.
The report concludes with a review of the legal and regulatory frameworks governing share pledging in India, highlighting existing gaps and suggesting areas for improvement. It examines relevant sections of the Companies Act, Depositories Act, SEBI regulations, and guidelines for non-resident pledging. The report calls for enhanced transparency, stricter compliance, and more robust regulatory measures to protect investors and ensure market stability. By implementing these recommendations, the report aims to foster a more stable and transparent financial market in India, mitigating the risks associated with share pledging and enhancing overall market integrity.

The report provides an in-depth analysis of the mutual fund industry’s growth, challenges, and areas for improvement. It highlights the significant growth of the industry, which has seen an increase in the number of fund houses, schemes, and assets under management (AUM). As of March 2020, the industry managed over ₹24.55 trillion in AUM, reflecting a strong investment culture among Indian investors.
A major focus of the report is on liquidity risk management, particularly in the context of events like the COVID-19 pandemic and the Franklin Templeton incident, where six debt schemes were shut down due to massive redemptions. The report discusses global best practices in liquidity risk management and recommends that the Indian mutual fund industry adopt similar measures, such as re-classification of assets based on liquidity, stress-testing methodologies, and transparent liquidity risk management policies. These steps are crucial to handling sudden large redemptions and maintaining market stability.
The report also addresses contingency management, highlighting the need for mutual funds to prepare for unpredictable events like natural disasters and economic crises. It recommends the development of formal contingency plans, regulated contingency reserves, and disaster management policies. By adopting these measures, the mutual fund industry can better manage operational risks and ensure continuity during significant disruptions.
Market risk management is another critical area covered in the report. It emphasizes the importance of protecting retail investors’ wealth and confidence by managing risks associated with macroeconomic factors. The report reviews SEBI’s regulations on hedging and portfolio rebalancing and suggests that fund houses should adopt portfolio insurance and formal market risk management policies. This would involve using derivative products to hedge against market risks and ensure the stability of investment portfolios.
Finally, the report stresses the need for financial literacy and investor protection. It critiques the current use of funds allocated for financial literacy, suggesting that they are often misused for marketing purposes. To address this, the report recommends independent financial literacy workshops, participation in national financial education initiatives, and the creation of a Mutual Fund Information Cell. These measures, along with enhanced internal controls and investor protection mechanisms, are essential for building investor confidence and ensuring the industry’s sustainable growth.

The report examines the regulatory challenges and implications of share buybacks in India. Share buybacks, where companies repurchase their own shares, are used to return excess cash to shareholders, boost earnings per share (EPS), and potentially increase the market price of remaining shares. While buybacks offer financial benefits, they also pose risks if not properly regulated. Historically, buybacks were prohibited in India until the Companies Act was amended in 1998.
The report compares international buyback provisions, reviewing practices in the USA, UK, Germany, France, and Australia. These comparisons reveal varied regulatory frameworks, approval processes, and volume restrictions. For instance, the US provides significant flexibility in buybacks, while European countries impose stricter regulations to prevent market manipulation and protect investors.
In the Indian scenario, the report scrutinizes existing regulations under the Companies Act 2013 and SEBI (Buy-back of Securities) Regulations 2018. It identifies trouble spots such as complex regulatory provisions, gaps in enforcement, and the need for clearer guidelines to ensure transparency and fairness, which can lead to inconsistent practices and potential exploitation by corporate insiders.
An empirical analysis of buyback trends in India over the past decade highlights that buybacks are often used to stabilize share prices, return surplus cash, and signal confidence to the market. However, they can also be used to manipulate stock prices or consolidate control among promoters, raising concerns about market fairness and investor protection.
The report concludes with recommendations to strengthen the regulatory framework for buybacks in India, including simplifying procedural requirements, enhancing disclosure norms, improving enforcement mechanisms, and aligning practices with global standards. These measures aim to foster a more transparent, fair, and efficient market environment, benefiting all stakeholders.

The report examines the effect of maintaining minimum public shareholding (MPS) on price discovery in the Indian stock market. This study focuses on listed public sector enterprises (PSEs) and public sector banks (PSBs) with public shareholding below the mandated 25% threshold. The report highlights the importance of MPS in enhancing market liquidity, preventing price manipulation, and ensuring efficient price discovery.
The research methodology involves analyzing a sample of 26 PSEs and 11 PSBs with less than 25% public shareholding and comparing them with Nifty 50 companies that meet the MPS requirement. The study uses descriptive statistics and event analysis to assess the impact of MPS compliance on various market parameters such as traded volumes, turnover, number of trades, percentage of deliverable trades, and impact cost. The analysis reveals that companies with higher public shareholding exhibit better market liquidity and more efficient price discovery.
The report provides a detailed comparative analysis of international practices regarding public shareholding and regulatory frameworks. It notes that countries with higher public shareholding requirements tend to have more transparent and liquid markets. In India, the regulatory framework under SEBI mandates listed companies to maintain a minimum of 25% public shareholding. The study highlights the challenges faced by companies in meeting these requirements and the regulatory measures adopted by SEBI to ensure compliance.
Empirical data from the study shows significant improvements in market statistics for companies that have complied with MPS norms through Offer for Sale (OFS) mechanisms. For instance, there is a notable increase in traded volumes and turnover, along with a reduction in impact cost, indicating enhanced market efficiency. The report underscores the positive correlation between increased public shareholding and improved price discovery, benefiting both investors and the overall market.
In conclusion, the report emphasizes the need for stringent enforcement of MPS regulations to ensure fair and transparent markets. It recommends simplifying compliance procedures, enhancing regulatory oversight, and adopting best practices from international markets. By addressing these issues, the Indian stock market can achieve greater liquidity, improved price discovery, and increased investor confidence, ultimately contributing to the market’s stability and growth.

The report explores the profound effects of the COVID-19 pandemic on India’s mutual fund industry. It assesses the industry’s performance before and after the pandemic struck, using a six-month period for both pre- and post-COVID-19 analysis. The study covers various market aspects, including equity and debt mutual funds, gold ETFs, and the responses of foreign and domestic institutional investors.
The pandemic had a significant negative impact on the equity market, with the Nifty 50 Index experiencing a sharp decline of 39.58% within 64 days from January 20 to March 24, 2020. This steep drop highlighted the vulnerability of the Indian markets to external shocks. However, a gradual recovery in asset under management (AUM) was observed post-March 2020, indicating a restoration of investor confidence driven by strong economic fundamentals and regulatory interventions.
The analysis of debt mutual funds revealed a mixed impact. While the overall debt AUM saw a decline initially, it recovered significantly by June 2020. However, credit risk funds, which invest in higher-risk debt instruments, continued to show a decline, reflecting persistent risk aversion among investors. Conversely, corporate bond funds, which invest in safer corporate bonds, and gilt funds, which invest in government securities, showed resilience and growth during this period.
Gold ETFs emerged as a preferred investment avenue during the pandemic, reflecting their role as a safe haven asset. The AUM for gold ETFs saw a remarkable increase of over 113% from July 2019 to June 2020. This surge in gold investments underscored the heightened risk perception and the shift towards safer assets during periods of financial uncertainty.
In conclusion, the report highlights the need for proactive regulatory measures to enhance market stability and investor protection. It recommends the development of robust liquidity and risk management frameworks for mutual funds and emphasizes the importance of financial literacy to help investors make informed decisions. By addressing these areas, the Indian mutual fund industry can better navigate future crises and contribute to the resilience and growth of the broader financial market.

The report explores the feasibility and benefits of implementing a unified dematerialized (Demat) account for all financial assets in India. This initiative aims to streamline the management of various financial instruments, such as equities, bonds, insurance policies, and bank deposits, by consolidating them into a single Demat account. The report highlights the potential of this system to enhance transparency, reduce administrative burdens, and improve investor convenience.
The report begins by detailing the current status of Demat accounts, noting the advantages of a single account for investors, issuers, and the government. For investors, it promises simplified portfolio management and improved asset safety. Issuers would benefit from reduced paperwork, while the government could expect better regulatory oversight and tax compliance. However, the report also identifies potential risks, such as data breaches, emphasizing the need for robust cybersecurity measures.
Legal and regulatory enablers necessary for implementing a single Demat account are thoroughly examined. The report reviews relevant acts and regulations, proposing amendments to accommodate the new system. It stresses the importance of coordination among financial regulators like SEBI, RBI, IRDAI, and PFRDA to ensure a seamless transition.
A phased implementation roadmap is outlined, starting with the integration of electronic insurance policies (e-insurance) and National Pension System (e-NPS) accounts. This initial phase aims to address operational challenges before expanding to include all financial assets.
In conclusion, the report advocates for the adoption of a single Demat account to enhance India’s financial infrastructure, promote financial inclusion, and improve business ease. It calls for collaborative efforts from all stakeholders to realize this transformative vision for India’s financial markets.

The report evaluates the impact of STT on the Indian financial markets and suggests potential restructuring to improve efficiency and revenue collection. STT was introduced in 2004 to simplify the tax regime on financial market transactions, replacing the long-term capital gains tax and reducing the short-term capital gains tax.
The report begins with a historical perspective on STT in India, highlighting its initial objectives: effective tax collection at source, incentivizing long-term investments, and controlling speculative trading. Despite these goals, the empirical data shows that STT collection has grown at a much slower rate compared to the turnover in the market, indicating inefficiencies in the current structure.
A significant portion of the report is dedicated to analyzing the current status of STT and its impact on various market parameters such as trading costs, market returns, volatility, and turnover. The analysis reveals that STT constitutes a substantial portion of the trading cost, especially in the spot segment, which discourages long-term investments and promotes speculative trading. The report also highlights the disparity between STT collections from different market segments, with equity futures contributing more significantly than options or cash transactions.
The report compares global best practices regarding financial transaction taxes, identifying key differences and potential lessons for India. It notes that many developed markets do not impose STT, while others, like the UK and France, have implemented it with varying success. These insights inform the report’s recommendations for restructuring STT in India.
In conclusion, the report proposes several actionable points for restructuring STT, including revising the tax rates, expanding the base of taxable transactions, and improving compliance mechanisms. By implementing these changes, the report aims to balance the need for revenue generation with the promotion of long-term investments and market stability. This comprehensive approach seeks to enhance the effectiveness of STT, making the Indian financial markets more robust and investor-friendly.

The report focuses on enhancing the integration of commodity spot markets with derivative markets in India. It examines the current state of agricultural markets and proposes reforms to create a seamless commodity market ecosystem.
The report begins by highlighting the historical context and challenges of the agricultural markets in India, regulated under the Agricultural Produce Market Committee (APMC) Act. It discusses the limitations of APMC markets, including fragmented operations, lack of infrastructure, and inefficiencies in price discovery. The introduction of electronic National Agriculture Market (e-NAM) and various e-trading platforms aims to unify these markets and improve transparency.
A significant portion of the report is dedicated to analyzing the emergence of e-trading platforms and their potential to enhance market efficiency. The study emphasizes the need for regulatory oversight to ensure the credibility and integrity of these platforms. It highlights the role of Farmer Producer Organizations (FPOs) and the recent Farm Acts of 2020 in facilitating a more market-oriented approach to agricultural trade.
The report provides a comparative analysis of international practices, focusing on how other countries have integrated spot and derivative markets. It identifies key areas where Indian markets can adopt best practices to improve market operations. The study also discusses the importance of robust warehousing, assaying facilities, and the use of electronic Negotiable Warehouse Receipts (eNWRs) to support market integration.
In conclusion, the report recommends several institutional reforms, including enhancing regulatory frameworks, promoting the use of eNWRs, and improving market infrastructure. It calls for coordinated efforts among various regulatory bodies such as SEBI, RBI, and WDRA to ensure seamless integration of spot and derivative markets. By implementing these reforms, the report aims to create a more efficient, transparent, and competitive commodity market ecosystem in India.

The report focuses on strategies to boost the participation of hedgers in India’s commodity derivatives market. This study, conducted under the DEA-NIFM Research Programme, outlines the historical context, current practices, challenges, and recommendations for enhancing the hedging ecosystem.
The introduction emphasizes the critical need for effective hedging in today’s volatile business environment. It explains that unpredictable commodity price fluctuations pose significant risks to businesses involved in the commodity value chain. By managing these risks through derivatives, companies can stabilize costs, protect profit margins, and gain a competitive edge. However, despite the establishment of commodity derivative exchanges in India, challenges such as limited product suites, poor liquidity, and operational issues hinder their effectiveness.
The report identifies several key concerns that deter Indian businesses from hedging onshore. Among these are the lack of OTC commodity derivatives offered by domestic banks, liquidity risks on local exchanges, and credit risks associated with clearing members. Additionally, issues related to collateral and margining on exchanges, GST compliance for physical deliveries, and the hesitant approach of public sector undertakings (PSUs) towards hedging are discussed. These challenges collectively contribute to the preference for offshore markets where customized OTC solutions and mature, liquid platforms are available.
Recommendations to address these issues include allowing Indian banks and financial institutions to offer OTC commodity derivatives, enhancing liquidity through government participation and market-making schemes, and addressing credit risk by enabling margin porting and establishing substantial contingency funds. The report also suggests policy changes to encourage PSUs to hedge their commodity exposures, simplify GST compliance for physical deliveries, and promote extensive educational campaigns to raise awareness about the benefits of commodity hedging.
Overall, the report provides a comprehensive roadmap to create a conducive environment for onshore commodity hedging in India. By implementing these recommendations, the aim is to attract more market participants, improve the efficiency of the domestic commodity derivatives market, and ultimately reduce the outflow of hedging volumes to foreign jurisdictions.

The report examines the current state and future directions for market surveillance in the Indian financial markets. It highlights the importance of an effective surveillance system to ensure the integrity, safety, and stability of the markets. The report identifies the goals of market surveillance, such as ensuring fair and orderly trading and detecting market abuse. These goals align with the International Organization of Securities Commissions (IOSCO) principles, which emphasize comprehensive inspection, investigation, and surveillance powers for regulators.
A key innovation introduced in the report is the Market Monitoring Index (MMI), a comprehensive tool designed with 40 market-driven parameters to measure market performance on a real-time basis. This index facilitates the continuous monitoring of market activities, enabling timely regulatory actions to prevent market abuse and ensure transparency. The MMI includes parameters like market concentration, volatility, liquidity, speculation, and governance-based factors, providing a robust framework for assessing market conditions.
The report also explores global best practices in market surveillance, emphasizing the use of advanced technologies such as artificial intelligence, big data analytics, and blockchain. These technologies enhance the capability of surveillance systems to detect and prevent market manipulations and other suspicious activities. Examples from markets like the US, UK, and Singapore demonstrate the effectiveness of integrating such technologies into the surveillance framework.
To strengthen the Indian market surveillance system, the report recommends establishing the Financial Surveillance Monitor of India (FSMI), a dedicated body with a clear organizational structure and defined functions. The FSMI would coordinate with various regulatory authorities like SEBI, RBI, and MCA to ensure a unified approach to market surveillance. A cost-benefit analysis of the FSMI suggests that its implementation would significantly enhance the market’s efficiency and integrity.
In conclusion, the report emphasizes the need for continuous improvement and adoption of global best practices in market surveillance. By leveraging advanced technologies and establishing a robust surveillance framework, India can enhance its market integrity, protect investors, and ensure a stable and transparent financial environment. The proposed measures and innovations aim to make the Indian financial markets among the most robust and well-regulated in the world.

The report emphasizes the importance of understanding financial concepts for personal and economic well-being. Financial literacy, which includes skills like personal financial management, budgeting, and investing, is crucial for making informed financial decisions. Unfortunately, the report highlights that over 76% of Indian adults lack basic financial knowledge, which hampers their ability to manage finances effectively. This widespread financial illiteracy poses significant challenges to both individual prosperity and broader economic development.
Surveys conducted globally and domestically reveal stark gaps in financial literacy among Indian adults. The 2012 Visa survey ranked India 23rd out of 28 countries, with only 35% of the population considered financially literate. Similarly, the 2014 S&P Global Financial Literacy Survey found that less than 24% of Indian adults are financially literate, placing India among the lowest globally. These findings underscore the need for comprehensive financial education programs to bridge this knowledge gap.
The report advocates for integrating financial literacy into the education system from an early age. By incorporating financial concepts into the school curriculum, particularly through subjects like mathematics, students can develop a solid foundation in financial literacy. The Ministry of Human Resource Development is urged to introduce topics such as earnings, savings, spending, budgeting, investing, and risk management into the curriculum to equip students with essential financial skills.
Digital tools and gamification are also highlighted as effective methods for enhancing financial literacy. The report suggests developing interactive financial education tools, such as money management games and e-learning platforms, to engage both students and adults. Additionally, introducing digital piggy banks and e-gullaks can help inculcate saving habits in children, making financial education more accessible and engaging.
To address the gender gap in financial literacy, the report recommends targeted financial literacy programs for women. Educating women can have a ripple effect, positively influencing the financial behavior of families and communities. Moreover, promoting financial inclusion through direct benefit transfer schemes and ensuring government subsidies and scholarships are routed through bank accounts can enhance financial awareness and inclusion across the population. By focusing on these areas, India can significantly improve financial literacy, empowering its citizens to make informed financial decisions and contributing to economic development and financial stability.

The report delves into the current mechanisms and proposes a structured framework for Regulatory Impact Assessment (RIA) in the Securities and Exchange Board of India (SEBI). The primary goal of RIA is to evaluate the prospective impacts of proposed regulatory measures, ensuring that benefits outweigh costs and that regulations achieve their intended objectives effectively.
The report begins with an introduction to SEBI’s role as the regulator of the Indian securities market, highlighting the need for efficient and fair regulations to protect investors, promote competition, and ensure market integrity. It underscores the importance of adopting a systematic RIA approach to enhance regulatory quality and governance. The report also discusses the economic rationale behind RIA, emphasizing its role in promoting evidence-based policy-making.
A significant portion of the report is dedicated to studying global best practices in RIA, with examples from OECD countries, the World Bank, and IOSCO. These international frameworks provide valuable insights into the key elements of an effective RIA process, such as problem definition, assessment of regulatory options, stakeholder consultation, and impact evaluation. The report highlights the need for SEBI to integrate these elements into its regulatory processes to align with global standards and improve regulatory outcomes.
The report identifies several challenges in SEBI’s current regulatory framework, including the lack of a formalized RIA process and insufficient stakeholder engagement. It proposes a comprehensive RIA framework for SEBI, outlining steps such as systematic impact analysis, cost-benefit assessment, and continuous post-implementation review. This framework aims to make the regulatory process more transparent, accountable, and responsive to market dynamics.
In conclusion, the report emphasizes the critical role of RIA in enhancing the effectiveness and efficiency of SEBI’s regulatory interventions. By adopting a structured RIA framework, SEBI can better anticipate the impacts of its regulations, minimize unintended consequences, and ensure that its regulatory measures are aligned with the overarching goals of investor protection, market integrity, and economic growth. The report advocates for the institutionalization of RIA within SEBI to foster a culture of continuous improvement and evidence-based regulation.

The report provides a detailed analysis of the cost structures involved in issuing corporate bonds via public and private placements. The study aims to understand the reasons behind the preference for private placements over public issuances and to suggest policy measures to address the cost divergences and promote public placements in India.
The report highlights the principal reasons why corporations prefer issuing debt over equity, emphasizing the tax benefits of interest payments and the desire to avoid ownership dilution. It then provides a comprehensive breakdown of the cost components associated with both public and private bond issuances. Public placements involve higher costs due to extensive regulatory requirements, credit rating fees, advertising, and brokerage, which collectively range between 1.26% and 3.27% of the issue size. In contrast, private placements are quicker and less expensive, costing up to 0.50% of the issue size.
A comparative analysis with global practices reveals that India’s corporate bond market is less developed compared to its counterparts in the Asia-Pacific region. Countries like Singapore and Hong Kong have established grant funds to reimburse issue-related expenses for first-time issuers, promoting local currency bond issuances. The report suggests adopting similar schemes in India to encourage public placements. Additionally, it proposes the establishment of a Corporate Bond Guarantee Fund Corporation to boost investor confidence and an Early Warning System to monitor corporate leverage.
The report also examines the dominance of financial sector issuances in India, noting that 64 sectors participated through private placements compared to only 20 through public placements. This imbalance highlights the need for wider participation from non-financial sectors to diversify the market. Furthermore, the report identifies the skew towards higher-rated bonds (AA+ and above) in private placements and calls for increased issuance in lower-rated segments to enhance market depth.
In conclusion, the report recommends several policy measures to reduce the cost disparity between public and private placements and to foster a more robust corporate bond market in India. These include standardizing disclosure requirements for issue expenses, promoting greater issuer awareness, and implementing institutional mechanisms like reimbursement of issue expenses and the establishment of a corporate bond promotion scheme. By addressing these issues, the Indian corporate bond market can achieve greater liquidity, transparency, and investor participation.

The report addresses the need for a standardized approach to valuing corporate bonds in India. It highlights the existing fragmentation in valuation methods and the resulting inconsistencies in bond pricing, which can lead to inefficiencies and unfair practices in the market. The study aims to create a cohesive and transparent valuation framework to enhance market integrity and investor confidence.
The introduction underscores the critical importance of uniform valuation for corporate bonds, especially given the diverse regulatory jurisdictions overseeing different market participants. It points out that while mutual funds, banks, insurance companies, and pension funds are significant investors in corporate bonds, they are regulated by different bodies like SEBI, RBI, IRDAI, and PFRDA. The lack of a unified valuation methodology can result in discrepancies in asset valuation, affecting the net asset values (NAVs) of mutual funds and the financial statements of banks and other institutions.
A comparative analysis reveals that uniform valuation practices are crucial for maintaining a fair and transparent market. The report reviews international practices, noting that developed markets do not necessarily have dedicated bond pricing agencies, while developing countries often engage such agencies to ensure accurate and reliable bond valuations. In India, the report identifies CRISIL, IMACS, and FIMMDA as the primary agencies providing bond valuations, each with its own methodologies, which contributes to the inconsistency in bond pricing.
The proposed framework suggests a hybrid approach to bond valuation, combining Securities Level Valuation (SLV) for frequently traded bonds and a poll-based matrix for less liquid bonds. The methodology includes steps for identifying and excluding outlier trades, using volume-weighted average yields (VWAP) for pricing traded ISINs, and constructing a yield matrix for non-traded bonds based on inputs from various financial entities. This approach aims to ensure that bond valuations are reflective of actual market conditions and provide a reliable basis for trading and investment decisions.
In conclusion, the report emphasizes the necessity of a uniform valuation methodology to enhance the transparency and efficiency of the Indian corporate bond market. It calls for regulatory bodies to adopt and enforce this standardized approach, ensuring consistent bond pricing across the market. By implementing these recommendations, the report aims to foster greater investor confidence and promote the growth and stability of the corporate bond market in India.

The report provides a detailed analysis of the cost structures involved in issuing corporate bonds via public and private placements. The study aims to understand the reasons behind the preference for private placements over public issuances and to suggest policy measures to address the cost divergences and promote public placements in India.
The report highlights the principal reasons why corporations prefer issuing debt over equity, emphasizing the tax benefits of interest payments and the desire to avoid ownership dilution. It then provides a comprehensive breakdown of the cost components associated with both public and private bond issuances. Public placements involve higher costs due to extensive regulatory requirements, credit rating fees, advertising, and brokerage, which collectively range between 1.26% and 3.27% of the issue size. In contrast, private placements are quicker and less expensive, costing up to 0.50% of the issue size.
A comparative analysis with global practices reveals that India’s corporate bond market is less developed compared to its counterparts in the Asia-Pacific region. Countries like Singapore and Hong Kong have established grant funds to reimburse issue-related expenses for first-time issuers, promoting local currency bond issuances. The report suggests adopting similar schemes in India to encourage public placements. Additionally, it proposes the establishment of a Corporate Bond Guarantee Fund Corporation to boost investor confidence and an Early Warning System to monitor corporate leverage.
The report also examines the dominance of financial sector issuances in India, noting that 64 sectors participated through private placements compared to only 20 through public placements. This imbalance highlights the need for wider participation from non-financial sectors to diversify the market. Furthermore, the report identifies the skew towards higher-rated bonds (AA+ and above) in private placements and calls for increased issuance in lower-rated segments to enhance market depth.
In conclusion, the report recommends several policy measures to reduce the cost disparity between public and private placements and to foster a more robust corporate bond market in India. These include standardizing disclosure requirements for issue expenses, promoting greater issuer awareness, and implementing institutional mechanisms like reimbursement of issue expenses and the establishment of a corporate bond promotion scheme. By addressing these issues, the Indian corporate bond market can achieve greater liquidity, transparency, and investor participation.

The report investigates the feasibility and potential benefits of allowing retail investors in India to directly access the stock market using Aadhaar-enabled e-KYC. The primary goal is to reduce transaction costs and minimize unauthorized trading complaints by enabling retail investors to trade directly, without intermediaries like brokers. This direct access is expected to provide faster execution, fewer errors, and greater control over trading decisions.
Globally, markets such as the US, UK, and Singapore have successfully implemented Direct Market Access (DMA) for retail investors. The report examines these international models, differentiating between one-touch DMA, which involves some broker intervention, and zero-touch DMA, which completely bypasses brokers. The successful implementation of DMA in these markets underscores its potential to enhance market efficiency and investor autonomy in India.
The report outlines the prerequisites and eligibility criteria for retail investors to access DMA in India. It proposes stringent KYC norms, minimum deposit requirements, and a requisite level of trading knowledge and experience. These measures aim to ensure that only well-informed and adequately prepared investors can participate, thereby mitigating risks associated with direct market access.
The operational framework for DMA includes steps from account opening to real-time verification of funds and securities, as well as the clearing and settlement processes. The report suggests initially limiting DMA to investment-oriented trades backed by funds in a bank account and securities in a demat account, excluding speculative trades like intraday and derivatives. This approach is designed to minimize risks and ensure a smooth rollout of DMA for retail investors.
In conclusion, the report highlights the significant benefits of DMA for retail investors, such as lower transaction costs, increased market participation, and enhanced financial inclusion. It recommends a phased implementation, starting with pilot projects to test and refine the framework before broader adoption. By leveraging technology and regulatory advancements, DMA has the potential to create a more inclusive and efficient securities market in India, aligning with global standards and protecting investor interests.

The report examines the necessity of aligning the Companies Act, 2013 with securities market laws to enhance regulatory coherence and efficiency. The need for this alignment arises from the divergent legislative jurisdictions and objectives of these laws, which often lead to regulatory gaps and overlaps, complicating compliance and undermining regulatory effectiveness.
The report highlights the historical context, noting the evolution of the Companies Act from a socialistic framework to a market-centric one, reflecting India’s economic maturity and globalization. The introduction of Section 55A in the Companies Act, 1956 was a significant step towards regulatory harmonization, granting SEBI authority over certain aspects of listed companies and paving the way for stronger investor protection mechanisms. This historical shift underscores the importance of continuing efforts to harmonize market-centric laws.
A comparative analysis of the Companies Act, 2013 and securities laws, such as the SEBI Act, 1992; Securities Contracts (Regulation) Act, 1956; and Depositories Act, 1996; forms a substantial part of the report. It covers areas including issue management, corporate governance, accounts and auditing, and director appointments and remuneration. The report identifies discrepancies between these laws, highlighting the need for alignment to ensure consistency and prevent regulatory arbitrage, which can undermine market integrity and investor confidence.
The report also addresses the challenges posed by a multi-regulatory landscape, where various regulators oversee different financial market segments. This fragmented approach can lead to regulatory overlaps and gaps, complicating compliance for businesses. The report emphasizes the need for a coordinated regulatory approach to streamline processes and enhance market efficiency, suggesting that better coordination among SEBI, IRDA, and PFRDA can significantly improve regulatory outcomes.
In its recommendations, the report proposes several policy measures to harmonize the Companies Act with securities market laws. These include legislative amendments to address regulatory disharmony, enhanced coordination between regulatory bodies, and the adoption of international best practices. By implementing these recommendations, India can create a cohesive regulatory environment that supports corporate governance, protects investors, and fosters market integrity, ultimately strengthening its financial markets and boosting investor confidence.

The report examines the relationship between the growth of Assets Under Management (AUM) in mutual funds and the market capitalization of the Nifty 50 Index from May 2015 to May 2018. It highlights the confidence of investors in the Indian economy through mutual fund investments and assesses the reasons behind the growth in AUM.
The study reveals that the AUM of mutual funds in India has grown at an annualized rate of 23.36%, increasing from ₹12.03 trillion in May 2015 to ₹22.59 trillion in May 2018. This growth is driven by both fresh investments and market appreciation. Fresh investments accounted for 64% of the growth, indicating strong investor confidence in mutual funds, while the remaining 36% resulted from the rise in market values of the assets held by these funds.
The analysis shows a significant correlation between the growth in AUM and the market capitalization of the Nifty 50 Index, with a correlation coefficient of 0.96. The market capitalization of the Nifty 50 Index grew at an annualized rate of 12.32% during the same period. This high correlation suggests that changes in market capitalization strongly influence the AUM of mutual funds, though the AUM growth rate is higher due to substantial fresh investments.
The report underscores the resilience of the mutual fund industry, noting that fresh investments play a more significant role in AUM growth than market fluctuations. This indicates that even in a market downturn, the mutual fund industry may continue to grow if investor confidence remains high and fresh investments persist.
In conclusion, the report highlights the robust growth of the mutual fund industry in India, driven by both market performance and substantial fresh investments. It emphasizes the importance of maintaining investor confidence to sustain this growth, and the positive correlation between mutual fund AUM and market capitalization reflects the industry’s potential to contribute significantly to the financial market’s stability and growth.

The report examines the challenges faced by the Bombay Stock Exchange (BSE) over the past decade and identifies key factors contributing to its slowdown. As one of the oldest and most significant stock exchanges in India, BSE's performance is critical to the country's economic growth and market stability. The study highlights the importance of revitalizing BSE’s growth trajectory to maintain its relevance and competitiveness in the evolving financial landscape.

The analysis emphasizes the need for BSE to innovate and strengthen its position in the financial markets. The study underscores the importance of attracting foreign institutional and individual investors by leveraging the opportunities provided under the relaxed Foreign Portfolio Investors (FPI) Regulations, 2014. It also highlights the significance of establishing a dedicated Research and Development Unit to drive innovation and improve BSE's perception among market participants.

The report identifies the necessity of enhancing global collaboration through initiatives such as the Global Trading Window (GTW) and fostering partnerships with international exchanges. Additionally, the study stresses the importance of creating an equitable trading environment by addressing inconsistencies in membership requirements and transaction charges across exchanges. It also highlights the role of advanced financial market training for traders and investors to foster a deeper understanding and engagement.

By addressing these challenges, the report envisions a strengthened BSE that can contribute to the sustainable growth of India’s capital markets while maintaining investor confidence and adapting to the dynamic global financial ecosystem.

The report provides a comprehensive analysis of the challenges and responses in the sector following the default of Infrastructure Leasing & Financial Services Limited (IL&FS) in 2018. This incident had significant ramifications, causing a liquidity crunch and increased scrutiny of the NBFC sector. The report details the impact of IL&FS’s defaults on commercial papers (CPs) and non-convertible debentures (NCDs), which led to a temporary market panic and elevated discount rates for NBFC-issued CPs.
To mitigate the liquidity crisis, the Reserve Bank of India (RBI) undertook several policy measures, including open market operations (OMOs) and modifications to the liquidity coverage ratio (LCR) requirements. These actions aimed to ensure adequate liquidity in the financial system and restore market confidence. Additionally, the State Bank of India’s (SBI) decision to purchase assets from NBFCs further bolstered market stability.
The report emphasizes the substantial growth in the issuance of CPs by NBFCs, highlighting their increasing reliance on short-term funding to manage their operations. Despite the tightening of interest rates and the subsequent defaults, NBFCs continued to demonstrate a strong appetite for CPs, reflecting their crucial role in the financial ecosystem.
Furthermore, the report provides a comparative analysis of the financial statements of 137 NBFCs, revealing a trend of aggressive balance sheet expansion. This growth was primarily driven by the NBFCs filling the credit gap left by public sector banks under corrective action plans by the RBI. However, the report also notes an imbalance in the financial structures of NBFCs, with long-term assets not being fully matched by long-term funding sources.
In conclusion, while the NBFC sector faced significant liquidity challenges following the IL&FS defaults, timely interventions by the RBI and market participants helped stabilize the situation. The report underscores the importance of robust liquidity management and regulatory oversight to maintain stability in the financial sector.

The study investigates the dynamics of the Offer for Sale (OFS) mechanism implemented by SEBI in 2012 to enable public listed companies to achieve the mandated 25% minimum public shareholding. Specifically, it analyzes the behavior of market participants in the seven days preceding the OFS date and on the offer date itself, using data from 14 cases involving 12 CPSEs between 2012 and 2017. The research examines price and volume movements in the spot and derivatives segments of the stock exchange.

The findings reveal significant market activity in the lead-up to the OFS. In the spot segment, high-volume selling was observed in 57.14% of cases, indicating participants' strategies to leverage anticipated price movements. Similarly, in the derivatives segment, 64.25% of cases exhibited high open-interest-based selling, underscoring the speculative behavior tied to expected floor prices. Additionally, a one-day gap between the 'Date of Notice' and the 'Floor Price Announcement' was identified in 64.28% of cases, creating opportunities for market reactions and potential anomalies.

The analysis highlights patterns in price and volume fluctuations, with market participants often capitalizing on the expected floor price announcement. For example, in many cases, increased trading activity and sharp price movements occurred in the lead-up to the OFS. Such behaviors demonstrate the sensitivity of the market to floor price disclosures and the strategic responses of traders.

The study also identifies 13 CPSEs out of 18 listed ones as likely candidates for future OFS due to their non-compliance with the 25% public shareholding requirement. Timely interventions and strategic actions are critical to address these anomalies and ensure market integrity.

This comprehensive analysis underscores the importance of robust surveillance mechanisms and transparency to mitigate potential market manipulations and enhance investor confidence in the Indian capital markets.

The report examines the framework and execution of ex-parte interim orders by the Securities and Exchange Board of India (SEBI) over a decade. The study highlights SEBI’s quasi-judicial powers, enabling it to issue immediate orders without hearing the other party, aimed at protecting investor interests and maintaining market integrity. These powers stem from SEBI’s legislative mandate to regulate the securities market, which includes investigating and taking preventive actions against market malpractices.
A historical overview of SEBI’s legislative empowerment shows a progressive increase in its authority, notably through amendments to the SEBI Act. Significant legislative changes, like the Securities Laws (Amendment) Act, 1995, expanded SEBI’s jurisdiction, allowing it to impose monetary penalties and regulate disclosures in securities issues. Further amendments in 1999 and 2002 reinforced SEBI’s autonomy and established the Securities Appellate Tribunal (SAT) to ensure fair adjudication of disputes arising from SEBI’s actions.
The report identifies key challenges in the current quasi-judicial regime, particularly the time sensitivity of market abuse cases. It notes frequent delays in completing investigations and issuing final orders, causing prolonged business hardships for the restrained entities and undermining confidence in SEBI’s mechanisms. The analysis includes specific case studies, such as the Kailash Auto Finance Limited and First Financial Services Ltd cases, illustrating the consequences of these delays and the need for more timely resolutions.
To address these issues, the report recommends several measures to strengthen SEBI’s quasi-judicial regime. These include setting standard timelines for investigations, enhancing cooperation with global regulatory bodies for cross-jurisdictional enforcement, and implementing a whistle-blower policy to encourage the reporting of market abuses. The study also suggests reinforcing surveillance and risk management frameworks to detect and act against market manipulations more effectively.
In conclusion, the report underscores the importance of SEBI’s prompt and decisive action in safeguarding the securities market. While SEBI has robust systems to prevent fraudulent activities, the recommendations aim to improve the efficiency and credibility of its enforcement actions. By adopting these measures, SEBI can better fulfill its mandate to protect investors and ensure a fair and transparent securities market.

The report explores the adoption and impact of digital signatures and electronic Know Your Customer (e-KYC) processes in India’s financial sector. It highlights the significance of these technologies in enhancing security, efficiency, and transparency in financial transactions, while also outlining the regulatory framework and accomplishments to date.
Digital signatures and e-KYC are critical for a robust and sustainable digital economy. Digital signatures provide authenticity, integrity, and non-repudiation to electronic documents, making them essential for secure online transactions and e-governance. The report outlines how digital signatures work, including the use of private and public keys and the role of Certifying Authorities in ensuring the security of these keys. e-KYC, on the other hand, streamlines the customer verification process by allowing online identity verification using Aadhaar, reducing paperwork and in-person verification requirements.
The report emphasizes the push stimulants for adopting e-KYC in India, such as the widespread issuance of Aadhaar numbers and the need for secure, efficient customer verification methods. The legislative backing provided by the Prevention of Money Laundering Act (PMLA) and the establishment of the Central KYC Records Registry (CERSAI) are crucial developments that support the e-KYC framework. Additionally, the Watal Committee and Nachiket Mor Committee have underscored the importance of digital identity in fostering financial inclusion and reducing fraud risks.
The current status of digital signatures and e-KYC adoption is promising, with significant progress in various sectors including banking, insurance, and securities. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have issued directives to facilitate e-KYC across financial institutions, making the process more streamlined and secure. The report also highlights the role of digital wallets and the government’s Direct Benefit Transfer schemes in promoting e-KYC and digital payments.
In conclusion, the report acknowledges the accomplishments in the adoption of digital signatures and e-KYC, while also identifying the remaining challenges and areas for further development. Recommendations include enhancing digital literacy, improving infrastructure, and ensuring robust regulatory frameworks to support the widespread use of these technologies. By addressing these challenges, India can further strengthen its digital payment ecosystem, enhance financial inclusion, and ensure the security and efficiency of financial transactions.

The report evaluates the feasibility and potential benefits of introducing Bond Exchange Traded Funds (ETFs) in India. ETFs are passive investment instruments that track specific indices and offer transparency, lower expense ratios, and ease of trading. Given the success of the equity share ETFs and the overwhelming public response to the CPSE ETF, SEBI has proposed the introduction of Bond ETFs to enhance the bond market in India.
The creation and redemption process of ETFs is essential for maintaining liquidity and price accuracy. Institutional investors, known as Authorized Participants (APs), provide a basket of securities to the ETF portfolio and receive equivalent ETF shares, which can then be traded in the secondary market. This process helps to keep the ETF’s price in line with its underlying securities, as APs can perform arbitrage when there are discrepancies between the ETF price and its net asset value.
Trading Bond ETFs on stock exchanges provides real-time pricing and transparency. Unlike traditional bond markets, where price discovery can be slow and opaque, Bond ETFs offer a continuous trading platform, enhancing liquidity and making it easier for investors to buy and sell bond exposure. The report suggests that Bond ETFs can be beneficial for retail investors by offering low-cost, diversified exposure to corporate bonds and reducing the complexities associated with direct bond investments.
However, several challenges hinder the effective implementation of Bond ETFs in India. These include low liquidity and depth in the domestic bond market, inadequate price discovery mechanisms, and the complex construction of a bond index. The report highlights that the bond market in India is characterized by limited participation, skewed debt raising channels, and a declining trend in corporate debt trading, which adversely affects liquidity and price discovery.
In conclusion, while Bond ETFs present significant potential benefits, including enhanced market participation and improved liquidity, there are substantial challenges to be addressed. These include improving market infrastructure, increasing the depth and liquidity of the bond market, and developing robust price discovery mechanisms. The report recommends careful consideration of these factors before introducing Bond ETFs in India to ensure their successful implementation and sustainability in the Indian securities market.

The report on the insurance industry provides a comprehensive analysis of key areas, including the surrender of insurance policies, investment regulations, the impact of regulatory changes, and global comparisons. It begins by discussing the surrender of insurance policies, highlighting the regulatory framework under the Insurance Act, 1938, and IRDA regulations. The report addresses critical questions about the amount returned to policyholders upon surrender, both before and after the mandatory lock-in period, concluding that surrender values vary widely based on policy terms.
Investment regulations for insurance companies in India are compared to global practices. The report explains the Prescriptive and Prudent Man models, emphasizing the regulatory approach of the IRDA and the guidelines set for investments by insurance companies. It shows that India’s regulations align well with international standards, particularly with the introduction of risk-based capital requirements similar to those in the EU’s Solvency II framework, ensuring a robust investment environment.
The impact of IRDA’s new regulations on commissions is analyzed, focusing on the IRDA (Payment of Commission or Remuneration or Reward to Insurance Agents and Insurance Intermediaries) Regulations, 2016. The report highlights the shift towards a more market-oriented approach and efforts to bridge regulatory gaps by clearly defining commission, remuneration, and reward, aiming for a transparent and fair environment for insurance agents and intermediaries.
The report reviews the segregation of insurance and investment components in insurance products, concluding that it is feasible and mandated by international accounting standards like IND AS 104 & 107, IFRS 17, and Solvency II. This segregation ensures transparency and security for policyholders, aligning Indian practices with global standards.
Lastly, the report compares investment environments of insurance companies globally, noting a shift towards risk-based capital requirements and internal risk management processes. This trend, seen in the adoption of the Prudent Person model in many countries, emphasizes qualitative risk management standards, crucial for the sustainable growth of the insurance sector.

The report on the impact of government policy changes on MSMEs in India delves into various challenges and their subsequent effects on the sector. Initially, it highlights the critical role MSMEs play in the Indian economy, including employment generation, manufacturing capabilities, and regional development. Despite this, the sector faces significant hurdles such as obsolete technology, inadequate infrastructure, and limited access to finance, which stymie growth and competitiveness .
A substantial part of the report is dedicated to analyzing the Non-Performing Assets (NPAs) within the MSME sector. It reveals a concerning trend of rising NPAs, which is attributed to various factors including deficient business models, poor asset quality, and inadequate market linkages. The empirical data shows a strong correlation between the number of sick MSME units and the amount of outstanding credit, underscoring the need for better credit appraisal and risk management practices .
The report also scrutinizes the policies and frameworks implemented by the Reserve Bank of India (RBI) and other governmental bodies aimed at alleviating the financial distress of MSMEs. It assesses the effectiveness of these measures, noting that while some progress has been made, there are still significant gaps in policy execution and support. The frameworks for the revival and rehabilitation of MSMEs need periodic review and strengthening to be more effective.
Further, the report discusses the importance of modernizing MSMEs through better technology adoption, skill development, and improved market access. It suggests that the MSMEs should embrace digital tools and collaborate with financial technology (FinTech) companies to enhance operational efficiency and reduce costs. Such measures would also aid in improving the sector’s attractiveness to institutional investors and other financial entities .
Finally, the report proposes a set of policy recommendations aimed at fostering a more supportive environment for MSMEs. These include enhancing credit facilities, encouraging corporatization, ensuring better access to infrastructure, and improving managerial competence within the sector. By implementing these recommendations, the report argues, MSMEs can significantly improve their contribution to the Indian economy, reducing the incidence of NPAs and ensuring sustainable growth.

The report provides an in-depth examination of the Securities Lending and Borrowing (SLB) mechanism within global financial markets and compares it to the Indian context. SLB is essential for market liquidity, allowing investors to lend securities temporarily to borrowers who need them for short-selling or other purposes, thereby enhancing trading efficiency and market stability.
The report begins by outlining the significance of SLB, noting its role in providing liquidity and facilitating price discovery. It highlights how SLB markets in developed economies like the US, UK, and Japan are well-established and heavily utilized. These markets benefit from advanced regulatory frameworks, active participation from institutional investors, and robust technological infrastructure, making them highly efficient and integral to their financial systems.
In contrast, the SLB market in India is relatively nascent and underdeveloped. The report identifies several challenges hindering the growth of SLB in India, such as regulatory constraints, limited participation from institutional investors, and lack of awareness among market participants. The Indian SLB market also suffers from lower volumes and limited availability of securities for lending, which restricts its effectiveness in improving market liquidity and stability.
The report further explores the regulatory environment governing SLB activities in various countries, comparing them with the regulations in India. It notes that while SEBI has implemented several measures to promote SLB, including the introduction of a dedicated SLB framework and allowing participation from a broader range of market participants, more needs to be done to align with international best practices. Recommendations include adopting a more flexible regulatory approach, enhancing market infrastructure, and increasing awareness and education among investors.
In conclusion, the report underscores the potential benefits of a robust SLB market in India, such as improved market liquidity, better price discovery, and enhanced market efficiency. It calls for concerted efforts from regulators, market participants, and other stakeholders to address the existing challenges and foster a more conducive environment for SLB activities. By implementing the suggested reforms, India can significantly strengthen its financial markets and align more closely with global standards.

The report explores the feasibility and potential benefits of introducing a Mutual Fund Linked Retirement Plan in India. The report begins by discussing the critical importance of retirement planning, emphasizing disciplined saving and investment to build a sufficient retirement corpus, which can provide a regular income stream in the post-retirement phase. It highlights the inadequacies of government-sponsored and traditional family-structured support systems in meeting the growing needs of the elderly population in India.
The report outlines the World Bank’s five-pillar framework for comparing the pension industry, which includes non-contributory social pensions, mandatory pay-as-you-go schemes, mandatory defined contribution schemes, voluntary pension schemes, and informal family support systems. It emphasizes the need for a well-developed, self-sustaining pension system in India due to the increasing elderly population, urbanization, and nuclearization of families. Current pension schemes like the Employees Pension Scheme, National Pension Scheme, and Atal Pension Yojana are discussed, noting their limited popularity and coverage, especially among the unorganized sector.
A significant portion of the report is dedicated to comparing the proposed MFLRP with existing pension schemes. It suggests that MFLRP could address the shortcomings of current schemes by offering better asset allocation, particularly increasing exposure to equities, which can generate stable long-term returns. The report also discusses the necessity of enhancing financial literacy and awareness among the public to improve the uptake of retirement plans, given that financial products in India are generally “push” rather than “pull” products.
The report draws comparisons with global pension systems, notably the 401(k) plans in the US, highlighting their features and success in channelizing household savings into long-term investment products. The SEBI Board’s recommendation of additional tax incentives for MFLRP is seen as a significant step towards encouraging long-term savings and reducing market volatility by increasing domestic institutional participation.
In conclusion, the report underscores the potential of MFLRP to fill the gaps in India’s current retirement planning landscape. It recommends implementing a model similar to the 401(k) with features like automatic asset rebalancing based on age and risk profile, tax incentives, and robust regulatory frameworks to ensure the scheme’s success and sustainability. The report advocates for concerted efforts from policymakers, regulators, and the financial industry to popularize MFLRP and enhance the financial security of India’s aging population

The report provides an in-depth analysis of the current framework for addressing investor grievances in the Indian securities market. The report traces the transformation of the market from being poorly regulated to one of the best-regulated globally, thanks to the proactive and investor-centric approach of policy makers and SEBI. Despite this progress, the dynamic nature of market conditions necessitates continuous regulatory updates to maintain investor confidence and protect investments from various malpractices.
The report identifies several types of investor grievances, including unauthorized trading, non-receipt of documents, misappropriation of funds, misuse of demat/trading accounts, and corporate governance issues. It explores the linkages between the efficiency of grievance redressal mechanisms and retail investor participation, highlighting that a robust redressal system is crucial for sustaining retail investor confidence. The study indicates that delays in grievance resolution and inadequate corporate governance negatively impact investor participation.
A comprehensive review of the existing regulatory framework, including the Companies Act, 2013 and SEBI Act, 1992, is conducted in the report. It identifies several gaps and deficiencies in these regulations, emphasizing the need for continuous improvement and adoption of global best practices. The study underscores the importance of a robust and expeditious grievance redressal system to ensure investor protection and market integrity.
The research methodology involved data extraction from SEBI, BSE, NSE, MSEI, and other agencies, followed by analysis using various statistical tools. Additionally, a survey of investors was conducted to gauge their satisfaction levels with the current grievance redressal mechanisms. Key findings reveal that while there have been improvements, significant issues such as delays in resolution, high complaint rates against brokers, and inadequate corporate governance persist.
In conclusion, the report offers policy recommendations aimed at enhancing the Indian securities market’s robustness and making it a preferred investment destination globally. These recommendations include improving regulatory frameworks, increasing the efficiency of grievance redressal mechanisms, and adopting best practices from other well-regulated markets. The study emphasizes the need for better regulatory oversight, enhanced investor education, and more stringent enforcement of existing regulations to ensure a fair and transparent market environment.

The report examines retail investor participation in the Indian capital markets using data from NSDL and CDSL. It emphasizes the critical role of retail investors in democratizing markets, enhancing corporate governance, and providing market stability. Despite the growing Sensex, retail participation has declined drastically from 20 million in the 1990s to around 8 million in 2009, with a penetration rate of just 1.3% compared to higher rates in the US and China.
Challenges faced by retail investors include difficulties in opening demat accounts, issues of price manipulation, poor grievance redressal mechanisms, and lack of proper guidance. Although the process of opening demat accounts has been simplified, it remains a barrier to entry for many potential investors. The report also highlights investment behavior based on NSDL and CDSL data, revealing a predominant investment in equities, particularly CNX 100 stocks, and a trend towards short-term investments and intraday trading.
To address these issues, the report stresses the importance of enhancing financial literacy and investor education. It points out the low financial literacy rates in India and calls for tailored financial literacy programs delivered through innovative methods like digital platforms. Additionally, it recommends policy measures to increase retail participation, such as improving regulatory frameworks, simplifying account opening processes, promoting financial literacy, and introducing fiscal incentives.
In summary, the report highlights the decline in retail investor participation, identifies key barriers, and offers strategic recommendations to enhance retail investor engagement in India’s capital markets.