India regulator proposes easing exchange investment approvals
India is moving to relax approval requirements for certain investments by stock exchanges and depositories as it seeks to better align oversight with risk. The proposal could give publicly listed market infrastructure institutions more flexibility to back core market functions, SEBI-mandated projects and some subsidiary-led investments.
Highlights
- SEBI proposed allowing exchanges and depositories to invest in core market functions and SEBI-mandated initiatives without prior approval for each transaction.
- The proposal removes advance approval requirements for subsidiary investments using internally generated funds and for entities under other financial regulators, but maintains board oversight and financial safeguards.
- SEBI aims to align oversight with risk, potentially enabling market infrastructure institutions to diversify revenue and pursue new business opportunities more efficiently amid commercial pressure.
Proposal broadens investment flexibility
As reported by Reuters, the Securities and Exchange Board of India on Thursday proposed allowing stock exchanges and depositories to make investments tied to core market functions without seeking prior approval for each transaction.The regulator also plans to remove advance approval requirements for investments in initiatives mandated by SEBI. Under the proposal, prior clearance would also be waived for investments made through subsidiaries using internally generated funds and for investments in entities supervised by other financial regulators.
Such investments would still need board oversight and would remain subject to financial safeguards. SEBI has invited comments on the proposals until Nov. 12.
Shift aims to match oversight with risk
The proposal addresses current rules under which even low-risk investments go through the same approval process as large strategic transactions. SEBI said oversight should be calibrated to actual risks while giving institutions greater operational flexibility.The change could help exchanges and depositories diversify revenue streams and pursue new business opportunities more easily. That may be particularly significant for market infrastructure institutions that are now publicly listed and operating under growing commercial pressure.
Our earlier article on India’s disinvestment programme explained that the Centre has raised the bulk of its proceeds since FY2016 through market-linked routes such as ETFs, public issues and buybacks, while strategic sales have played a much smaller role. It also highlighted how the proposed IDBI Bank stake sale stands out as an unusually large strategic transaction and could materially improve the government’s ability to meet its annual disinvestment target.
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