SEBI is drafting plans to simplify compliance norms for foreign investors to encourage more capital inflow. The regulator also clarified its cautious stance on stock exchange self-listing and set strict technological requirements for any attempt to revive defunct regional exchanges.
The Securities and Exchange Board of India (SEBI) has initiated steps to streamline its regulatory framework for Foreign Portfolio Investors (FPIs). This move comes as the regulator prepares to issue a consultation paper aimed at reducing compliance friction, which has long been a concern for international investors compared to other global financial markets. By simplifying these processes, the regulator intends to capture a larger share of foreign capital while ensuring that market integrity remains a priority.
Regarding the long-standing debate on whether stock exchanges should be allowed to list on their own platforms, the regulator maintains a cautious outlook. SEBI noted that the proposal remains in a dormant state rather than being outright rejected. The hesitation stems from a potential conflict of interest, as stock exchanges operate both as frontline regulators and commercial market operators. Any future progress on this front would require the introduction of robust safeguards to ensure regulatory neutrality and prevent bias.
The regulator also addressed the potential revival of defunct regional stock exchanges, such as the Calcutta Stock Exchange. SEBI expressed skepticism about the commercial viability of such entities, given that modern electronic trading systems have made the traditional physical exchange model largely redundant. For any entity looking to secure an operating license, the barrier to entry will be exceptionally high. Applicants would need to prove they possess the technological infrastructure to handle advanced risks, including AI-driven threats, and must demonstrate sufficient trading volume to remain solvent and competitive.
The shift in focus comes amid a period of significant growth for the Indian financial system. Over the last decade, the ratio of market capitalization to GDP has risen to 130%, up from 69% in the 2016 fiscal year. Simultaneously, the corporate bond market has expanded to an outstanding debt of approximately Rs 61 lakh crore. Looking ahead, the regulatory agenda will prioritize the development of new financing vehicles for businesses and further initiatives to deepen retail investor participation. The primary objective for the regulator remains finding a balance between enabling rapid growth and maintaining a transparent, resilient market structure that protects public trust.