Warning bells – India’s regulatory framework must infuse confidence in investors, savers

Source: The post is based on the article “Warning bells – India’s regulatory framework must infuse confidence in investors, savers” published in The Hindu on 30th January 2023.

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About India’s regulatory environment.

News: The latest stock market issues surrounding the Adani group highlighted challenges associated with India’s regulatory environment. The Securities and Exchange Board of India (SEBI) had stepped up scrutiny of the conglomerate’s transactions, but there has been no official word from the markets’ regulator.

Why the involvement of Public sector participation in the conglomerate is a cause of concern for India’s regulatory environment?

Major state-owned banks and the LIC are key pillars of the country’s financial system. a) This might trigger investor concern about broader financial sector stability, b) Deposits and life insurance policies as well as taxpayer resources that have been invested to keep the PSU lenders adequately capitalised. Investing such funds in the conglomerate will damage public trust and funds.

What should be done to improve India’s regulatory environment?

Regulators could enhance credibility in India as an investment destination by tightening not just the listing requirements. Regulators must enforce strict actions in case of egregious breaches of the laws. This will infuse confidence in investors, and savers.

SEBI and the Reserve Bank of India must ensure reforms in the regulatory framework when India holds the G-20 presidency.