Budget 2019: Sitharaman Proposes To Raise Minimum Public Shareholding Limit To 35%

Budget 2019: capital market reforms find focus in Sitharaman’s first budget.

The SEBI headquarters in Mumbai. (Photographer: Santosh Verma/Bloomberg)
The SEBI headquarters in Mumbai. (Photographer: Santosh Verma/Bloomberg)

The Indian government intends to undertake a host of changes in consultations with regulators to deepen the capital markets.

Delivering the Union Budget speech, Finance Minister Nirmala Sitharaman laid out a list of changes for bond markets and equity markets. The idea, Sitharaman said, was to deepen the markets and enable wider participation.

Measures For Equity Market

  • Government to ask Securities and Exchange Board of India to raise minimum public shareholding limit in listed equities to 35 percent from 25 percent.
  • Foreign Portfolio Investment limit for investment in listed securities to be harmonised with Foreign Direct Investment limit in the relevant sector.
  • Proposal to merge non-resident Indian portfolio limits with FPI limits

Measures For Debt Market

  • Credit Guarantee Corporation will be set up in 2019-20 to help infrastructure financing via the debt markets.
  • Measures for deepening corporate debt market to be undertaken in consultation with the Reserve Bank of India.
  • Retail investment in debt securities to be encouraged.
  • Interoperability between Reserve Bank of India & SEBI depositories will be enabled to encourage retail investment in government bonds.

There is a “concerted effort” by the government to bring in foreign money to India to spur an investment cycle, said Ananth Narayan, professor of finance at the SP Jain Institute of Management & Research. “There seems to be a real intention to try and develop the corporate bond market. Something that we’ve been trying since I’ve had a lot more hair on my head. This seems genuine.”

Of course, eventually it will have to go into even more detail and we’ll have to wait for what actually comes out of the RBI and SEBI deliberations. At least as far as setting the path is concerned, there is a big impulse for trying and getting more foreign investors.
Ananth Narayan, Professor of Finance, SP Jain Institute of Management & Research

Agreed Abheek Barua, chief economist at HDFC Bank. “The government is indeed very serious about reviving at least one segment of the capital markets, which is bonds,” he said. “It is presumably looking at long-term funding through that route. And also very clearly recognising that we need a lot more foreign savings coming in.”