Mumbai: Finance minister P. Chidambaram on Saturday, said the government is committed to facilitate investments, help entrepreneurs raise capital and create routes to channelize household savings to financial markets. “Economic situation is still challenging. More investment to vital sectors like infrastructure, steel, and power is crucial,” said Chidambaram.
The Congress party-led United Progressive Alliance (UPA) government has been on a reform spree over the past few weeks, despite pressure from its allies. After enhancing foreign direct investment (FDI) limit in multi-brand retail and aviation from 26% to 49% on 14 September, on Thursday, the cabinet cleared two long-pending Bills in insurance and pension that will liberalize the sectors further and allow them to attract FDI of up to 49% from 26% currently.
“A huge amount of capital is required in the insurance sector. So a higher FDI was required. There will be more reforms in the coming days,” said Chidambaram after meeting the financial regulators, stock exchanges and the mutual fund industry in Mumbai. The finance minister said he will also meet officials from state-owned insurers Life Insurance Corp. of India (LIC), Genreal Insurance Corp of India and other insurance companies.
Following a meeting with the board members of the Securities and Exchange Board of India (Sebi), Chidambaram said there is a need to re-energize the capital market. In line with this, the Sebi board, on Saturday, held a meeting and said it will work on ways to rationalize routes for foreign portfolio investments. “...Sebi will prepare a draft guideline based on the suggestions of the working group on foreign investment in India so that uniform guidelines are made for various categories of investors such as foreign institutional investors, foreign venture capital investors, non-resident Indians, qualified foreign investors, etc.”
Also, with effect from 1 January 2014, FIIs will be allowed to re-invest up to 50% of their debt holdings at the end of the preceding calendar year.
In an effort to support the economy by creating more demand for construction of new homes, Sebi enhanced the exposure limits to financial services sector for debt-oriented mutual fund schemes if they intend to invest the additional money in housing finance companies (HFCs). Over and above the existing 30% limit in the financial services sector, debt schemes will be allowed to invest 10% additionally if the money is allocated to HFCs.
To encourage primary market issuance by listed entities, the capital market regulator clarified that listed entities coming out with further public offers need not meet the profitability criteria.
Sebi, however, said that to ensure compliance with the minimum public shareholding norms by listed firms within the stipulated deadline, it will shortly come out with a concrete plan of action.
To ensure that investors do not suffer due to non-compliance of their firms with the minimum public shareholding norms before the deadline, Sebi asked the exchanges to take necessary steps.
“Stock exchanges shall carefully monitor adherence and take steps to issue advisories to shareholders of non-compliant companies about potential penal actions, so that investors have adequate time to safeguard their interests,” said Sebi.
All private listed firms are required to attain a minimum public holding of 25% by June 2013. State-run listed companies are required to have a minimum public holding of 10% by August 2013.