The Securities and Exchange Board of India (Sebi) is working on reducing regulatory costs and simplifying compliance to make capital markets more competitive, chairman Tuhin Kanta Pandey said while speaking to the media on the sidelines of an event.

“There is always a cost of regulation. We need to simplify the regulation while maintaining its objective,” Pandey said.

Sebi is putting together a framework to study how its regulations impact market participants. The regulator has created a separate vertical under its Department of Economic and Policy Analysis to examine regulatory costs and efficiency.

The National Institute of Securities Markets (NISM) Centre for Regulatory Studies will work on studying regulatory impact. An external advisory committee chaired by Chief Economic Adviser V. Anantha Nageswaran will help design the framework.

“There are regulatory impact assessments in other jurisdictions also. That will also be studied in the way it is being done elsewhere. We need to have our own models and research in India,” Pandey said.

He said compliance costs play a role in determining the cost of capital and overall market efficiency. “Cost of capital is an important cost, and it should come down. For all productive sectors, access to finance should be available, which also includes not only availability but also the cost,” he said.

About the NSDL glitches

Pandey also spoke about the recent disruption at National Securities Depository Ltd (NSDL). He said the issue was linked to inter-depository transfers and was caused by a technical glitch, which led to settlement delays and temporary backlogs.

“The NSDL issue was related to Inter Depository Transfer (IDT), and there was a technical glitch which led to a situation where some settlements were affected. When the buyer and seller hold accounts with different depositories, there has to be an Inter Depository Transfer because the securities are transmitted directly to the client. There was a problem in this process, and they shifted operations to the disaster recovery site. However, certain backlogs were created, which carried over to the next day and the following day. Finally, settlements for the fourth and fifth were completed on Saturday, and from Monday onwards it has been working normally," Pandey explained.