Conducive regulatory environment must for advancement of financial ecosystem: FM

Finance Minister Nirmala Sitharaman, during the launch of ARCL (AMC Repo Clearing Ltd) and Corporate Debt Market Development Fund (CDMDF) for corporate bond market development today, said the regulatory environment must strive to balance the creation of a conducive environment for starting and running businesses, maintenance of market integrity, and sustenance of market stability. 

This, she says, can be the possible trinity by which the country advances the financial domain, "with markets, regulators, the government, policymakers, and legislators, all looking forward to a robust market system that will guide us towards a developed India".

Quality, proportionality and the effectiveness of regulations matter the most for the ease of doing business, ease of investing and ease of living, the FM opines.

She says the financial services ecosystem is growing rapidly in India, and it currently comprises over 70 funds and other players. The FM says the total capital committed to funds stood at $16.3 billion as of June 2023.

"As a result of several initiatives taken by the government in the last three years, we have witnessed substantial growth across the entire spectrum of financial services, including banking, capital markets, fund management, insurance, aircraft leasing, FinTech, etc., in GIFT City in Gujarat."

She says there has been a full-scale operation of the NSE IFSC-SGX Connect (Singapore Exchange), with the transition of SGX Nifty derivatives to NSE IFSC that took place on July 3, 2023.

"GIFT Nifty derivatives on NSE International Exchange (NSE IX) witnessed a record first session single day trading activity of more than 2.14 lakh contracts with a turnover of $8.5 billion on July 24, 2023," she adds.

According to the FM, 10 years ago, the country’s market capitalisation stood at only ₹74 lakh crore, which has doubled every five years since then and reached 300 lakh crore today. "It is now ranked fifth among the 10 most valued countries."

AMC Repo Clearing Limited (ARCL) was incorporated in April 2021 and is recognised in-principle by the Securities and Exchange Board of India (SEBI) under Stock Exchanges and Clearing Corporations (SECC) Regulations, 2018.

ARCL is a central counterparty (CCP) offering clearing and settlement services to all trades executed on NSE and BSE under "tri-party repo" in corporate debt securities with robust risk management along with guarantee mechanism.

Tri-party repo is a type of repo contract where a third entity (apart from the borrower and lender), called a tri-party Agent, acts as an intermediary between the two parties to the repo to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.

Besides, capital markets regulator Securities and Exchange Board of India (SEBI) has also issued detailed guidelines on the Corporate Debt Market Development Fund (CDMDF). The fund will act as a backstop facility for purchase of investment-grade corporate debt securities, to instil confidence amongst the participants in the Corporate Debt Market during times of stress. The fund is also expected to enhance secondary market liquidity by creating a permanent institutional framework for activation in times of market stress.