Amid a row over RBI reserves, Modi govt eyes SEBI funds

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Updated: July 18, 2019 8:47:21 PM

Securities and Exchange Board of India (SEBI): Sebi has protested Modi government's decision to transfer its surplus fund to the Consolidated Fund of India.

SEBI, Ajay Tyagi, Finance Bill, Nirmala Sitharaman, Surplus FundSebi vs Govt: Sebi has protested the decision to transfer its surplus fund to the government.

SEBI: The Modi government’s decision to amend the Finance Bill to stake a claim on the surplus reserves available with the Securities and Exchange Board of India may not have gone down well with the market regulator. According to media reports, SEBI chairman Ajay Tyagi has written a letter to the finance ministry protesting the government’s move to transfer surplus funds available with Sebi to the Consolidated Fund of India.

The Sebi chief’s protest comes close on the heels of a controversy over the Union government’s efforts to get a one-time transfer of surplus funds available with the banking regulator Reserve Bank of India.

A panel led by former RBI Governor Bimal Jalan is expected to submit its report on the issue this month. Media reports claim that the Jalan panel is set to recommend a staggered transfer of RBI surplus, instead of a one-time transfer.

What are the changes proposed in the Finance Bill?

Through the Clause 178 of the Finance Bill (No 2), 2019, the government intends to amend the Section 14 of the Securities and Exchange Board of India Act, 1992 to direct the regulator to create a reserve fund from the general fund managed by it.

The amendment will create a reserve fund which will receive one-fourth of the annual surplus of Sebi’s General Fund. However, the size of the reserve fund will not exceed Sebi’s total expenditure in the preceding two financial years.

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What are the expenses of Sebi?

According to section 14 (2) of the Sebi Act, 1992, the board spends money on payment of salary, allowances and remuneration to members, officers and other employees of the board.

It also spends money on discharge of its functions as mandated under section 11 of the Sebi Act and any other expenses to carry out the objects and purposes of the Sebi Act.

In the amendment to finance bill (No 2) 2019, the government has also inserted a section for capital expenditure of the board. It will be approved by the board and also by the central government. So in addition to the payment of salaries, remunerations and other expenditures for discharge of its functions under the law, SEBI’s expenditure will also include any capital expenditure as approved by the government.

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How it will affect the surplus fund available with the Sebi?

After the passage of the second Finance Bill of 2019, Sebi will have to create a Reserve Fund out of its General Fund. And the Sebi will not be able to keep any amount in the reserve fund in excess of its expenditure in the preceding two financial years.

Section 178 of the Finance Bill of 2019 states that: ‘After incurring all the expenses referred to in sub section (2) and transfer to reserve fund as specified in sub section (3), the surplus fund of General Fund shall be transferred to Consolidated Fund of India.’

It simply means that any amount in excess of its expenditures in preceding two financial years will be transferred to Consolidated Fund of India created under article 266 (1) of the constitution.

This is the most important fund of the Union government where all the receipts of the central government like collection of taxes, fees, licencce fee, dividends, profits, recoveries of loans, and also also all the loans raised by the government through G-Secs and T-Bills are kept.

Sebi’s surplus fund will be transferred to this fund.

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