The Reserve Bank of India (RBI) on Tuesday also came out with a statement assuring the markets of all help.
Sebi is “internally assessing” the potential impact of the coronavirus epidemic on the capital markets, its Whole-Time Member S K Mohanty said on Wednesday. He, however, said the Financial Sector Development Council (FSDC), an apex body of regulators formed by the government, is yet to get involved in the discussions.
The comments come a day after the action by central banks across the world, including a surprise 50 basis points cut in rates by the US Federal Reserve. The Reserve Bank of India (RBI) on Tuesday also came out with a statement assuring the markets of all help.
“Sebi is aware of coronavirus and the possible impact that it can have on the market. We are taking the necessary steps,” Mohanty told reporters here. “We have seen the RBI statement; we are aware of it. Whatever has to be done, has to be done. We are internally assessing the situation,” he added.
When asked if the issue has been discussed at FSDC, he said, “Not yet”.
Addressing a capital markets summit organised by industry lobby Assocham earlier, Mohanty said Sebi has taken up the contentious issue of taxation on real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) with the government.
The Budget 2020-21 has provisions for changing the dividend distribution tax (DDT) for REITs and InvITs, which was seen as a dampener by the industry. “The taxation part is not in the hands of Sebi but we have taken it up with the government. Let’s hope for the best,” he said.
“If that (change or amendment) happens, if we stick to the taxation incentive to REITs and InvITs given in 2016, if that is restored, then definitely India will get billions of dollars which will help our economy in a great way,” he said. Speaking to reporters later, realtor Niranjan Hiranandani, who also chairs Assocham, welcomed the Sebi efforts.
In 2019, India was able to get USD 20 billion in investments through the REITs and InvIT flows and the industry was expecting the same to go up to USD 30 billion in 2020, he said warning that continuing with the Budget provisions will adversely affect capital inflows into the country.
The government is proposing to tax dividends at the hand of unit holders and there are concerns on double taxation as well, which have collectively put a question mark over the future of the business trusts’ existing investments and also future plans.
Mohanty said that so far, Sebi has been very supportive of the business trusts. Meanwhile, Mohanty also rued that there is a greater reliance on the “opaque” private markets for capital-raising, and also warned that such a trend does not bode well for the USD 5-trillion GDP target.
He said there has been only a 1 per cent rise in the number of listed firms in India over the last three years, which he termed as “not a good sign.” There is a “burden of compliances and disclosures” once a company opts for listing, while no such requirements are mandated if it continues as a private concern, which may be harm interests to list, he said. Even within the public issues, 80 per cent are offer-for-sales and not proposals for fresh capital-raising, he said.2