Sebi internally assessing potential impact of coronavirus on markets

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Published: March 5, 2020 3:10 AM

Speaking at the ASSOCHAM's 12th Capital Market Summit in Mumbai, Mohanty also said that they have not yet discussed this issue at the Financial Sector Development Council (FSDC) level.

SK Mohanty, whole-time member of Sebi, said: “It's a wait-and-watch situation on coronavirus. We have seen RBI's statement and are internally assessing the situation,” said Mohanty.SK Mohanty, whole-time member of Sebi, said: “It’s a wait-and-watch situation on coronavirus. We have seen RBI’s statement and are internally assessing the situation,” said Mohanty.

A day after the Reserve Bank of India (RBI) said that it was closely monitoring developments following the outbreak of coronavirus, the Securities and Exchange Board of India (Sebi) has said that they are internally assessing the situation and its possible impact on capital markets.

SK Mohanty, whole-time member of Sebi, said: “It’s a wait-and-watch situation on coronavirus. We have seen RBI’s statement and are internally assessing the situation,” said Mohanty.

Speaking at the ASSOCHAM’s 12th Capital Market Summit in Mumbai, Mohanty also said that they have not yet discussed this issue at the Financial Sector Development Council (FSDC) level. FSDC is an inter-regulatory body to bring in greater coordination between government and regulators.

On Tuesday, RBI stated that it is monitoring global and domestic developments closely and continuously, and stands ready to take appropriate actions to ensure orderly functioning of financial markets, maintain market confidence, and preserve financial stability.

In order to attract more flows into Real Estate Investments Trusts (REITs) and Infrastructure Investments Trusts (InvITs), the market regulator has taken up the issue of taxation with the government of India and Central Board of Direct Taxes (CBDT). In the Union Budget, it was announced that unit holders would need to pay tax on dividend income from special purpose vehicle (SPV) received by REITs and InvITs. Unit holders will now pay tax on dividend income at applicable income tax rate.

“Taxation part is not under Sebi, but we have taken up the issue with the government of India and CBDT and let’s hope for the best. If taxation incentive that was given to REITs and InvITs industry in 2016 is restored, it will help attract more flows and help the economy,” said Mohanty.

In 2016, the FM had announced that any distribution made out of income of SPV to REITs and InvITs having specified shareholding will not be subjected to the dividend distribution tax (DDT). REITs, which invest primarily in completed, income-yielding real estate assets, are similar to mutual funds, and can be listed and traded on stock exchanges. There are multiple advantages of REITs for both investors as well as developers or private equity (PEs). For investors, REITs offer steady returns, capital appreciation opportunity and low-ticket size of investment. For developers, it can help them monetise the portfolio of operational assets, unlock capital and deleverage the balance sheets.

According to the Niranjan Hiranandani, president, ASSOCHAM, India had received $20 billion in REITS and InvITs in 2019 and he was expecting $30 billion this year, but these provisions would adversely affect capital flows.

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