Market regulator SEBI will soon be “doing something” about the Futures & Options (F&O) segment, which has turned into a “gambling den”, Ashwani Bhatia, Wholetime Member said on Tuesday.

“Many studies have come. Very soon we are going to do something about it (F&O)”,Bhatia said at a “Local Governance Synergy Conclave”, jointly organised by the Office of Comptroller and Auditor General of India (ICAI) and the Institute of Chartered Accountants of India (ICAI). 

Bhatia’s remarks are significant as it came a day after the SEBI Board deferred decision on changes to the F&O norms. 

SEBI had proposed set of seven changes to existing F&O norms, which, if implemented, was expected to reduce equity derivatives volumes by 30-40 per cent, impact exchange valuations and hit retail focused brokers the most. A SEBI consultation paper  on this subject had received over 10,000 responses, largely negative.

In May this year, India became the fourth largest capital market in the world. This growth was primarily driven by strong show on the derivatives segment. The daily turnover (notional) in derivative segments is more than the GDP of the country. On the day of settlement, it is sometimes even double the GDP of the country.

Municipal bonds

Bhatia felt there is a need to grant tax breaks to retail investors in municipal bonds to ensure that this instrument gets popular with such investors. 

SEBI will soon approach the 16th Finance Commission and Union Finance Ministry to discuss the issue of tax breaks for municipal bonds, he added.

Bhatia highlighted that bonds of only 12 out of the 4000 municipal bodies are currently listed in stock exchanges. The total outstanding of the listed Muni bonds is meagre ₹2,700 crore. 

Meanwhile, Institute of Chartered Accountants of India (ICAI) President Ranjeet Kumar Agarwal said that accounting and auditing system of 2.65 lakh panchayats and 4000 municipal bodies need to be further strengthened if India were to achieve its goal of becoming a developed country by 2047.

Agarwal said that Green finance and municipal bonds are the new area to get the finance and strengthen financial ecosystem in the country. Already Municipal bonds have started to be getting listed, he added.

“If accounting systems of municipal bodies are not moving from single entry to double entry on regular basis, rating of municipal bonds issued by them will be difficult. ADB and World Bank are also funding municipal bonds”, Agarwal said.

“India as a whole can grow very fast if the country were to strengthen its accounting systems at the level of municipal bodies”.

He also highlighted that ICAI will come out with specialised green finance standards so that banks and Financial Institutions can fund enterprises on the basis of these standards.

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