The Securities Exchange Board of India (Sebi) is forming an advisory committee on financial technology or fintech-related issues, which would look at safeguards that can be put in place to facilitate Crowdfunding of ‘genuine’ ventures and mobilise more household savings into the financial markets using technology solutions.
“With the economy doing well and a well-regulated market, the current numbers (for household savings invested in capital markets) are unacceptable,” Sebi chairman UK Sinha said on Thursday. “I feel that people are ready to invest, but issues related to convenience are holding them back, such as getting KYC done,” he said.
“To harness technology to enable persons in small towns with small amounts to invest in a retirement fund, we are going to form an advisory committee on fintech that will be led by some very strong business leaders from the industry,” Mr. Sinha said at a India Digital Summit hosted by IAMAI in the capital.
The committee, that will also include other experts and representatives from different sections of the fintech industry, will be formed shortly. “I hope this committee will help us spread the market and mobilise domestic household savings for the growth of the country by way of providing risk capital as well as debt investments,” Mr. Sinha said.
The advisory committee will also examine the best way forward to facilitate crowdfunding of genuine ventures, the Sebi chairman said, adding that the regulator has concerns about letting anonymous entities raise funds without any safeguards.
“We had issued a discussion paper on allowing crowdfunding, but most comments we received, especially from your industry (tech startups) termed the proposed norms ás very restrictive,” the Sebi chief said, pointing out that entities raising money without any due diligence entails risks.
“If you want to raise money in the bond market, one has to file a draft red herring prospectus, make lots of disclosures, get a credit rating and appoint a debenture trustee,” he said, adding that even England and New Zealand that have allowed crowdfunding of ventures have imposed certain ‘restrictions.’
Reviewing Start-up listing norms
Sebi is holding fresh discussions with representatives of startups and venture capital funds to assess why a single start-up hasn’t been listed yet on the special platform created by the regulator for mature ventures looking to go public with an IPO.
“We have started discussions to understand if it’s a question of where the economy is, timing or maturity of start-up businesses or something in our norms for listing,” Mr Sinha said, stressing that the system was created after several rounds of discussions and a realisation that several large tech start-ups were going to mature soon.