Government will not revise transferring reserves provisions

The clash between the government and the Securities and Exchange Board of India (SEBI) is reaching new levels as the government has rejected the market regulator’s request to reconsider the provisions related to transferring 75% of the surplus funds to the government. 

The Finance Bill 2019 passed in the Lok Sabha last week states that the SEBI has to set up a reserve fund with 25% of its excess funds being transferred while the remaining amount goes into the government’s coffers. 

The Finance Bill 2019 says that the market watchdog should set up a reserve fund and deposit 25% of the surplus fund in any year to such fund. The reserve fund should not be more than the total annual expenditure of the two previous fiscal years. 

After transferring 25% of the surplus fund into the reserve fund, the remaining 75% should be transferred into the government’s coffers. The SEBI chairman has expressed his dissent to the amendments and has written a letter to the Finance Minister mentioning his concerns.

Also Read: What SEBI’s amendments mean for debt mutual funds investors

SEBI believes that the amendments would hamper the financial autonomy of the board. RBI had earlier raised similar concerns to the transfer of surplus funds to the government. The proposal also means that SEBI should seek the government’s nod for capital expenditure.

The latest amendment will restrict the financial autonomy of the SEBI and hinders its ability to work towards developing and widening the Indian security market, and this may result in the Indian stock market not coping with the ever-evolving global securities market.  

Money bills once passed in the Lok Sabha will become unchangeable even if the Rajya Sabha intends to make amendments to it. The government has passed the Finance Bill in Lok Sabha, ignoring the concerns raised by the market regulator.