Merger of FMC with Sebi restored confidence on regulatory oversight of commodities

MUMBAI: The merger of erstwhile commodities regulator Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi) was a landmark change in the regulatory sphere over the past two years, which also marked a beginning in the direction of forming a unified financial regulator.

Regulators in India’s capital markets have been the direct outcome of scams, which were the result of loopholes and the lack of an authority to enforce rules.

This merger too, came in the backdrop of a scam at commodities exchange NSEL, but the key difference is that it was already in the works. It is in line with the recommendation of the Financial Sector Legislative Reforms Commission (FSLRC), of creating one regulator encompassing the securities, commodities, insurance, and pension markets. It has restored confidence among market participants about regulatory oversight on commodities that is as strong as in equities.

Capital markets, too, have seen several reform measures such as the introduction of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), uniform KYC for investors and ease of listing norms for startups, which is a priority area of the government’s Make in India programme. Ecommerce companies, however, are yet to tap this new platform. “Liberalisation of the FDI norms and the steps taken to improve the ease of business are amongst the most remarkable steps that would contribute to the success of the government’s flagship Make in India programme,” said Thomas Mathew, former joint secretary-capital markets, in the finance ministry.

“Initiatives like REITs, InvITs, gold bonds, restructuring of commodity futures market, Bank Boards Bureau, Mudra Bank, International Financial Centre, bankruptcy law etc will eventually lead to financialisation of physical assets and wellrounded growth of the economy in the medium- to long term,” said GN Bajpai, former chairman of Sebi.