Nirmala Sitharaman will chair a meeting with regulators on easing investment norms.
Finance Minister Nirmala Sitharaman will soon chair a meeting of the Financial Stability and Development Council (FSDC) to ask financial regulators for instruments like Infrastructure Investment Trusts (InvITs) to be used for monetization of public assets like highways, gas pipelines. It will be asked to relax and harmonize investment norms. and railway track.
The council meeting assigned to enhance coordination among financial sector regulators – RBI, SEBI, IRDA and PFRDA – assumes significance after Government unveils National Monetization Pipeline (NMP) listing of assets in sectors that are to be monetized for an estimated ₹ 5.96 lakh crore over four years.
The economy is still not out of the woods from the COVID-19 pandemic and Ms Sitharaman urged the industry to look beyond banks and tap markets for their financial needs, to ease and encourage investment in the corporate bond market Steps are also expected to be taken. To be discussed by FSDC.
A top finance ministry official said, “The FSDC meeting has been planned for some time and will be called soon.”
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NITI Aayog, which administers the NMP, has emphasized the importance of expanding the investor base and scale of monetization instruments such as InvITs and Real Estate Investment Trusts (REITs), and the regulators taking different stances on such investments. concerns have been noted.
The measures announced in the Union Budget to enable InvITs and REITs to borrow money from FPIs and issue debt securities are also expected to be reviewed by the FSDC, as well as the efficacy of changes implemented by individual regulators.
For example, SEBI recently reduced the minimum investment amount for InvITs and REITs to ₹10,000- ₹15,000 so that retail investors can participate. The Pension Fund Regulatory and Development Authority (PFRDA) as well as the Employees’ Provident Fund Organization (EPFO) have allowed investment of up to 5% of their corpus in InvITs despite tough conditions.
“The long-term nature of infrastructure projects requires the active participation of investors, who see similar return profiles from their investments. However, the extant investment guidelines for insurance and pension funds limit the investment of such funds in InvIT/REIT assets,” NITI Aayog flagged in its guidebook for NMP.
For insurers, the Insurance Regulatory and Development Authority (IRDA) has allowed exposure to InvITs and REITs up to 3% of their own fund size or 5% of units issued by a single trust, whichever is lower. Mutual funds regulated by stock market watchdog SEBI can invest up to 10% of their assets in a single InvIT/REIT.
These need to be streamlined to ensure uniformity, the commission said, besides highlighting discrepancies in all categories at the level of exposure.
“For example: IRDA rules do not permit investment of insurance funds in unlisted InvITs. Hence, a staggering approach to streamline investment guidelines and limits, insurance and pension funds for unlisted InvITs are not allowed. InvIT starting with allocation is envisaged to keep pace with the growth in the market,” it said.
IRDA and PFRDA also mandate a high credit rating for InvITs to be eligible for their long-term investments, and a credit enhancement mechanism to promote generally low ratings of infrastructure projects may also join FSDC’s deliberations. can.
A Credit Enhancement Guarantee Corporation, announced in the 2019 Union Budget, is not yet operational, while the RBI’s partial credit guarantee enhancement scheme has some limitations in its current form.
Restrictions relating to investments in the overall corporate bond market are also likely to be marked at FSDC, with SEBI recently asking the Reserve Bank of India, IRDA and PFRDA to urgently reconsider the norms limiting debt market exposure, so that a To enable prompt reconsideration can be done immediately. economic recovery.
SEBI whole-time member Anant Barua told the capital markets conference last month that there are many players in the debt market, but due to such norms, the number of participants in each investor segment is limited, thereby hampering the pool of available liquidity.
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