The Hindu Business Line : Integrity, risk management are key challenges: Bajpai

MAINTAINING market integrity, risk management and sound corporate governance are the key challenges of the Indian securities market, according to Mr G.N. Bajpai, Chairman, SEBI.

Availability of new and good quality scrips in the market is an issue and there is a need that demand must be met by supply. Clearing and settlement in our markets have been functioning effortlessly, even with the exchanges transacting up to 10 million trades a day, Mr Bajpai said. The SEBI Chairman was addressing the inaugural session of a three-day seminar on `Emerging Securities Market - Challenges and Prospects,' jointly organised by SEBI and the ICFAI University.

The key challenge in managing the risk of the markets is because of the blurring of boundaries between various financial entities and the dollarisation of the market. Systemically important financial institutions that essay various functions of banks, insurance companies and asset management companies make it difficult to contain market risk, at times, said Mr Bajpai.

Independent directors represent passive investors and have to find balance between shareholders who participate in the management of the company and those who do not. Independent directors have to play their role very effectively and have to demand information from the management, in case they feel that they are not fully informed of any of the issues, said Mr Bajpai.

Quality of role played by independent directors has a direct bearing on corporate governance, he added. Corporate governance must move from being form to substance.

Development of the debt market is one of the key solutions for having a balanced market. In the equity market, increasing the free float of stocks would be crucial to add depth, he added.

Regulation of the markets should be both by practices and policies and a prudential framework should be laid down for the same, said Mr Bajpai. As research is seen as critical to the development of the market, SEBI is instituting three awards of Rs 1 lakh each for excellence in research on the securities market, announced Mr Bajpai.

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