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Securities and Exchange Board of India

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ANNUAL REPORT
2020-21
ANNUAL
REPORT
2020-21
This Report is in conformity with the format as
per the Securities and Exchange Board of India
(Annual Report) Rules, 2021, notified in Official
Gazette on March 12, 2021
 MEMBERS OF
THE BOARD
(As on March 31, 2021)

Appointed under Section 4(1)(a) of the SEBI Act, 1992 (15 of 1992)

AJAY TYAGI
CHAIRMAN

Appointed under Section 4(1)(d) of the SEBI Act, 1992 (15 of 1992)

G. MAHALINGAM
WHOLE TIME MEMBER

MADHABI PURI BUCH

WHOLE TIME MEMBER

S. K. MOHANTY
WHOLE TIME MEMBER

ANANTA BARUA
WHOLE TIME MEMBER

Nominated under Section 4(1)(b) of the SEBI Act, 1992 (15 of 1992)

TARUN BAJAJ
Secretary
Department of Economic Affairs
Ministry of Finance
Government of India

K.V.R. MURTHY
Joint Secretary
Ministry of Corporate Affairs
Government of India

Nominated under Section 4(1)(c) of the SEBI Act, 1992 (15 of 1992)

M. RAJESHWAR RAO
Deputy Governor
Reserve Bank of India

Appointed as Part Time Member under Section 4(1)(d) of the SEBI Act, 1992 (15 of 1992)

Dr. V. RAVI ANSHUMAN

Professor
Indian Institute of Management,
Bangalore
 MEMBERS OF
THE BOARD

AJAY TYAGI
Chairman

G. MAHALINGAM MADHABI PURI BUCH S. K. MOHANTY ANANTA BARUA

Whole Time Member Whole Time Member Whole Time Member Whole Time Member

TARUN BAJAJ K.V.R. MURTHY M. RAJESHWAR RAO DR. V. RAVI ANSHUMAN

Secretary, Joint Secretary Deputy Governor Professor
Department of Economic Affairs Ministry of Corporate Affairs Reserve Bank of India Indian Institute of Management
Ministry of Finance Government of India Bangalore
Government of India
 Chairman, Whole Time Members and
Executive Directors

(Left to Right)

Sitting: Shri Ananta Barua, Whole Time Member; Shri G. Mahalingam, Whole Time Member;
Shri Ajay Tyagi, Chairman; Ms. Madhabi Puri Buch, Whole Time Member;
Shri S. K. Mohanty, Whole Time Member

Standing: Shri G. P. Garg, Executive Director, Shri V.S. Sundaresan, Executive Director,
Shri Sujit Prasad, Executive Director, Shri Anand Rajeshwar Baiwar, Executive Director,
Shri S.V.M.D. Rao, Executive Director, Shri Nagendraa Parakh, Executive Director,
Ms. Arti Chhabra Srivastava, Chief Vigilance Officer, Ms. G. Babita Rayudu, Executive Director,
Shri Amarjeet Singh, Executive Director; Shri S. Ravindran, Executive Director
EXECUTIVE DIRECTORS (As on March 31, 2021)
Shri S. Ravindran Establishment Division and Treasury & Accounts Division in the General
Services Department, Human Resources Department, Internal Inspection
Department, Office of International Affairs and Foreign Portfolio Investors
& Custodians
Shri S. V. Murali Dhar Rao Investment Management Department and Collective Investment Schemes,
Regional & Local Offices
Shri Nagendraa Parakh Market Intermediaries Regulation and Supervision Department and
Corporation Finance Investigation Department
Shri Amarjeet Singh Corporation Finance Department, Department of Economic and Policy
Analysis and RTI Appellate Authority for matters related to Investigations
Department, Recovery & Refund Department and PACL
Shri Sujit Prasad Market Regulation Department, Department of Debt and Hybrid Securities
and National Institute of Securities Markets
Shri Anand R Baiwar Investigation Department and Recovery & Refund Department (including
work related to PACL Committee), RTI Appellate Authority for all matters
except matters related to Investigations Department, Recovery & Refund
Department and PACL
Ms. Arti Chhabra Srivastava Chief Vigilance Officer
Shri V. S. Sundaresan Integrated Surveillance Department and Commodity Derivatives Market
Regulation Department
Ms. G. Babita Rayudu Legal Affairs Department, Enforcement Department and Special
Enforcement Cell (SEC)
Shri G. P. Garg Office of Investor Assistance and Education, Information Technology
Department, General Services Department (other than Establishment
Division and Treasury & Accounts Division), Official Language Division,
Board Cell and RTI & PQ Cell

CHIEF GENERAL MANAGERS (As on March 31, 2021)

Shri Suresh B. Menon Enquiry and Adjudication Department
Shri Amit Pradhan Enquiry and Adjudication Department
Shri N. Hariharan Communication Division, Office of Investor Assistance and Education – IAD
and Board Cell
Shri A. Sunil Kumar Human Resources Department, Chief Financial officer – Treasure and
Accounts Division, Establishment Division
Shri Jayanta Jash Investigations Department
Shri Parag Basu Market Intermediaries Regulation and Supervision Department
Ms. Barnali Mukherjee Corporation Finance Department
Shri Manoj Kumar On Deputation
Shri Sunil Jayawant Kadam Posted to NISM - Registrar
Dr. Prabhakar Reddy Patil Department of Economic and Policy Analysis - 1 and 2
Shri Santosh Kumar Shukla On Deputation
Shri B. Rajendran Regional Director – Southern Regional Office
Shri Jeevan Sonparote Corporation Finance Department
Dr. Ruchi Chojer Investment Management Department - 1
Shri Biju S. Enforcement Department - 2
Ms. Anita Kenkare Investigations Department
Shri Santosh Kumar Sharma Office of Investor Assistance and Education – IGRD, PQ Cell, Central Public
Information Officer
Shri Avneesh Pandey Information Technology Department
Shri Sharad K. Sharma Regional Director – Northern Regional Office
Shri G. Ramar Enquiry and Adjudication Department
Shri D. Sura Reddy Refund and Recovery Department
Shri Deepak A. Trivedi Market Intermediaries Regulation and Supervision Department
Shri Biranchi Narayan Sahoo Investment Management Department - 2
Shri Shashikumar Valsakumar Office of Chairman and Office of International Affairs
Shri Aliasgar S. Mithwani Commodity Derivatives Market Regulation Department
Ms. Asha Shetty Department of Debt and Hybrid Securities
Shri K. Saravanan Enquiry and Adjudication Department
Ms. Maninder Cheema Enquiry and Adjudication Department
Ms. Harini S Balaji Integrated Surveillance Department
Shri Debashis Bandyopadhyay Market Regulation Department - 2
Shri Prasanta Mahapatra Enquiry and Adjudication Department
Shri D.V. Sekhar Legal Affairs Department - 2
Ms. Anitha Anoop Enforcement Department - 1
Shri Krishnanand Raghavan Office of Investor Assistance and Education - IAD
Shri B.J. Dilip Corporation Finance Investigation Department
Shri Manojan Karayi Information Technology Department
Shri Sanjay C Purao Corporation Finance Investigation Department
Shri Rajesh Kumar Dangeti Corporation Finance Department
Shri G Vijayakrishnan Legal Affairs Department -1
Shri Geetha G Office of Whole Time Member
Shri G Ram Mohan Rao Market Intermediaries Regulation and Supervision Department
Shri M Suresh Kumar GSD- Facilities Management Division

Annual Report Team

DEPA I
Dr. Prabhakar Reddy Patil Chief General Manager
Dr. Deepali Dixit Deputy General Manager
Shri Laltu Pore Assistant General Manager
Ms. Prasad Patankar Assistant General Manager
Shri A.V.Subba Rao Manager
Shri Sumit Kumar Verma Manager
Ms. Sheryl Fernandez Secretary
DEPA II
Ms. Deepthi L. S. General Manager
Shri Sudhakar B. Khairnar Assistant General Manager
Shri Vimal Kumar Verma Assistant General Manager
Ms. Rekha Nair Manager
Ms. Vinod Kumari Assistant Manager
 CHAIRMAN’S
STATEMENT

the beginning of the pandemic, subsequently got a

tremendous boost with the flush of liquidity playing
an important role.

A unique highlight of this year was the unprecedented

growth in individual investor participation in the
securities market. This is evidenced through multiple
It has been over a year since COVID-19 was declared metrics. The number of new demat accounts opened
as a global pandemic. The effect of the pandemic is saw an extraordinary surge. From 4.2 lakh new demat
visible in all spheres of human life causing both social accounts opened per month last year, the number
and economic strains. Yet, a way out of this health and increased to around 12 lakh this year. The increased
economic crisis is increasingly visible. After a period participation was witnessed in rise in the share of
of contraction last year, India’s GDP is forecasted to individual investors in equity cash segment turnover
grow, as per World Bank estimates, by 8.3 per cent during this year. The participation of individual
during 2021-22 as against a forecast of 5.6 per cent for investors through mutual funds also got a boost. 81
the global GDP during 2021. The economic prospects lakh folios were added this year vis-à-vis 73 lakh last
of the country appear encouragingly positive, at this year.
stage.
It was not only the individual investors and domestic
While the whole country struggled with the pandemic, mutual funds whose participation surged this year.
the Indian securities market demonstrated its resilience Foreign Portfolio Investors (FPIs) invested in India with
and strength during these difficult times. Despite renewed vigor, with the result that 2020-21 stands out
one of the most stringent national lockdown in the as the best year in terms of net investment by FPIs in
beginning of the year compared to anywhere else in the Indian equity market. FPIs poured around USD 37
the world, our securities market remained open on billion in the Indian equity market this year on a net
all the trading days and all the settlements happened basis.
smoothly. While initially, there was a spike in the stock
SEBI facilitated strong market activity during the
market volatility and fall in benchmark indices, the
year by timely addressing impediments to continuity
sentiments soon turned positive and the markets, since
of business on account of the pandemic, providing
then, have traversed on an upward path. By the end of
relaxations to fund raising and other norms and
March 2021, stock market capitalization rose to more
enabling easier compliance by regulated entities.
than ₹200 lakh crore i.e. about 103 per cent of GDP.
Increased use of technology played an important
Despite the pandemic, the overall resource mobilization role in ensuring smooth operations during the
during the year remained strong at ₹10.12 lakh crore, pandemic. SEBI facilitated e-KYC which enabled easier
even surpassing last year’s figure of ₹9.96 lakh crore. onboarding for new investors. Use of technology was
While businesses in general were affected due to ramped up in SEBI’s internal processes for surveillance,
the pandemic, many companies were able to raise inspection, compliance monitoring, investor grievance
substantial funds through equity and debt this year. redressal etc. The market participants including
All of the IPOs saw good investor interest. The bond investors, intermediaries and companies adapted
market, after witnessing a brief tumultuous period at to the pandemic by enhancing use of technology in
their own activities. Listed entities held their AGMs a limited purpose clearing corporation for clearing
and Board meetings in virtual mode. The percentage and settlement of corporate bond repo transactions
of share of trades originating from mobile devices and proposing the setting up of a backstop facility for
increased significantly in both cash and derivatives buying corporate bonds, as announced in the Union
segment. Budget for 2021- 22.

Along with COVID related measures, SEBI continued on On the commodity derivatives side, new products such
its path of building a stronger, vibrant and transparent as futures on commodity indices and options on goods
securities market. The corporate governance norms were introduced to widen the gamut of instruments
and disclosure requirements for listed companies were available for trading. A pilot program was also run by
further strengthened, including enhancing the role one of the exchanges to provide hands-on experience
and applicability of the risk management committee, to farmers on how to use options on goods for hedging
extending the requirements for mandatorily framing the price risk they face from the time of sowing to final
a dividend distribution policy and many others. sale of their produce.
SEBI introduced a new framework for sustainability
reporting called the Business Responsibility and In the coming year and in the future, SEBI will continue
Sustainability Report (BRSR) thereby laying the its ongoing efforts of protecting the interests of
foundation of a comprehensive disclosure framework investors and regulating the securities market while
for sustainability reporting, making India one of the ensuring that the market continues to grow. Efforts are
few countries in the world to have a framework for on to frame the Investor Charter, as announced in the
such comprehensive disclosures. Union Budget 2021-22. Risk management framework
of mutual funds is being revised. A framework for
The robustness of risk management practices could not identification and segregation of collateral at client
have been subject to more severe stress tests than the level is being designed. Measures are being undertaken
real life scenarios of 2020. The new margin framework for further strengthening the corporate governance
and the verification of its upfront collection came into framework of listed entities.
effect during 2020-21 further strengthening the risk
management framework. On the development front, SEBI will continue to
facilitate introduction of new products, platforms and
A number of reforms were undertaken with respect participants. SEBI is working on areas such as gold
to debt mutual funds. These include, among others, spot exchange, social stock exchange, improving
mandating minimum investment in liquid assets and retail participation in REITs and InvITs, development
stress-testing for open-ended debt schemes, issuing of passive funds, facilitating entry of new Market
detailed guidelines for risk-o-meter and mandating Infrastructure Institutions, etc.
minimum percentage of transactions to be undertaken
through the Request for Quote (RFQ) platform of stock The market events and trends during 2020-21 clearly
exchanges. These reforms are aimed at placing mutual demonstrated the potential of the securities market
funds in a better position to deal with redemption to contribute to India’s economic development. Going
pressures and bring transparency in their investments. forward, SEBI shall continue to strive to further develop
securities market and sustain market confidence.
Based on experience gained in regulating the bond
market over the years and particularly in light of the I invite your kind attention to the details in the
disruption observed in corporate bond market due various chapters of SEBI Annual Report 2020-21 which
to the impact of pandemic, SEBI initiated a number of elaborate on the above. While the format of the Annual
steps for bringing more liquidity and stability in the Report has undergone a change during this year, SEBI
corporate bond market, especially in the lower rated has attempted to retain comparability to the extent
segment. These include, facilitating the setting up of possible with the previous reports.
CONTENTS

List of Box Items.......................................................... ii

List of Tables ............................................................... iii

List of Figures.............................................................. viii

List of Abbreviations ................................................. ix

1. INTRODUCTION............................................... 1 6. FOREIGN PORTFOLIO INVESTORS

1.1 Year in Review........................................... 1 AND FOREIGN VENTURE CAPITAL
INVESTORS........................................................ 157
1.2 Performance Highlights........................... 3
6.1 Policy Developments................................ 157
1.3 Looking Forward...................................... 5
6.2 Market Activity and Trends Observed . 158
2. REVIEW OF FINANCIAL
MARKETS ........................................................... 12 7. CREDIT RATING AGENCIES ........................ 166

2.1 Global Securities Market.......................... 13 7.1 Policy Developments................................ 166

2.2 Indian Securities Market.......................... 16 7.2 Market Activity and Trends ................... 167

3. PRIMARY MARKET ......................................... 18 7.3 Risk Management Measures................... 168

3.1 Equity Markets.......................................... 18 8. PROTECTION OF THE INVESTOR

INTERESTS ......................................................... 169
3.2 Debt Markets and Hybrids...................... 37
8.1 Investor Education.................................... 169
3.3 Corporate Governance and Corporate
Restructuring............................................ 40 8.2 Investor Centric Policy Measures .......... 179

3.4 Intermediaries Associated....................... 50 8.3 Redressal of Investors’ Grievances......... 183

4. SECONDARY MARKET .................................. 55 8.4 Investor Protection and Education

Fund .......................................................... 190
4.1 Cash Markets............................................. 55
9. TECHNOLOGY .................................................. 193
4.2 Equity Derivatives Markets..................... 76
9.1 Cyber Security and System Resilience... 194
4.3 Commodity Derivatives Markets........... 82
9.2 Technology in Market Ecosystem........... 195
4.4 Currency Derivatives Markets................ 102
9.3 Technology in SEBI................................... 196
4.5 Interest Rate Derivatives Markets.......... 105
9.4 FinTech and RegTech Initiatives............. 200
4.6 Market Infrastructure Institutions.......... 107
9.5 Other Developments................................ 200
4.7 Intermediaries Associated....................... 118
10. REGULATORY ACTION, SUPERVISION
5. FUND MANAGEMENT ACTIVITIES........... 127
AND ENFORCEMENT..................................... 202
5.1 Mutual Funds............................................ 128
10.1 Manner of Overseeing Markets.............. 202
5.2 Alternative Investment Funds ............... 147 10.2 Regulatory Actions .................................. 217
5.3 Portfolio Managers................................... 151 10.3 Litigation.................................................... 225
5.4 Collective Investment Schemes ............. 153 10.4 Amendments to Regulations................... 234
5.5 Real Estate Investment Trusts and 10.5 New Regulations (Aims and
Infrastructure Investment Trusts........... 153 Objectives)................................................. 236

5.6 Intermediaries Associated....................... 156 10.6 Progress or Impact Assessment of the

New Regulations/Rules........................... 236

i
11. INTERNATIONAL ENGAGEMENTS............ 241 12.8 Sources of Funds and Major Areas of
Expenditure .............................................. 252
11.1 International Engagements having
Implications for Indian Markets............ 241 13. ORGANIZATIONAL MATTERS.................... 254
13.1 SEBI Board................................................. 254
11.2 Issues Highlighted during various
Engagements............................................. 247 13.2 Audit Committee ..................................... 255

12. NATIONAL INSTITUTE OF SECURITIES 13.3 SEBI Offices................................................ 255

MARKETS........................................................... 248 13.4 Human Resource Activities .................... 256

12.1 Academic Programmes............................ 248 13.5 Research Activities ................................... 263

12.2 Training Programmes .............................. 249 13.6 Promotion of Official Language ............ 268
13.7 Internal Inspection Department............. 271
12.3 Research and Publications....................... 249
13.8 Vigilance Cell ............................................ 271
12.4 Investor Education and Financial
13.9 RTI Activities ............................................ 272
Literacy ..................................................... 250
13.10 Parliament Questions Cell....................... 274
12.5 Certification of Associated Persons in
the Securities Markets............................. 250 13.11 Fees and Other Charges .......................... 275
13.12 Changes made to the Delegation
12.6 Development and Administration of
the Continuing Professional Education Order.......................................................... 277
Programme................................................ 251 13.13 Sources of Funds and Major Areas of
Expenditure .............................................. 277
12.7 Other Initiatives........................................ 251

LIST OF BOX ITEMS

3.1 Social Stock Exchange............................................ 22 5.1 Major Reforms in Debt Mutual Funds and
Corporate Bond Market Post Closure of Certain
3.2 Measures Taken in the Equity Markets in the
Mutual Funds Schemes.......................................... 128
Backdrop of COVID-19 Pandemic........................ 25
5.2 Relaxations in Compliance due to COVID-19 -
3.3 Advisory on Disclosure of Material Impact of Requirements Pertaining to Mutual Funds......... 137
COVID-19 on Listed Entities................................. 41
6.1 Highest ever Foreign Portfolio Investors Investment
3.4 Business Responsibility and Sustainability Inflows in the Equity Markets............................... 159
Reporting by Listed Entities.................................. 44 8.1 Investor Education in Virtual Mode during
COVID Times ......................................................... 170
4.1 Margins Related Reforms...................................... 56
8.2 Securities Market Trainers..................................... 177
4.2 Trend of Increased Investor Participation including
10.1 Surveillance Measure pertaining to ‘Persistent
use of Technology during 2020-21....................... 66
Noise Creators’........................................................ 204
4.3 Proposed framework for Gold Exchange in 10.2 Rationalization of Compliances............................ 236
India and draft SEBI (Vault Managers
13.1 SEBI Young Professional Program and SEBI
Regulations, 2021.................................................... 83
ITD Internship Programme................................... 260
4.4 Price Protection through Put Options for 13.2 Creation of New Department- Corporation
FPOs/ Farmers......................................................... 86 Finance Investigation Department....................... 261

ii
LIST OF TABLES

1.1 Key Statistics on the Indian Economy................. 3 3.15 Mega Public Issues of Corporate Bonds............. 39

2.1 Global Trends in Economic Growth.................... 13 3.16 Commercial Papers Listed.................................... 40

2.2 Global Trends in Primary and Secondary 3.17 Issuance of Municipal Bonds in 2020 - 21........... 40
Markets.................................................................... 15
3.18 Number of Companies in which Demat
2.3 Global Trends in Derivatives Markets................. 15 Account of Promoter(s) was Frozen.................... 46

2.4 Total Fund Mobilisation in Indian Capital 3.19 Total Number of Companies Suspended
Market...................................................................... 16 (Non-Compliance with various SOP
Provisions)............................................................... 46
2.5 Ranking of India’s Stock Exchanges among
the Global Derivatives Exchanges........................ 17 3.20 Fines Levied............................................................ 47

2.6 Global Ranking of Derivatives Contracts 3.21 Number of Listed Companies being
Traded on India’s Stock Exchanges...................... 17 Wound Up............................................................... 47

3.1 Resource Mobilisation through Public 3.22 Trends in Open Offers........................................... 47

and Rights Issues.................................................... 31
3.23 Status of Draft Letter of Offers for Open
3.2 Sector-wise Resource Mobilisation...................... 32 Offers ....................................................................... 48

3.3 Size-wise Resource Mobilisation.......................... 32 3.24 Exemption Applications under Regulation

11 of Takeover Regulations................................... 49
3.4 Details of Mega Issues during 2020-21................ 33
3.25 Buy-back Cases....................................................... 49
3.5 Industry-wise Resource Mobilisation.................. 34
3.26 Scheme of Arrangement........................................ 50
3.6 Size-wise Resource Mobilisation by SME
Issuers during 2020-21........................................... 35 3.27 Registration of Intermediaries Associated
with the Primary Market....................................... 53
3.7 Number of SME Issuers Migrating to Main
Board ....................................................................... 35 3.28 Registered Intermediaries Associated with
the Primary Market................................................ 54
3.8 Resource Mobilisation through Qualified
Institutional Placement.......................................... 36 3.29 Median Time Taken for Approval of Registrations
for Intermediaries Associated with the Primary
3.9 Size-wise Resource Mobilisation through
Market during 2020-21.......................................... 54
Qualified Institutional Placements...................... 36
3.30 Details of Suspension/Cancellation of Registration
3.10 Resource Mobilisation through Preferential
of Intermediaries Associated with the Primary
Allotments............................................................... 37
Market...................................................................... 54
3.11 Time Taken for Regulatory Approval of
4.1 Major Indicators of the Indian Securities
Applications for Public Issuance.......................... 37
Market...................................................................... 59
3.12 Resource Mobilization through Public Issues
4.2 Exchange-wise Trading Statistics......................... 61
and Private Placement of Corporate Bonds........ 38
4.3 Turnover at the Top-20 Cities in the Cash
3.13 Sector-wise Resource Mobilization through Public
Segment of BSE and NSE...................................... 61
Issues of Corporate Bonds.................................... 39
4.4 Market Capitalisation at BSE and NSE............... 62
3.14 Size-wise Resource Mobilisation through
Public Issues of Corporate Bonds........................ 39 4.5 Select Ratios Relating to the Stock Market......... 63

iii
4.6 Trading Frequency of Listed Stocks..................... 65 4.29 Product-wise Market Share in Equity
Derivatives Segment.............................................. 79
4.7 Clearing Corporation-wise Delivery
Statistics................................................................... 65 4.30 Instrument-wise Share in Index Futures and
Options at NSE....................................................... 80
4.8 Delivery to Trade Ratios........................................ 66
4.31 Participant-wise Share in the Equity Derivatives
4.9 Depository Statistics .............................................. 67
Segment................................................................... 81
4.10 Depository-wise Settlement Statistics................. 67
4.32 Category-wise Share in the Turnover of the Equity
4.11 Depository Statistics: Debentures/Bonds and Derivatives Segment.............................................. 81
Commercial Papers................................................ 68
4.33 Top 10 Brokers in the Equity Derivatives
4.12 Geographical Spread of DP Locations................. 68 Segment of BSE....................................................... 82
4.13 Secondary Market: Corporate Bond Trades 4.34 Top 10 Brokers in the Equity Derivatives
(Reported Trades)................................................... 69 Segment of NSE...................................................... 82
4.14 Settlement of Corporate Bonds............................ 69 4.35 Permitted and Traded Contracts at Domestic
4.15 Business Growth in the WDM Segments Exchanges................................................................ 92
at NSE and BSE....................................................... 70 4.36 Major Indicators of the Commodity Derivatives
4.16 Activity and Trend on Request for Quote Market...................................................................... 92
Platform................................................................... 70 4.37 Participant-wise Share in turnover of Commodity
4.17 Scrips Suspended from Trading at BSE/NSE..... 71 Derivatives Market................................................. 95

4.18 Scrips Delisted from Trading at BSE/NSE.......... 72 4.38 Median Time Taken for Regulatory Approval
for Commodity Futures Contracts....................... 96
4.19 Surveillance Measures........................................... 72
4.39 Median Time Taken for Regulatory Approval for
4.20 Share of Participants in Annual Cash Market
Futures on Commodity Indices Contracts ......... 96
Turnover.................................................................. 73
4.40 Median Time Taken Time for Regulatory Approval
4.21 Share of Top-100 Brokers/Securities in Annual
for Options in Goods Contracts........................... 97
Cash Market Turnover........................................... 74
4.41 Median Time Taken for Regulatory Approval
4.22 Top 10 brokers in the Equity Segment of
for Quanto Futures Contracts in IFSC................. 97
BSE ....................................................................... 75
4.42 Physically Delivered Quantity............................. 98
4.23 Top 10 brokers in the Equity Segment of
NSE ....................................................................... 75 4.43 Warehouse Capacity Utilisation at
Exchanges................................................................ 98
4.24 Instrument-wise Share of Securities Traded
on the WDM Segment............................................ 75 4.44 Trends in the Currency Derivatives Segment.... 103

4.25 Participant-wise share in the WDM Segments 4.45 Time Taken for Regulatory Approval of New
at NSE....................................................................... 76 Products in Currency Derivatives........................ 103

4.26 Participant-wise Trading in the Corporate 4.46 Product-wise Market Share in Currency
Bond Market of NSE.............................................. 76 Derivatives Segment.............................................. 104

4.27 Trends in Turnovers and Open Interest in the 4.47 Product-wise Market Share in Currency
Equity Derivatives Segment.................................. 77 Derivatives Segment (Currency Pairs)................ 104

4.28 Time Taken for Regulatory Approval of 4.48 Participant-wise Market Share in Currency
New product in Equity Derivatives..................... 78 Derivatives Segment.............................................. 105

iv
4.49 Trends in Interest Rate Derivatives at NSE 5.9 Unit Holding Pattern of Mutual Funds............... 145
and BSE.................................................................... 106
5.10 Number of Defaults and Restructurings in Debt
4.50 Product-wise Share in Interest Rate Derivatives Securities held by Mutual Fund Schemes........... 146
at NSE and BSE....................................................... 106
5.11 Quantum of Unclaimed Amount wth Mutual
4.51 Participant-wise Share in Interest Rate Funds ....................................................................... 146
Derivatives at NSE and BSE.................................. 107
5.12 Number of Registered Alternative Investment
4.52 Stock Exchanges with Permanent Recognition.. 108 Funds (Category-wise).......................................... 148

4.53 Recognition Granted to Stock Exchanges 5.13 Category-wise Investment by AIFs...................... 149
during 2020-21........................................................ 108
5.14 Instrument-wise Deployment of Funds by
4.54 Stock Exchanges Already Exited AIFs ....................................................................... 150
(as on March 31, 2021)........................................... 109
5.15 Registered Portfolio Managers............................. 152
4.55 Ownership Pattern of BSE, NSE and MSEI........ 111
5.16 Assets Managed by Portfolio Managers............. 152
4.56 Ownership Pattern of CDSL and NSDL.............. 112
5.17 Total Fund Inflows/Outflows under Portfolio
4.57 Registered Stock Brokers....................................... 122 Management Services............................................ 153

4.58 Classification of Stock Brokers............................. 123 5.18 Number of Registered REITs and InvITs............ 155

4.59 Registered Clearing Members.............................. 124 6.1 Net Investment by Foreign Portfolio
Investors .................................................................. 159
4.60 Classification of Clearing Members..................... 125
6.2 Assets of Foreign Portfolio Investors in India.... 160
4.61 Registered Depository Participants..................... 125
6.3 Percentage Share of Top 15 Sectors in Foreign
4.62 Registered Intermediaries..................................... 126
Portfolio Investors Total Equity Assets............... 161
4.63 Median Time Taken for Approval of
6.4 Country-wise Number of Foreign Portfolio
Registrations of Intermediaries............................ 126
Investors and their Assets under Custody......... 162
4.64 Details of Suspension/Cancellation of
6.5 Percentage Share of Top 10 Countries in Foreign
Registration of Intermediaries Associated
Portfolio Investors Total Equity Assets............... 163
with Securities Markets......................................... 126
6.6 Foreign Investment Limits in Corporate
5.1 Deemed Residual Maturity of Basel III AT-1
Bonds ....................................................................... 163
Bonds and Tier 2 Bonds......................................... 136
6.7 Value of Offshore Derivative Instruments/
5.2 Mutual Funds Registered with SEBI................... 138
Participatory Notes Holding by Foreign Portfolio
5.3 Mutual Fund Schemes Launched........................ 139 Investors................................................................... 164
5.4 Sector-wise Resource Mobilisation by Mutual 6.8 Registered Foreign Venture Capital Investors... 164
Funds ....................................................................... 140
6.9 Cumulative Net Investments by Foreign Venture
5.5 Scheme-wise Resource Mobilisation and Assets Capital Investors..................................................... 165
under Management by Mutual Funds................ 142
7.1 Activities of Credit Rating Agencies................... 167
5.6 Asset Class-wise Deployment of Funds.............. 143
8.1 Regional Seminars / Webinars in Association
5.7 Mutual Fund Scheme-wise Annual Returns...... 144 with MIIs................................................................. 170
5.8 Trends in Transactions on Stock Exchanges by 8.2 Regional Seminars / Webinars in Association
Mutual Funds.......................................................... 144 with AMFI............................................................... 170

v
8.3 Snapshot of the Reach during the World Investor 10.4 Inspections of Merchant Bankers, RTA/STA and
week - 2020.............................................................. 173 Qualified RTAs....................................................... 210

8.4 Details of Programs conducted in India during 10.5 Inspections Conducted of Other Intermediaries/
the Celebration of GMW- 2021............................. 174 Funds ....................................................................... 210

8.5 Financial Education Workshops / Webinars by 10.6 Trends in Investigations........................................ 211

Resource Persons.................................................... 179
10.7 Category-wise Nature of Investigations............. 211
8.6 Timelines for Handling of Complaints............... 184
10.8 Investigations Completed..................................... 212
8.7 Status of Investor Grievances Received and
10.9 Type of Regulatory Action Initiated.................... 212
Redressed (Year-wise)............................................ 185
10.10 Type of Regulatory Action Initiated by
8.8 Status of Pending Complaints.............................. 185
CFID ....................................................................... 213
8.9 Type/Category of Complaints.............................. 185
10.11 Type of Enforcement Action Taken...................... 214
8.10 Region-wise Investor Complaints Received and
10.12 Age-wise Analysis of Enforcement Actions-
Resolved during 2020-21....................................... 187
Section 11/11B Proceedings................................... 215
8.11 Status of Review Complaints................................ 187
10.13 Age-wise Analysis of Enquiry Proceedings by
8.12 Calls Data on Toll Free Helpline.......................... 187 Designated Authorities.......................................... 215

8.13 Status of Complaints and Arbitration cases with 10.14 Age-wise Analysis of Enquiry Proceedings by
Stock Exchanges with respect to the Trading Designated Member............................................... 216
Members.................................................................. 189
10.15 Age-wise Analysis of Enforcement Actions -
8.14 Status of Complaints and Arbitration cases Adjudication Proceedings..................................... 216
with Stock Exchanges with respect to the Listed
10.16 Age-wise Analysis of Enforcement Actions –
Companies............................................................... 189
Prosecution Proceedings....................................... 216
8.15 Inflow of Money into IPEF of SEBI...................... 190
10.17 Fraudulent and Unfair Trade Practices Cases
8.16 Utilization of IPEF of SEBI.................................... 190 during 2020-21........................................................ 217

8.17 Inflow of Money into Beneficial Owner 10.18 Nature of violation in section 11/11B
Protection Funds of Exchanges ........................... 191 Proceedings............................................................. 217

8.18 Utilization of Beneficial Owner Protection 10.19 Interim Orders and Final Orders during
Funds of Exchanges............................................... 191 2020-21..................................................................... 218

8.19 Inflow of Investor Protection Funds of 10.20 Enquiry Reports submitted against
Depositories............................................................ 192 Intermediaries......................................................... 218

8.20 Utilization of Investor Protection Funds of 10.21 Type of Violations in Adjudication Orders......... 219
Depositories............................................................ 192
10.22 Adjudication Orders Passed against
10.1 Inspection of Brokers and Depository Intermediaries......................................................... 220
Participants.............................................................. 208
10.23 Recovery Proceedings by SEBI............................. 220
10.2 Inspections of Brokers by Stock Exchanges........ 209
10.24 Status of Refunds made by SEBI.......................... 221
10.3 Inspection of Debenture Trustees and Credit
10.25 Prosecutions Launched......................................... 222
Rating Agencies...................................................... 209

vi
10.26 Nature of Violations in Prosecutions Launched 12.6 Continuing Professional Education
during 2020-21........................................................ 222 Programmes............................................................ 251

10.27 Region-wise Data on Prosecution Cases Filed... 222 12.7 Sources of Funds and Expenditure of NISM...... 253
10.28 Region-wise Data on Prosecution Cases
13.1 Composition of SEBI Board (As on March 31,
Pending.................................................................... 223
2021) ....................................................................... 254
10.29 Nature of Prosecutions Launched....................... 223
13.2 Board Meetings during 2020-21........................... 255
10.30 Number of Prosecution Cases decided by the
13.3 Grade-wise Distribution of Staff Members......... 256
Courts up to March 31, 2021................................. 223

10.31 Settlement Applications Filed with SEBI............ 224 13.4 Grade-wise Staff Members Retired/Resigned/
Deceased.................................................................. 257
10.32 Compounding Applications filed by the
Accused in Criminal Courts................................. 224 13.5 Distribution of Staff Members (Age Brackets)... 257

10.33 Status of Appeals before SAT............................... 225 13.6 Distribution of Officers by Qualification............ 257

10.34 Status of Litigation before Supreme Court......... 226 13.7 Promotions of Staff Members in Various
10.35 Status of Litigation before High Courts.............. 226 Grades...................................................................... 258

10.36 Status of Litigation before Other Forum............. 226 13.8 Region-wise Distribution of Staff Members....... 258

10.37 Fora-wise Status of Cases...................................... 227 13.9 Trends in RTI Applications and First
Appeal...................................................................... 273
11.1 Regulatory Assistance............................................ 246

11.2 Regulatory Assistance between all Securities 13.10 Trends in Appeals before Central Information
Regulators................................................................ 246 Commission............................................................ 273

12.1 Academic Programmes at NISM.......................... 249 13.11 Session-wise Details of Parliament

Questions................................................................. 274
12.2 Training Programmes at NISM............................ 249
13.12 Fees and other Charges......................................... 275
12.3 Research and Publications at NISM.................... 249

12.4 Proposed E-learning Courses at NISM............... 250 13.13 Sources of Funds for 2020-21................................ 278

12.5 Details of Certification Examinations at 13.14 Major Areas of Expenditure for 2020-21............. 278
NISM ....................................................................... 251

vii
LIST OF FIGURES
3.1 Resource Mobilisation through the 4.16 Exchange-wise share in Commodity Derivatives
SME IPOs................................................................. 35 Turnover in 2020-21................................................ 99
4.1 Share in Traded Value in the Secondary 4.17 Exchange-wise contribution of Agri. Commodity
Market during 2020-21.......................................... 55 Derivatives Turnover ............................................ 99
4.2 Movement of Stock Market Bluechip
4.18 Product Segment-wise Concentration in Aggregate
Indices...................................................................... 58
Turnover.................................................................. 100
4.3 Performance of Major Stock Indices.................... 60
4.19 Movement of Currencies during 2020-21........... 102
4.4 Annual Change in the Sectoral Indices of
BSE and NSE during 2020-21................................ 60 4.20 Top 10 Shareholders of BSE, NSE and MSEI...... 111
4.5 Price to Earnings Ratio.......................................... 63 4.21 Top 10 Shareholders of CDSL and NSDL........... 113
4.6 Price-to-Book Value Ratio..................................... 64 5.1 Snapshot of Fund Management Activities......... 127
4.7 Annualized Volatility of Benchmark 5.2 Mobilisation of Resources by Mutual Funds..... 140
Indices...................................................................... 64
5.3 Sector-wise Deployment of Funds
4.8 Monthly Trend in Trades done through Request
(Debt) (Per cent of Investment)............................ 143
for Quote Platform................................................. 71
5.4 Sector-wise Deployment of Funds (Equity)
4.9 Mode of Trading in the Cash market during
2020-21..................................................................... 74 (Per cent of Investment)......................................... 143

4.10 Trends in Equity Derivatives Segment of NSE.. 78 5.5 Sector-wise Deployment of Funds by AIFs........ 150
4.11 Maturity-wise Share in Index Options at NSE .. 80 5.6 Share of Services provided by Portfolio
4.12 Mode of Trading in the Equity Derivatives Managers................................................................. 152
Segment of NSE during 2020-21........................... 82 6.1 Trends in Net Investment by Foreign Portfolio
4.13 Movement of World Bank Commodity Price Investors .................................................................. 158
Indices...................................................................... 89
6.2 Instrument-wise Net Investment by Foreign
4.14 Movement of Domestic and International Portfolio Investors during 2020-21....................... 160
Commodity Futures Indices................................. 90
8.1 Calls answered during 2020-21............................ 188
4.15 Variation in Futures Prices (Year-on-Year) of
Near-month Contracts Traded at Exchanges 13.1 Grade-wise Distribution of Staff Members
during 2020-21........................................................ 91 (2020-21)................................................................... 256

This report can also be accessed on internet at: http://www.sebi.gov.in

Conventions used in this Report

` : Rupees
Lakh : Hundred thousand
Crore : Ten million
Million : Ten lakh
Billion : Thousand million/hundred crore
NA : Not Available
Na : Not Applicable
Differences in total are due to rounding off and sometimes they may not exactly add up to hundred percent.
Source of Charts and Tables where not mentioned is SEBI.

viii
ABBREVIATIONS

AGMs Annual General Meetings

AI Artificial Intelligence

AIFs Alternative Investment Funds

AMCs Asset Management Companies

AMFI Association of Mutual Funds in India

APAC Asia-Pacific

API Application Programming Interface

APMC Agricultural Produce Market

APRC Asia - Pacific Regional Committee

ARMF Alternate Risk Management Framework

ASBA Application Supported by Blocked Amount

ASM Additional Surveillance Measures

AT1 Additional Tier 1

AT-II Additional Tier 2

AUC Assets Under Custody

AUM Asset Under Management

BCP&DR Business Continuity Plan and Disaster Recovery

BO Beneficiary Owner

BOP Balance of Payments

BRICS Brazil Russia India China and South Africa

BRR Business Responsibility Report

BRSR Business Responsibility and Sustainability Report

BSE BSE Limited

CAS Consolidated Account Statement

CAS Consolidated Account Statement

CBF Capacity Building Fund

CC Clearing Corporation

CDD Client Due Diligence

CDE(s) Commodity Derivative Exchange(S)

CDSL Central Depository Services (India) Limited

ix
CEO Chief Excutive Officer

CERSAI Central Registry of Securitisation Asset Reconstruction and Security Interest of India

CERT-In Indian Computer Emergency Response Team

CFID Corporation Finance Investigation Department

CII Critical Information Infrastructure

CIMC Collective Investment Management Company

CIO Chief Investment Officer

CIRP Corporate Insolvency Resolution Process

CIS Collective Investment Schemes

CKYC Central Know Your Client

CKYCR Central KYC Registry

CM Clearing Member

CMPA Client Securities Margin Pledge Account

CMS Case Management System

CMT Crisis Management Team

CoTs Commodities Derivatives Trainers

COVID-19 Coronavirus Disease of 2019

CPE Continuing Professional Programmes

CPGRAMS Centralized Public Grievance Redress and Monitoring System

CPI-C Consumer Price Index-Combined

CPIO Central Public Information Officer

CPs Commercial Papers

CRAs Credit Rating Agencies

CRR Cash Reserve Ratio

CSE Calcutta Stock Exchange

CSO Central Statistics Office

CSR Corporate Social Responsibility

CWS Commodity Watch System

D&P Depositories and Participants

DA Designated Authority / Data Analytics

DDPs Designated depository participants

DEA Department of Economic Affairs

x
DFIs Domestic Financial Institutions

DIS Delivery Instruction Slip

DLT Distributed Ledger Technology

DM Designated Member

DMS Document Management System

DOR Department of Revenue

DPs Depository Participants

DRS Disaster Recovery Site

DSE Designated Stock Exchange

EBP Electronic Book Provider

EEA European Economic Area

EFE Eligible Foreign Entities

EGR Electronic Gold Intergration

ELM Extreme Loss Margin

EMEA Europe, Middle East and Africa

EMIR European Markets Infrastructure Regulation

EPFO Employees Provident Fund Organization

EPR Extended Producer Responsibility

ESG Environmental, Social and Governance

ESOP Employee Stock Ownership Plan

ESPs E-voting Service Providers

ETCD Exchange Traded Commodity Derivative

ETFs Exchange Traded Funds

EU European Union

F&O Futures and Options

FBIL Financial Benchmark India Pvt Ltd

FDI Foreign Direct Investment

FIA Futures Industry Association

FMCG Fast Moving Consumer Goods

FOW-NOW Fast Trade on Web - Neat on the Web route

FPE For Profit Enterprise

FPIs Foreign Portfolio Investors

xi
FPOs Follow-on Public Offerings

FSB Financial Stability Board

FVCI Foreign Venture Capital Investor

GBP British Pound Currency

GDP Gross Domestic Product

GEM Growth and Emerging Markets

GFCF Gross Fixed Capital Formation

GNDI Gross National Disposable Income

Govt. Government

GRI Global Reporting Initiative

G-sec Government Securities

GSM Graded Surveillance Measure

HNIs High Net-worth Individuals

HUFs Hindu Undivided Families

HYE Half Year Ending

IA Investment Advisor

IAPs Investor Awareness Programs

IAR Internal Audit Report

IBC Insolvency and Bankruptcy Code

ICCL Indian Clearing Corporation

ICDR Issue of Capital and Disclosure Requirements

ICEX Indian Commodity Exchange Limited

IDR Indian Depository Receipts

IEMs Independent External Monitors

IFA Independent Financial Adviser

IFS Index Futures Segment

IFSC International Financial Services Centre

IGP Innovators Growth Platform

IGRC Investor Grievance Redressal Committee

IMF International Monetary Fund

IMs Information Memorandums

INFE International Network on Financial Education

xii
INR Indian Rupee

InvITs Infrastructure Investment Trusts

IONS Inward Outward and Office Noting System

IOSCO International Organization of Securities Commissions

IPEF Investor Protection and Education Fund

IPF Investor Protection Fund

IPO Initial Public Offering

IPP Institutional Placement Programme

IRD Interest Rate Derivatives

IRDAI Insurance Regulatory and Development Authority of India

IRT Income Reporting Threshold (Taxation)

ISD Integrated Surveillance Department

ISIN International Securities Identification Number

IST Inter Scheme Transfers

IT Information Technology

JPY Japanese Yen

KIM Key Information Memorandum

KMP Key Management Personnel

KRA KYC Registration Agency

KUA KYC User Agency

LE Legal Entities

LLP Limited Liability Partnership

LODR Listing Obligations and Disclosure Requirements

LPCC Limited Purpose Clearing Corporation

Ltd. Limited

LTRO Long-Term Repo Operations

MAC Media Access Control

MB Merchant Banker

MCA Ministry of Corporate Affairs

MCCIL Metropolitan Clearing Corporation of India Limited

MCR Monthly Cumulative Report

MCX Multi Commodity Exchange of India Limited

xiii
MCXCCL MCX Clearing Corporation Limited

MDAC Market Data Advisory Committee

MF Mutual Fund

MFA Multi-Factor Authentication

MFAC Mutual Funds Advisory Committee

MIIs Market Infrastructure Institutions

ML Machine Learning

MMoU Multilateral Memorandum of Understanding

MoF Ministry of Finance

MoSPI Ministry of Statistics and Programme Implementation

MoU Memorandum of Understanding

MPO Minimum Public Offer

MPS Minimum Public Shareholding

MSEI Metropolitan Stock Exchange of India Limited

MWPL Market Wide Position Limit

NAV Net Asset Value

NBFCs Non Banking Finance Companies

NCCL National Commodity Clearing Limited

NCDEX National Commodity and Derivatives Exchange Limited

NCDs Non-Convertible Debt Securities

NCFE National Center for Financial Education

NCIIPC National Critical Information Infrastructure Protection Centre

NCL NSE Clearing Ltd.

NCLT National Company Law Tribunal

NCRPS Non-Convertible Redeemable Preference Shares

NDUs Non Disposal Undertakings

NFO New Fund Offer

NGBRCs National Guidelines on Responsible Business Conduct

NISM National Institute of Securities Markets

No. Number

NPO Not for Profit Organisation

NRIs Non-Resident Indians

xiv
NSCCL National Securities Clearing Corporation Limited

NSDL National Securities Depository Limited

NSE National Stock Exchange of India Limited

NSECL NSE Clearing Limited

NSO National Statistics Office

OAVM Other Audio-Visual Means

OCB Overseas Corporate Bodies

OECD Organization for Economic Co-operation and Development

OFS Offer for Sale

OIP Office of Informant Protection

OMS Order Management System

OTC Over the Counter

OTP One Time Password

OVD Officially Valid Document

PAC Persons Acting in Concert

PAN Permanent Account Number

PCM Professional Clearning Members

PDC Post Dated Cheque

PF Provident Fund

PFRDA Pension Fund Regulatory and Development Authority

PIDs Public Interest Directors

PIT Prohibition of Insider Trading Regulations

PMAC Primary Market Advisory Committee

PMLA Prevention of Money Laundering Act

PMOPG PMO Public Grievance

PMS Portfolio Management Services / Schemes

PNs Participatory Notes

PoA Power of Attorney

PPM Private Placement Memorandum

PPTs Power Point Presentations

PSI Price Sensitive Information

PSU Public Sector Undertaking

xv
QFIs Qqualified Foreign Investors

QIB Qualified Institutional Buyer

QIP Qualified Institutional Placement

RA Research Analyst

RBI Reserve Bank of India

REF Recovery Expense Fund

REITs Real Estate Investment Trusts

RFQ Request for Quote

RGESS Rajiv Gandhi Equity Savings Scheme

RHPs Red Herring Prospectus

RIs Registered Intermediaries

RMC Risk Management Committee

RMRC Risk Management Review Committee

RP Resource Person

RPO Recovery Point Objective

RTA Registrars to An Issue & Share Transfer Agent

RTO Recovery Time Objective

S&P Standard & Poor's

SAT Securities Appellate Tribunal

SCN Show Cause Notice

SCORES SEBI Complaints Redressal System

SCRR Securities Contracts (Regulation) Rules

SCSBs Self Certified Syndicate Banks

SDI Securitised Debt Intruments

SDLs State Development Loans

SDSI 2020 SEBI Digital Survey of Investors 2020

SE Stock Exchange

SEBI Securities and Exchange Board of India

SECC Stock Exchange and Clearing Corporation

SGB Sovereign Gold Bonds

SGF Settlement Guarantee Fund

SI Portal SEBI Intermediary Portal

xvi
SIA Social Impact Assessments

SID Scheme Information Document

SIT-NET SEBI Enterprise-wide Integrated IT Network Infrastructure

SMAC Secodary Market Advisory Committee

SMARTs Securities Market Trainers

SME Small and Medium Enterprise

SMS Short Message Service

SOC-NOC Security Operations Centre and Network Operations Centre

SOP Standard Operating Procedure

SPAC Special Purpose Acquisition Companies

SPAN Standardized Portfolio Analysis of Risk

SSE Social Stock Exchange

SSHI 2020 SEBI Survey of Housholds Investors 2020

SVFs Social Venture Funds

TAC Technical Advisory Committee

T-bills Treasury Bills

TCFD Task Force for Climate related Financial Disclosures

TDS Tax Deduction at Source

TFT Trade-For-Trade

TLRTO Targeted Long Term Repo Operations

TLS Transport-layer security

TM Trading Member

TREPs Tri-party Repo

TVCs Television Commercials

UIDAI Unique Identification Authority of India

UK United Kingdom

UPI Unified Payments Interface

UPSI Unpublished Price Sensitive Information

USA United States of America

USD United States Dollar

UTI Unit Trust of India

VA Valuation Agencies

xvii
VAPT Vulnerability Assessment and Penetration Testing

VC Video Conferencing

VCFs Venture Capital Funds

VCP Volatility Chain Participant

VID Voluntary Information Disclosure

VIX Volatility Index

VRR Voluntary Retention Route

VSR Volatility Scan Range

VWAP Volume weighted Average Price

w.r.t. with respect to

WDM Wholesale Debt Market

WFE World Federation of Exchanges

WG Working Group

WIW World Investor Week

ZCZP Zero Coupon Zero Principal Bond

xviii
 Chapter - 1 : Introduction

CHAPTER ONE:
Introduction

D
uring the year under review, SEBI These initiatives strengthened the robustness
continued its journey towards building a and resilience of Indian securities markets. The
stronger and more vibrant Indian capital COVID-19 crisis did not hamper the monitoring
market. In view of the challenges arising from the and enforcement functions and SEBI continued to
COVID-19 pandemic, a number of measures were take action against the entities who had violated any
focused towards temporarily easing the burden of securities market regulations.
compliance and reducing hardships for investors,
As per the new SEBI (Annual Report) Rules,
companies and intermediaries in the securities
2021, this Annual Report of SEBI has 13 Chapters
market. For instance, in view of the liquidity
dealing with specific activities of SEBI viz. primary
stress faced by corporates, SEBI took immediate
markets, secondary markets, protection of investor
measures to facilitate the capital raising process
interests, regulatory actions etc. for the benefit of
and temporarily relax the criteria for recognition
of default. SEBI also extended the time line for stakeholders in understanding the developments in

companies and intermediaries to file various each domain of the regulatory sphere.

reports. Various measures taken in the context of

1.1. YEAR IN REVIEW
COVID-19 are detailed in the subsequent sections
of the report. The COVID-19 pandemic affected most sectors
of the economy, limiting their capacity utilisation
Additionally, SEBI continued to pursue its
and output levels. Sector-wise, agriculture was the
mandated statutory objectives: protecting the
lone green shoot exhibiting resilience with positive
interests of investors in the securities market,
growth throughout the year. Contact-intensive
promoting the development of and regulating
services, like hotels, transport and construction
the securities market. Towards strengthening the
were hit the hardest and have shown some signs of
ecosystem of financial markets and keeping in pace
recovery from the third quarter onwards.
with the changing technology and other market
developments, changes were made to the extant The private final consumption expenditure
regulatory framework, as detailed in the report. and gross fixed capital formation languished during

1
Securities and Exchange Board of India Annual Report : 2020-21

the first two quarters. However, this was counter- During April-December 2020, net foreign
balanced with higher Government consumption direct investment (FDI) flows recorded an all-
expenditure which supported the economy during time high inflow of USD 40 billion, 30.4 per cent
the pandemic. The rebound in economic growth higher as compared to April-December 2019-20,
in third quarter was boosted by vaccination signalling India’s favourable position as a preferred
dissemination, hopes of robust recovery in services investment destination. Computer software and
sector along with normalising of demand and supply hardware sector received the highest FDI equity
in the economy with easing of restrictions. inflow of USD 24.4 billion in the April-December

Further, gross domestic product (GDP) at 2020 period.

current prices in the year 2020-21 was estimated Government and the central bank responded
to `197.5 lakh crore, as against the first revised on a timely basis to provide liquidity support
estimates of `203.5 lakh crore in 2019-20, indicating a measures to the economy. Reserve Bank of India (RBI)
decrease of three per cent as compared to an increase as part of its accommodative stance, took number
of 7.8 per cent in 2019-20. of conventional and unconventional measures like
As per provisional estimates of National long-term repo operations (LTRO), on-tap targeted
Income released by National Statistics Office long-term repo operations (TLTRO), variable
(NSO), India’s gross domestic product (GDP) at rate repo auctions, cash reserve ratio (CRR) cut,
constant (2011-12) price contracted by 7.3 per cent special liquidity scheme for non-banking financial
in 2020-21 as compared to four per cent growth in companies (NBFCs)/mutual funds, open market
2019-20. operations, and others to infuse sustained liquidity
in the COVID-19 displaced economy.
Gross fixed capital formation (GFCF) at current
prices was estimated at `53.5 lakh crore for 2020-21 In 2020-21, Indian rupee (INR) exhibited a

as compared to `58.5 lakh crore during 2019-20. The mixed trend against the US Dollar. After depreciating
rate of GFCF to GDP was 27.1 per cent during 2020- to its lowest level of `76.81 on April 22, 2020, the
21 as against 28.8 per cent in 2019-20. Gross domestic INR recovered as India witnessed sustained strong
savings for 2020-21 were projected at 28.9 per cent foreign portfolio investors (FPIs) investment
of the gross national disposable income (GNDI) as inflows in the equity market. The INR maintained
compared to 30.9 per cent estimated for 2019-20. an appreciating bias in H2: 2020-21 on the back of

The pandemic related uncertainties showed its growth revival and weakening US Dollar.
impact on the inflation rate also, with food inflation The exchange rate had largely moved in the
trending on the higher side in the initial months of range of INR 72-75 since October 2020, with INR
2020-21 due to supply constraints. The consumer
appreciating to `72.29 on February 24, 2021 but
price index-combined (CPI -C) inflation averaged to
depreciated thereafter owing to elevated global
6.2 per cent in 2020-21, higher than 4.8 per cent in
financial market volatility on the back of rising US
2019-20. Factors like sticky fuel prices in the second
bond yields, rising crude oil prices and moderating
half of the year, elevated food prices and rise in
FPI investment inflows. Throughout the year, the
service prices retained the inflation on the higher side
movement of INR against USD has remained modest.
in 2020-21.

2
 Chapter - 1 : Introduction

Table 1.1: Key Statistics on the Indian Economy

Particulars 2019-20 2020-21

Rate of Growth of GDP (Per cent) 4.2 -7.3

Inflation (Per cent) 5.9 6

Gross Saving (` billion) 63,860 -

Gross Saving (Per cent of GNDI) 30.9 28.9#

Gross Fixed Capital Formation (` billion ) 58,513 53,499

Gross Fixed Capital Formation at current prices (per cent of GDP) 28.8 27.1

Fiscal Deficit (Per cent of GDP) 4.6 9.5

Current Account Deficit (Per cent of GDP) 0.9 1.0#

Exchange Rate (Indian Rupees Per US Dollar) 75.4 73.5

Foreign Exchange Reserves (USD billion) 478 579

Note: # Projections-Reserve Bank of India- Monetary Policy Report- April 2021
Source: MoSPI, RBI, FBIL

Overall, the volatility in the financial markets `21,345 crore through IPOs, `37 crore through
reduced significantly during 2020-21. The volatility FPOs and `55,670 crore through rights issues) in the
of US equities, measured in terms of the CBOE previous year. Further, `78,738 crore were raised
Volatility Index (VIX), fell from 53.5 in March 2020 through qualified institutional placement (QIPs)
to 19.4 in March 2021.The volatility index of Indian as against `54,389 crore raised in 2019-20. During
equities, the India VIX, fell from 64.4 in March the same period, `40,930 crore was raised through
2020 to 20.6 per cent in March 2021. Further, Indian preferential issues as against `1,74,886 crore raised
benchmark indices viz. Nifty and Sensex recorded a during 2019-20.
strong positive growth during 2020-21. Both Sensex
1.2. PERFORMANCE HIGHLIGHTS
and Nifty rebounded by 68 per cent and 70.9 per cent,
During the year, SEBI endeavoured to protect
respectively during 2020-21. At the end of 2020-21,
the interest of all stakeholders by ensuring efficient
total market capitalisation at National Stock Exchange
functioning of the markets. The policy measures
(NSE) and BSE Limited (BSE) increased by 80 per cent
undertaken by SEBI during the year under review
and 80.5 per cent respectively to `203 lakh crore and
are discussed in detail in the subsequent chapters
`204.3 lakh crore compared to 2019-20.
under headings as primary markets, secondary
During 2020-21, a total of `1,10,118 crore (of markets, fund management activities etc. Snapshot
which `31,030 crore through initial public offers of performance indicators for the year 2020-21 are
(IPOs), `15,030 crore through follow-on public summarized below -
offerings (FPOs) and `64,059 crore through rights a. As per Futures Industry Association (FIA),

issues) was mobilised through equity public and NSE emerged as the world’s largest derivatives
rights issues compared to `77,052 crore (of which exchange for 2nd consecutive year in 2020 by

3
Securities and Exchange Board of India Annual Report : 2020-21

number of contracts traded. Further, NSE was 20. The net asset value of InvITs as on March 31,
ranked 4 in the world in the cash equities by
th
2021 appreciated by 132.5 per cent to `1,05,529
number of trades as per the World Federation crore as compared to `45,396 crore at the end
of Exchanges (WFE) for calendar year 2020. of 2019-20.

b. As per WFE, in 2020, NSE ranked 1st among the h. 

The Pan-India turnover in equity cash
global equity derivatives exchanges in terms of segment, equity derivatives segment and
total volume traded. NSE’s Bank Nifty Index currency derivatives segment registered a
options were the top ranked equity index growth of 70.2 per cent, 96.8 per cent and 5.8
options contracts in terms of volume while the per cent respectively during 2020-21 over
CNX Nifty Index options were ranked 2 nd
in 2019-20. However, the Pan-India turnover
the same list. NSE and BSE were ranked 6 and
th
in the interest rate derivatives segment and
17 , respectively amongst the top exchanges in
th
commodity derivative segment decreased by
terms of volume traded in single stock futures 69.7 per cent and 0.02 per cent, respectively
and options. during the period.
c. Crude and natural gas futures contracts traded i. During 2020-21, equity derivatives segment
at Multi Commodity Exchange of India limited had the highest market share of 93.8 per
(MCX) were ranked 12 and 14 respectively
th th
cent in the gross or notional turnover across
in the global energy contracts by volume. the segments (compared to 90.1 per cent
MCX was ranked 7 and 10 globally in terms
th th
in the previous year) followed by currency
of contracts traded in commodity futures and derivatives segment with total market share of
commodity options, respectively. 2.4 per cent, equity cash segment (2.3 per cent)
d. Five contracts traded at NSE and BSE were and commodity derivatives (1.3 per cent).
amongst the top 10 currency futures and j. India’s leading equity blue-chip indices Nifty
options contracts during 2020. and Sensex increased by 70.9 per cent and
e. In the corporate bonds segment, a total of
 68 per cent respectively in 2020-21. The
`7,82,428 crore (`10,588 crore through public annualized volatility of the Sensex and Nifty
issue and `7,71840 crore through private decreased to 23 and 22.1 in 2020-21, respectively
placement) were mobilised in 2020-21 as as compared to 28.2 and 27.1 respectively
compared to `6,89,686 crore (`14,984 crore during 2019-20.
through public issues and `6,74,702 crore k. In terms of trading volumes, Pan-India total
through private placement) in 2019-20. trading volumes in the cash segment increased
f. During 2020-21, `14,300 crore was raised by by 61.5 per cent in 2020-21.
real estate investment trusts (REITs). The net l. 
During 2020-21, 142 lakh demat accounts
asset value for REITs stood at `58,430 crore as registered with Central Depository Services
on March 31, 2021 compared to `28,910 crore (India) Limited (CDSL) and National Securities
as on March 31, 2020. Depository Limited (NSDL), highest in any
g. The funds raised by infrastructure investment financial year. The total number of demat
trusts (InvITs) surged up by 251.6 per cent to accounts registered with CDSL and NSDL
`40,432 crore in 2020-21, as compared to 2019- stood at 551 lakh as on March 31, 2021.

4
 Chapter - 1 : Introduction

m. As on March 31, 2021, Sensex and Nifty's alternative investment funds (AIFs) increased
price-earnings’ ratios surged to 34.4 and by 22 per cent to `4,51,216 crore from `3,69,988
33.2, respectively as compared to 17.8 and crore at the end of 2019-20. The amount of
19.4, respectively on March 31, 2020 while fund raised and investment made increased by
the price to book value ratios were 3.3 and 23.3 per cent and 30.7 per cent, respectively in
4.2, respectively as compared to 2.3 and 2.5, 2020-21.
respectively during 2019-20.
1.3. LOOKING FORWARD
n. MCX iCOMDEX composite index, increased by
26.2 per cent while the NKrishi index recorded Indian capital markets have been witnessing

an increase of 32.7 per cent during the year. The increasing growth and with time, have become more

annualised volatility for MCX iCOMDEX in matured, modernized and integrated. At the same

2020-21 remained the same at 15.8 per cent as time, markets are getting increasingly more complex

in previous year whereas annualised volatility with the emergence of new products, tech-enabled

of NKrishi Index increased to 13.7 per cent processes and increasing global integration. Black

during the year as compared to 12.5 per cent in swan events like COVID-19 present new challenges

2019-20. in terms of ensuring operational resilience and

appropriate risk management for smooth functioning
o. The year 2020-21 saw net inflows of foreign
of the capital markets. SEBI has been taking a
portfolio investments to the tune of `267.1
number of steps for developing and strengthening a
thousand crore (2nd highest inflow in a
well regulated, modern securities market in India to
particular year after 2014-15) into the Indian
enable it to effectively play the vital role of meeting
capital market, compared to a net outflow of
the capital needs of the growing economy while
`27.5 thousand crore in 2019-20.
facilitating the participation of new investors in
p. 
During 2020-21, the gross resource the markets. In the coming year, SEBI will continue
mobilization by the mutual funds were `86 its ongoing efforts to facilitate the development of
lakh crore compared to `188 lakh crore in market based financing, to increase the penetration
previous year. However, due to substantially of securities markets and to enhance market trust.
lower redemptions, the net inflows in 2020-21 The measures proposed in this direction during
increased by 146 per cent to `2,14,743 crore as 2021-22 include the following -
compared to `87,301 crore in 2019-20.
Investor Charter
q. 
At the end of 2020-21, the assets under
SEBI, in line with the Hon’ble Finance Minister’s
management (AUM) of mutual funds
announcement in her Budget Speech, is working on
registered a growth of 41.2 per cent over the
developing an Investor Charter for investors in the
previous year and stood at `31.4 lakh crore.
securities market. The Investor Charter will focus
r. At the end of March 31, 2021, the total AUM of
on the rights and responsibilities of investors and
the portfolio management industry increased
the investor grievance redressal mechanism. It is
by 13.9 per cent over the previous year and
proposed to have a charter for SEBI and separate
stood at `20,67,205 crore.
charters for entities regulated by SEBI. It is also
s. 
At the end of 2020-21, the amount of proposed to prescribe timelines for various investor
commitment raised by all categories of related activities in the charter. The Investor Charter

5
Securities and Exchange Board of India Annual Report : 2020-21

will not only help to bring in more transparency in c. Reviewing the extant regulatory framework

the investment process but also encourage investors for preferential issue.
in the market to invest with better knowledge.
Review of Regulatory Provisions related to Equity
Framework for Gold Exchanges Markets

In order to have effective price discovery of gold The equity market is dynamic and keeps
on domestic platforms, the Union Budget for 2021-22 evolving with changing market conditions.
had proposed the setting up of gold spot exchanges Regulations need to be in tune with the changing
with SEBI as the market regulator. SEBI will be market dynamics and practices, while striking a
working in this area and formulate appropriate rules balance between market regulation and market
and regulations for gold spot exchanges. development. Some of the key proposed changes are
Introduction of New Products for Fund Raising indicated below –

In order to align the development of the a. Reviewing provisions related to shares with
securities market with the needs of the market superior voting rights;
and to encourage capital formation through the b. Harmonizing the regulatory provisions
introduction of new products, SEBI will, inter-alia, be dealing with sweat equity and share based
working on the following areas – employee benefits;
a. The recommendations of the Working Group c. Examining alternatives to the reverse book

/ Technical Group for setting up a Social Stock building process for determining the delisting
Exchange; price under SEBI’s delisting Regulations;
b. Examining the feasibility of introducing Special d. Reviewing the SEBI (Merchant Bankers)

Purpose Acquisition Companies (SPAC) type Regulations, 1992.
structure in India.
Governance, Disclosures and Monitoring of Listed
Reforms relating to Capital Raising Entities

SEBI shall continue its ongoing process of An effective and high standard of corporate
reforms in the primary market to facilitate fund governance is a pre-requisite for building confidence
raising and increase both issuer and investor of the shareholders in the capital markets. SEBI has
confidence. Some of the key measures proposed endeavoured to achieve this goal by continuously
towards this end are – strengthening the corporate governance framework,
a. Revisiting the period of lock-in of the minimum increasing focus on the quality of disclosures made
promoter holding in case of public issues by listed entities and monitoring of compliance by
where the objects of the issue are other than listed entities with various regulatory provisions.
capital expenditure and project finance. SEBI In the forthcoming year, SEBI will focus on the
will also examine the proposal to shift from the following areas:
existing concept of ‘promoter’ to the concept of a. Enhancing Governance: SEBI shall focus
‘controlling shareholder’, in a phased manner. on further strengthening the regulatory
b. Reviewing the existing provisions related to framework for independent directors and
the price band and other features of book built/ whole-time directors and norms governing
fixed price issues. related-party transactions.

6
 Chapter - 1 : Introduction

b. Sustainability Disclosures: With the increasing entity for recognition as an LPCC for clearing
focus on sustainable finance, concerted efforts and settling repo transactions in corporate
shall be made towards creating awareness and debt securities. Guidelines in this regard,
facilitating the implementation of sustainability including contribution of `150 crore towards
disclosures by listed entities. share capital of the proposed LPCC by AMCs,
have been issued. It is expected that the entity
c. 
Leveraging Technology: SEBI shall leverage
formed by AMCs for repo clearing would be
on technology in the area of digitization of
functional soon.
disclosures and reducing the time-period for
listing from the closure of public issue. The c. Market Makers
use of technology shall also be enhanced for Being acutely conscious of the need for
monitoring the quality of disclosures made by diversification of sources for financing the
listed entities. infrastructure needs of the country, SEBI
Development of Corporate Bond Market has been focusing its attention on creating
a vibrant secondary market for investment
a. Backstop Facility for Corporate Debt Market
grade corporate bonds. SEBI has rolled out

Based on a proposal from SEBI, an several measures in the recent past to facilitate
announcement in the Union Budget for 2021-22 liquidity in the secondary market. One
was made with regard to creation of a backstop additional proposed step is aimed at creating
facility that would purchase investment grade a set of market makers who will be present
debt securities both in stressed and normal in the market most of the time both on the
times and help development of the bond buy side as well as the sell side of investment
market. Currently, SEBI along with other grade corporate bonds. SEBI is working
stakeholders including the Ministry of Finance out appropriate eligibility criteria for such
and the mutual fund industry, is in the process market makers so as to ensure that financially
of finalizing the modalities to implement the sound entities with the requisite expertise are
Budget announcement. encouraged to participate. Simultaneously, the
b. 
Limited Purpose Clearing Corporation for issues of funding the cost of inventory holding
Repo on Corporate Bonds of these entities through various mechanisms -
An Internal Task Force of SEBI for the by putting in place a back-to-back arrangement
development of corporate bond market, inter with the issuers, by creating a repo market for
alia, recognized the importance of a well- corporate bonds which can fund the inventory
functioning corporate bond repo market for the holding of the market makers, etc. are also
broader objective of development of corporate being examined.
bond market. Subsequently, towards the d. Transparency
achievement of the said goal, the framework It is proposed to revamp the corporate
for a Limited Purpose Clearing Corporation bond database which is accessible to all
(LPCC) was approved by SEBI. investors. This database will make available
Asset Management Companies (AMCs) of more granular level information about debt
mutual funds are in the process of setting up an covenants to investors in the debt market.

7
Securities and Exchange Board of India Annual Report : 2020-21

e. Other Measures of execution of mutual fund transactions,

With a view to further develop and strengthen initiation and tracking of service requests,
the corporate bond market, SEBI is proposing queries and complaints, access to investment
to: related reports etc.

i. Revamp the existing regulations relating b. 

Enhancing Liquidity Risk Management
to issue and listing of debt securities Measures for Debt schemes
by removing redundant provisions,

As a part of enhancing liquidity risk
streamlining the existing provisions,
management measures in mutual funds, a
easing the process of issue of debt
framework is being developed to determine
securities and adding provisions on
the minimum percentage of assets that an
investor protection and transparency.
open-ended debt oriented scheme should hold.
ii. 
Enhance the continuous listing Proposals for other liquidity management
requirements for debt listed entities so as tools including a swing pricing framework are
to improve the granularity of disclosures also being examined.
relating to financials, material events
c. Classification of Debt Schemes in Terms of a
including credit events, corporate
Potential Risk Class Matrix
governance related disclosures including
related party transactions etc. In order to empower investors to take informed
decisions, a proposal that all debt schemes
Encourage Participation in Real Estate Investment
may be classified in terms of a potential risk
Trusts and Infrastructure Investment Trusts
class matrix consisting of parameters based
Going forward, it is proposed to examine on maximum interest rate risk and maximum
reduction of: credit risk that can be taken in a scheme in
a. The minimum investment requirement in the addition to the present categorization and
initial public offer by REITs and InvITs to bring Risk-o-Meter disclosures is underway.
the same on par with equity issues, so as to d. Standardization of Benchmarks
encourage participation of retail investors in
such hybrid instruments. An exercise on standardization of benchmarks
of mutual fund schemes is being carried out to
b. Trading lot to bring it at par with that for

bring uniformity in performance evaluation
equity viz. one unit to enhance liquidity, so as
across schemes.
to encourag secondary market participation
and widen the reach of REITs and InvITs. e. Development of Passive Funds

Measures for Mutual Fund Schemes Globally, passive funds such as index funds
a. 
User-Friendly Registrar and Transfer Agents’ and exchange traded funds (ETFs) have
Inter-Operable Platform emerged as one of the largest asset classes.
Passive funds are low cost products, well
A user-friendly platform, which is inter-
diversified in nature and perform in line with
operable amongst registrar and transfer
the market indices providing an alternative to
agents, is in the process of development and
actively managed funds to retail investors.
is expected to be functional in 2021-22. This
platform will deliver an integrated, harmonized Passive funds in India have tremendous scope
and elevated experience to investors in respect to grow as the AUM under passive funds

8
 Chapter - 1 : Introduction

in India is still low as compared to its global etc., policies regarding risk management,
peers. It is proposed to examine possible incorporation of a risk management culture
measures to the development of passive funds within the organization and principles for
covering various aspects such as increase in the identification, measurement and management
liquidity for ETFs on the exchange platforms of various risks at the level of mutual fund
by efficient market making, better disclosures schemes and for overall functioning of AMCs.
and transparency regarding ETFs, introduction
h. Alignment of Interest of Asset Management
of new ETF products, reviewing the criterion Companies and their Employees with the
regulatory requirement for new players with Unitholders of the Mutual Fund Schemes
focus on passive funds etc.
To align the interest of the AMCs and key
f. Strengthening of Inspection of Mutual Funds employees of the AMCs with the unitholders
by use of Technology of the mutual fund schemes, it is being
A separate division has been created in SEBI considered that a part of the compensation
for automation of inspection of mutual funds of key employees may be in the form of units
so as to further strengthen supervision of of the mutual fund scheme(s), in which they
mutual funds. Going forward, the division have a role/oversight. Further, to align the
aims to add new alerts and cover the entire interest of the AMCs with the unitholders of
gamut of quantitative aspects of inspections. the mutual fund schemes, a mechanism is
Further, in-spirit violations would also be being considered where AMCs may invest a
identified and added for surveillance. Existing minimum amount in the schemes based on the
algorithms running for alert generation would risk value and AUM of such schemes.
be modified on an ongoing basis for all changes Deepening of Commodity Derivatives Market
in regulatory guidelines. Automation of the
With a large share of its GDP being contributed
inspection process would help in examination
by commodity based economic activities, and large
of entire data rather than inspection of sample
population dependent on agriculture, India needs
data and also result in early recognition of any
a deep and liquid commodity derivatives market
possible violations.
catering to the risk management needs of various
g. 
Risk Management Framework of Mutual stakeholders. SEBI has been undertaking a host
Funds of developmental measures to infuse depth and

Overarching guidelines regarding risk liquidity in the domestic commodity derivatives
management of mutual funds were previously markets. One such step during the last year was
issued by SEBI in the year 2002. In view of the introduction of options on goods. The options on
changed landscape of mutual fund industry agricultural commodities enable farmers to lock-in
and the financial markets in general, SEBI the price without giving away the flexibility to fetch
is in the process of issuing a revised risk the best prevailing price for their produce. SEBI
management framework for mutual funds would endeavor to make such products available
to cover aspects such as governance of risk in multiple commodities and at various centers so
management framework- including roles and that more and more farmers are able to participate
responsibilities of Board of Trustees, Board and take benefit of this product. SEBI will also
of AMC, management and key personnel continue taking measures such as introduction of

9
Securities and Exchange Board of India Annual Report : 2020-21

new products, permitting new participants and institutions to handle cyber incidents/ breach, SEBI is
revamping the product design to deepen and broaden proposing, inter-alia, to ensure that an independent,
the commodity derivatives markets and make them special purpose cyber audit of the MIIs is carried out
more relevant for physical market stakeholders. in terms of penetration testing, vulnerability testing
etc. in order to assess the vulnerability of the MIIs to
Adoption of Technology for Surveillance
a possible cyber threat.
Indian markets today generate over 550
Segregation of Client Collateral
crore daily order and trade messages in the equity
and equity derivative segments. Data has become In the past, there have been instances of
the backbone of surveillance. SEBI uses various misuse of client collateral by trading member (TM)/
innovative techniques, such as pattern recognition clearing member (CM), which become accentuated
and data analytics to process this ever-increasing at the time of default of a TM/CM. Such events not
data. only adversely impact investors’ confidence in the
integrity of the market but also bring disrepute to
The future of surveillance will entail further
the entire trading ecosystem. In order to mitigate
deployment of technology to detect more complex the risk of misuse of client collateral by TM/CM, it is
and evolving manipulation techniques by fraudsters. proposed to put in place a framework which would
It is envisaged that use of enhanced technology will enable identification of collateral at a client level.
aid SEBI in better identifying abnormal or fraudulent The proposed framework for segregation of client
behaviour in the market including front running and collateral would enable identification and protection
insider trading. Technology will be used to simulate of client collateral from –
human intelligence to further refine its alerts system.
a. Misappropriation/ misuse by TM/CM; and
Enabling Regulatory Framework to Facilitate Entry
b. Default of TM/CM and/or other clients.
of New Market Infrastructure Institutions
Such a framework would not only mitigate
Currently, the Market Infrastructure Institution
the risk of misuse of client collateral but also ensure
(MII) landscape in Indian markets is dominated by
expeditious settlement of clients’ claims in the event
a few entities which reflects a lack of competitive
of default by a TM/CM.
environment. This is primarily owing to restrictive
ownership which serves as a potential entry barrier Roadmap for further enhancing Information

to market participants who wish to establish / Technology Infrastructure

acquire an MII. Against this backdrop of absence of In the forthcoming years, SEBI will be
competition or threat of any takeover of an MII, it implementing major information technology (IT)
may be desirable to reform the current ownership projects which are critical to its day-to-day operations
structure of MIIs to create an enabling framework and its mandate. As a part of SEBI’s endeavor to adopt
which facilitates new entrants to set up or acquire an analytics in its decision making process, it is planned
MII in India. to implement various analytical models based on
artificial intelligence (AI)/ machine learning (ML)
Special Purpose Cyber Audit of Market
as well as rule based algorithms. Further, analytics
Infrastructure Institutions
related to unstructured data is also planned on its
In order to enhance the cyber security Data Lake platform. These will be used by various
and cyber resilience framework and to improve operational departments of SEBI for surveillance,
the preparedness of the market infrastructure investigations and inspections on the one hand and

10
 Chapter - 1 : Introduction

policy-making and processing of applications on the processes in the market. The aim, going forward,
other. is to enhance the overall integrity, standardization,
To enhance its cyber security preparedness, quality and availability of data in Indian securities
SEBI will conduct Enterprise wide Vulnerability market. This would cover data across major segments
Assessment and Penetration Testing (VAPT) for all its viz. primary and secondary markets in equity and
IT systems. Further, SEBI will also perform external debt as well as for mutual funds.
Penetration Testing of public domain websites of MIIs Unified Securities Market Code
and select securities market intermediaries in order Union budget 2021-22 made an important
to proactively advise these entities on strengthening
announcement to come out with a unified securities
their cyber security.
market code. This will consolidate SEBI Act, 1992,
SEBI will be overhauling its existing IT network SCRA, 1956, Depositories Act, 1996 and Government
infrastructure which includes network devices, IP Securities Act, 2006 into a single Securities Market
telephony, wireless solutions etc. across its Head Code. A single Securities Market Code will be
office, Regional offices and Local offices. helpful in ease of doing business by stating all
In order to usher innovations in the securities required compliances in one code. It will also aid in
market not only in terms of technology but also in effective enforcement by harmonizing and removing
the area of new processes, legal and procedural ambiguities and duplications in different Acts.
improvements, SEBI is poised to broad-base Over the period, SEBI has been suggesting various
the regulatory sandbox regulations and suggest amendments in these Acts to the Government.
appropriate provisions in the SEBI Act, to the SEBI look forward to an early finalization of this
Government. Code and will provide all the required inputs to the
Government in this regard.
Investor Awareness Activities
SEBI plans to enhance its investor awareness Securities Market Virtual Museum

activities in the coming year through the Securities Indian securities market has a long standing
Market Trainers (SMARTs) programme. SEBI will history dating back to the 19th century. Records of
continue with media campaigns to spread investor this eventful journey are scattered across various
awareness messages in various languages, across sources. As time passes, these records, treasured
the country. Special emphasis will also be given to experiences, memories and lesser-known facts about
spreading awareness about commodities derivatives significant events which shaped our capital markets
especially in the farming community. will fade, if not archived.
Integrated Data for Securities Market SEBI has initiated a project on Virtual Museum
With the growth and diversification of Indian of Indian securities market which intends not only
securities market, the volume and variety of data to preserve records of historical importance, but also
has also increased manifold over the years and create curiosity among stakeholders, researchers,
will continue to do so. Accordingly, in order to and students; inculcate awareness in the public and
enhance the ease of access and usability of data on demystify the world of stock markets to potential
Indian securities market, SEBI, under the guidance investors of tomorrow. The project of having
of its Market Data Advisory Committee (MDAC), a Museum in a virtual form will transcend the
a standing committee set up by SEBI last year, has limitation of physical space as any visitor with an
started examining various data groups and data internet connection will be able to access it.

11
Securities and Exchange Board of India Annual Report : 2020-21

CHAPTER TWO:
Review of Financial Markets

T
he world continues to suffer from the developing economies saw their growth rate falling
COVID-19 pandemic which was declared from 3.6 per cent in 2019 to -2.2 per cent in 2020.
as public health emergency of international The year 2020 tested the fiscal resilience of
concern on January 30, 2020 subsequently as a most of the economies, with fiscal stimulus packages
pandemic on March 11, 2020. Onset of the pandemic becoming need of the hour. The recession impact
in 2020 posed multipronged economic and financial was made less severe with most economies taking
stability challenges across the economies. To soften swift actions with central banks providing liquidity
the disruptions, monetary and fiscal authorities and supporting the credit extension to vulnerable
around the world launched large scale stimulus borrowers. Further, the fiscal stimulus packages
measures to ease financial conditions, reduce stress announced by governments ensured the needed
and to support smooth functioning of financial relief to households and corporates in the form of
markets and overall economy. cash transfers and wage subsidies.

In India, Reserve Bank of India (RBI) took many

The global economy plunged into the worst
steps during 2020-21 to ease the liquidity conditions
recession since Great Depression owing to the
impact of shutdowns across jurisdictions to contain in the system and support the growth in the various

the spread of COVID-19. The global output of 2020 sectors of the economy. During 2020-21, RBI reduced

contracted sharply by 3.3 per cent with slowdown repo rate by 40 basis points to four per cent and was

pervading across all regions comparing with the 2.8 held low till March 2021. Further, RBI extended the
per cent growth level in 2019. Advanced economies three-month moratorium on repayment of loans to
were especially hit hard by the pandemic and banks by another three months till August 31, 2020.
faced prolonged lockdowns amid higher spread. RBI also provided `50,000 crore special liquidity
According to International Monetary Fund (IMF) facility for mutual funds and `50,000 crore special
estimates, the output of advanced economies shrunk finance facility for National Bank for Agriculture
by 4.7 per cent in 2020 as compared to the growth of Rural Development, Small Industries Development
1.6 per cent during 2019. The emerging markets and Bank of India and National Housing Bank.

12
 Chapter - 2 : Review of Financial Markets

Table 2.1: Global Trends in Economic Growth (Per cent)

Particular 2019 2020 2021#

World Output 2.8 –3.3 6
A. Advanced Economies 1.6 –4.7 5.1
i. United States 2.2 –3.5 6.4
ii. Euro Area 1.3 –6.6 4.4
B. Emerging Market and Developing Economies 3.6 –2.2 6.7
i. Emerging and Developing Asia 5.3 –1.0 8.6
China 5.8 2.3 8.4
India## 4 –8.0 12.5
ii. Russia 2 –3.1 3.8
iii. Brazil 1.4 –4.1 3.7
iv. Mexico –0.1 –8.2 5
v. South Africa 0.2 –7.0 3.1
General Government Fiscal Balance Overall
World -3.6 -10.8 -9.2
Advanced Economies -2.9 -11.7 -10.4
i. Japan -3.1 -12.6 -9.4
ii. United States -5.7 -15.8 -15
Emerging Market and Developing Economies -4.7 -9.8 -7.7
i. China -6.3 -11.4 -9.6
ii. India -7.4 -12.3 -10
iii. Brazil -5.9 -13.4 -8.3
iv. South Africa -5.3 -12.2 -10.6
World Trade Volume (goods and services) 0.9 –8.5 8.4
Consumer Prices 1.4 0.7 1.6
a. Advanced Economies 1.4 0.7 1.6
b. Emerging Market and Developing Economies 5.1 5.1 4.9
Note: # IMF forecast for 2021, ## Figures for India corresponds to 2019-20, 2020-21 and 2021-22, respectively.
Source: World Economic Outlook, April 2021, IMF

2.1 GLOBAL SECURITIES MARKET

The pandemic resulted in global market trillion, breaching the USD 100 trillion mark for the
meltdown with volatility in March 2020 reaching first-time in November 2020. All regions witnessed
the levels of global financial crisis. However, by July an increase in market capitalisation with Americas
2020, most markets regained their pre-pandemic registering a 21.7 per cent increase, as Nasdaq and
levels. The stock market capitalisation world-wide New York Stock Exchange added 46.6 per cent and
suffered a 20.7 per cent fall in first quarter of 2020, 12.5 per cent to their respective market capitalisation
only to recover quickly in the following months. As during 2020. The Asia-Pacific (APAC) and Europe,
compared to 2019 year-end, market capitalisation Middle East and Africa (EMEA) region saw an
was up by 17 per cent in 2020 reaching USD 109.2 increase of 15 per cent and 10.1 per cent, respectively.

13
Securities and Exchange Board of India Annual Report : 2020-21

Despite the uncertainty and gloom wrought high of 46.3 billion contracts registering an annual
by the pandemic, globally there was an increase increase of 43 per cent as compared to 2019. The
of 23.1 per cent in initial public offers (IPOs) in uptrend was driven by higher volumes of exchange
2020 relative to 2019. The value of IPOs in 2020, a traded options contracts.
historic high in past ten years, was boosted by The single stock options volumes traded in
rebound in equity valuations and emergence of Americas, a region which represents almost 89
special purpose acquisition companies (SPAC) and per cent of the global volumes of options, saw
direct listing as a faster route for public listing in phenomenal growth of 80.7 per cent in 2020, while
US. Globally, prominent IPOs were issued by high single stock futures volumes mainly driven by B3
quality companies representing diverse sectors like – Brasil Bolsa Balcão in the Americas, recorded a
cloud computing, biotech, healthcare, consumer tech spectacular 99.3 per cent increase in 2020 compared
etc. New listings (by value) in all the regions picked with 2019.
up, with Americas region recording a 76.9 per cent
The stock index options constituted the largest
jump followed by APAC region viewing a 51.5 per
share by volume traded amongst all derivatives,
cent uptickand EMEA registering a decline of 32.1
with an overall increase in volume by 42.9 per cent in
per cent in listings. The average size of an IPO also
2020 as compared to 2019. The APAC region which
increased to USD 187.2 million in 2020 from USD
accounts for majority of the volumes in stock index
169.2 million in 2019.
options saw an increase of 52.3 per cent, mainly
The number of non-IPO listings increased by contributed by NSE.
21.1 per cent in 2020, dominantly driven by APAC
A tumultuous foreign exchange market led to
region where 86 per cent of the non-IPO listings took
higher volumes in currency derivatives contracts
place. The number of non-IPO listings in Americas
with currency options witnessing a decline
also witnessed an increase while EMEA region saw a
and currency futures witnessing an upswing
significant decline of almost 71 per cent as compared
in the global markets resulting an increase of
to 2019.
1.8 per cent.
After the slowing trading activity seen in
With expansionary monetary policy becoming
2019, the year 2020 saw record levels of value and
the de jure for central banks across the world, interest
volume traded in securities markets. The value of
rates were at their lowest across countries. This
share trading during the year stood at a staggering
had led to a fall in trading activity in interest rate
USD 137.6 trillion with 38 billion number of trades
derivatives, with volume of interest rate options and
globally. The value traded increased by 53.7 per cent
futures falling in all the three regions.
while the volume traded increased by 56 per cent.
After an initial shock in prices of commodities,
Due to highly uncertain market conditions
the commodities prices firmed up as global supplies
owing to the pandemic, there was a heavy reliance
and pent-up demand weighed on the prices. The
on derivatives products, which drove the global
second half of 2020 saw broad-based price increase
exchange traded derivatives volumes to their record
in energy, base metal and agriculture commodities.
levels.
This led to rise in trade activity in the commodity
Derivatives trading increased for almost all derivatives, with commodity futures volumes
contract types and regions in 2020 vis-à-vis 2019. increasing by 36.6 per cent and commodity options
Total derivatives contracts traded reached a record increased by 23.8 per cent in 2020 over 2019.

14
 Chapter - 2 : Review of Financial Markets

Table 2.2: Global Trends in Primary and Secondary Markets

2019 2020
Particulars
Americas APAC EMEA Total Americas APAC EMEA Total

Number of IPOs 265 778 164 1206 287 945 253 1,485

Resources Raised through IPOs

52 99 53 204 92 150 36 278
(USD billion)

Number of Non-IPO listings 78 1,075 157 1,310 178 1,365 46 1,587

Resources Raised through Non-IPO

92 233 110 434 134 340 177 651
listings (USD billion)

Global Stock Market Capitalisation

40,855 31,201 21,451 93,328 49,730 35,869 23,608 1,09,206
(USD billion)

Number of Trades ('000s) 67,19,023 1,59,58,757 20,28,766 2,42,74,537 1,13,24,162 2,34,74,776 32,21,188 3,80,20,126

Value of Shares Traded (USD billion) 45,125 32,365 11,423 88,914 73,457 50,285 13,892 1,37,634

Source: World Federation of Exchanges

Table 2.3: Global Trends in Derivatives Markets (Millions of contracts)

2019 2020
Particulars
Americas APAC EMEA Total Americas APAC EMEA Total
Equity Derivatives
Single Stock Options 3,463 395 322 4,180 6,257 465 324 7,046
Single Stock Futures 28 948 722 1,698 371 1,461 1,552 3,384
Single Index Options 683 5,096 520 6,299 708 7,760 531 8,999
Single Index Futures 2,372 956 828 4,155 4,492 1,247 989 6,729
Interest Rate Derivatives
Interest Rate Options 700 2 174 876 531 1 125 658
Interest Rate Futures 2,457 250 966 3,673 2,183 228 891 3,302
Commodity Derivatives
Commodity Options 159 42 63 265 163 104 60 328
Commodity Futures 1,070 4,118 1,359 6,548 1,074 6,206 1,663 8,942
Currency Derivatives
Currency Options 23 1,246 64 1,335 17 777 64 858
Currency Futures 721 1,117 580 2,420 1,123 875 964 2,963
Source: World Federation of Exchanges

15
Securities and Exchange Board of India Annual Report : 2020-21

2.2 INDIAN SECURITIES MARKET due to unprecedented FPI investment outflows

induced by the COVID-19 pandemic. The Indian
After witnessing a turbulent month of March
rupee subsequently appreciated in line with
2020, Indian equity market made a sharp V-shaped
other emerging market currencies, led by strong
recovery in sync with global markets on the back of
FPI investment inflows, as risk appetite returned
massive fiscal and monetary stimulus and gradual
for emerging market assets amidst pick-up in
easing in COVID-induced restrictions. Sensex and
economic activity, progress on vaccine discovery
Nifty reached their all-time peak in February 2021
and easing of early COVID-19 related restrictions.
on back of robust corporate performance, low
FPIs made net investment of `2.7 lakh crore in the
funding cost and strong foreign portfolio investor
Indian securities market during 2020-21. This is the
(FPI) investment inflows.
second highest yearly investment by FPIs in India
The rally however, was interrupted after record net inflows of `2.8 lakh crore in 2014-15.
intermittently by a surge in the US treasury yields, In 2020-21, there was also an increase in
rise in crude oil prices and fresh spikes in COVID-19 resources mobilization from the primary market.
cases in certain Indian states due to 2nd wave During 2020-21, a total of `10,12,214 crore was
towards the end of the year. At the end of 2020-21, raised from Indian markets as against `9,96,013
Sensex and Nifty posted a positive return of 68 per crore in 2019-20 (Table 2.4). Corporates mobilised
cent and 70.9 per cent respectively, after witnessing higher resources from the corporate bond market
a fall of 23.8 per cent and 26 per cent, respectively (77.3 per cent) to seize the benefit of lower costs.
during 2019-20. Private placements remained the preferred choice
Indian Rupee depreciated to touch a historical for corporates, accounting for 98.8 per cent of total
low of 76.91 on an intra-day basis on April 22, 2020 resources mobilised through the corporate bonds.

Table 2.4: Total Fund Mobilisation in Indian Capital Market (Amount in ` crore)

2019-20 2020-21
Particular
No. of Issues Amount No. of Issues Amount

A. Equity 377 3,06,327 344 2,29,786

IPOs 60 21,345 55 31,030

FPOs 2 37 2 15,030

Rights Issue 17 55,670 21 64,059

QIPs 14 54,389 31 78,738

Preferential Allotments 284 1,74,886 235 40,930

B. Debt 1,821 6,89,686 2,013 7,82,428

Public 34 14,984 18 10,588

Private Placement 1,787 6,74,702 1,995 7,71,840

Total (A+B) 2,198 9,96,013 2,357 10,12,214

Source: BSE, NSE

16
 Chapter - 2 : Review of Financial Markets

In terms of number of trades in equity shares make their mark in the top ranked equity derivatives
during 2020, NSE ranked 4 globally, preceded by
th
exchanges but also in commodities segment wherein
its Asian peers (viz. Shenzen, Korean and Shanghai the crude and natural gas futures contracts traded at
Stock Exchanges). Not only did Indian exchanges MCX.

Table 2.5: Ranking of India’s Stock Exchanges among the Global Derivatives Exchanges

Product Exchange Global Rank

Single Stock Options NSE 6

Single Stock Futures NSE 4

Single Index Options NSE 1

Single Index Options India International Exchange 7

Stock index Futures NSE 8

Interest rate Options NSE 8

Interest rate Futures NSE 10

Currency Options NSE 1

Currency Futures NSE 3

Commodity Options MCX 10

Commodity Futures MCX 7

Source: World Federation of Exchanges

Table 2.6: Global Ranking of Derivatives Contracts Traded on India’s Stock Exchanges

Product Exchange Global Rank

Bank Nifty Index Options NSE 1

CNX Nifty Index Options NSE 2

USD/INR Options NSE 1

USD/INR Futures NSE 4

USD/INR Options BSE 5

Source: World Federation of Exchanges

17
Securities and Exchange Board of India Annual Report : 2020-21

CHAPTER THREE:
Primary Market

3.1 EQUITY MARKETS to these changes were notified on September

28, 2020. The key amendments to SEBI ICDR
A. Policy Developments
Regulations include:
Primary market is an avenue for resource
i. Truncated disclosures by issuers complying
mobilization and capital formation in the country
with the following eligibility conditions:
as it brings together investors seeking investment
opportunities and issuers seeking to mobilize • where the issuer has been filing periodic
resources to finance their investments. A well- reports/ statements/ information in
developed primary market is fundamental for an compliance with Listing Regulations as
economy to prosper. There are various elements applicable, for last one year;
involved in ensuring vibrant and resilient primary • where three years have passed after
markets such as ease of capital raising and change in management pursuant
restructuring, investor protection and ensuring to acquisition of control or listing
timeliness of disclosures among others. This section consequent to a scheme of arrangement.
throws light on the policy measures initiated in these
ii. Issuers not satisfying above eligibility
areas, during the financial year 2020-21.
conditions shall make more detailed
I. CAPITAL RAISING disclosures as laid down vide this amendment
in ICDR regulations. These detailed disclosures
a. 
Rationalization of Eligibility Criteria and
are however, less exhaustive than the previous
Disclosure Requirements for Rights Issues
requirements.
SEBI rationalized eligibility and disclosure
iii. Threshold for filing draft letter of offer with
requirements relating to rights issues to make
SEBI for rights issues for observations was
the fund raising through this route, easier, faster
increased from `10 crore to `50 crore.
and cost effective. Amendment to SEBI(Issue
of Capital and Disclosure Requirements) iv. Relaxation from mandatory minimum
Regulations, 2018 (ICDR Regulations) pursuant subscription of 90 per cent for rights issue

18
 Chapter - 3 : Primary Market

where object of the issue involves financing Entities going through Corporate Insolvency
other than financing of capital expenditure for Resolution Process
a project. For companies which undergo corporate
v. Eligibility for making a fast track rights issue insolvency resolution process (CIRP) and
was relaxed in case of pending show-cause continue to remain listed pursuant to
notices for enforcement proceedings involving implementation of the approved resolution
imposition of monetary penalty, prosecution plan, SEBI in its board meeting held on
and audit qualification, subject to necessary December 16, 2020 decided that such
disclosures along with potential adverse companies will be mandated to have at least
impact on the issuer being made in the letter of five per cent public shareholding at the time of
offer. their admission to dealing on stock exchange,
as against no minimum requirement at present.
b. 
Relaxations for Listed Companies having
Further, such companies would be required to
Stressed Assets
bring the public shareholding to at least 10 per
SEBI granted relaxation to listed companies cent within a period of 12 months and 25 per
having stressed assets with respect to pricing cent within 36 months. Vide amendment dated
methodology for preferential issues. Allottees January 08, 2021 to SEBI (Listing Obligations
of preferential issues were also exempted from and Disclosure Requirements) Regulations,
open offer obligations if the acquisition is 2015 (LODR Regulations), additional
beyond the prescribed threshold or if the open disclosures were mandated such as specific
offer is warranted due to change in control, details of resolution plan, details of assets
in terms of SEBI (Substantial Acquisition post-CIRP, details of securities continuing to
of Shares and Takeovers) Regulations, be imposed on the company’s assets and other
2011 (SAST Regulations). Amendment in material liabilities imposed on the company,
ICDR Regulations, 2018 pursuant to these proposed steps to be taken by the incoming
changes were notified on June 22, 2020. investor/acquirer for achieving the minimum
These relaxations made fund raising through public shareholding (MPS) and quarterly
preferential allotments relatively easier for disclosure of the status of achieving the MPS
stressed companies. etc.
c. 
Relaxation in Cooling Off Period between e. 
Relaxation in the Minimum Promoter’s
Two Qualified Institutional Placement Issues Contribution and the subsequent Lock in
Vide amendment dated June 16, 2020 to ICDR Requirements for Further Public Offer
Regulations, the cooling off period between Vide amendment dated January 08, 2021 to
two qualified institutional placements (QIPs) ICDR Regulations, applicability of minimum
was relaxed from six months to two weeks. promoters' contribution and the subsequent
The relaxation will facilitate listed entities to lock in requirements for further public offer
quickly access funds from capital markets, as of specified securities was done away with,
and when the need arises. subject to fulfilment of the following:

d. 
Recalibration of Threshold for Minimum a. where the issuer does not have an
Public Shareholding Norms for Listed identifiable promoter;

19
Securities and Exchange Board of India Annual Report : 2020-21

b. equity shares of the issuer are frequently to companies in view of the evolving start-up
traded on a stock exchange for a period ecosystem.
of at least three years;
The key proposals approved by the SEBI Board
c. issuer has been in compliance with the are as follows -
LODR Regulations, for a period of at
• Present eligibility requirement under
least three years; and
IGP, for issuer to have 25 per cent of pre-
d. the issuer has redressed at least 95 per
issue capital held by eligible investors for
cent of the complaints received from the
two years period, is reduced to one year.
investors.
• The term ‘Accredited Investor’ for the
f. Relaxations in Minimum Public Offer
purpose of IGP is renamed as ‘Innovators
Requirements for Large Issuers
Growth Platform Investors’. Pre-issue
In terms of Securities Contracts (Regulation) shareholding of such investors for
Rules, 1957 (SCRR), issuers with post issue meeting eligibility, is considered for only
market capital of at least `4,000 crore or more,
10 per cent, is now increased and shall
were required to offer to public at least 10 per
be considered for the entire 25 per cent
cent of its post issue market capital (minimum
required for meeting eligibility norms.
public offer- MPO). Further, such issuers were
also required to achieve a MPS of at least 25 per • In terms of present IGP provisions,
cent within three years from the date of listing. issuer company is not permitted to make
discretionary allotment. It had been
SEBI Board in its meeting dated February 17,
decided to allow issuer company to
2021 recommended changes in the SCRR, such
allocate up to 60 per cent of the issue size
that for issuers with post issue market capital
on a discretionary basis, prior to issue
exceeding `1,00,000 crore, the requirement of
opening, to eligible investors with a lock
MPO be reduced from 10 per cent of post issue
market capital (existing provision) to `10,000 in of 30 days on such shares.

crore + 5 per cent of the incremental amount • In line with the provisions of main board
beyond `1,00,000 crore. Further, these issuers IPO, issuer companies which had issued
shall be required to achieve at least 10 per cent superior voting rights equity shares to
public shareholding in two years and at least promoters / founders shall be allowed to
25 per cent public shareholding within five
list under IGP framework.
years from the date of listing.
• For companies listed under IGP
g. 
Revamp of Framework of Innovators Growth
framework, stipulation for triggering
Platform
open offer under Takeover Regulations,
SEBI Board in its meeting dated March 25, 2011, had been relaxed from existing
2021 approved the proposals with respect to 25 per cent to 49 per cent. However,
framework of Innovators Growth platform irrespective of acquisition or holding
(IGP) under ICDR Regulations, with an of shares or voting rights in a target
objective to make the platform more accessible company, any change in control directly

20
 Chapter - 3 : Primary Market

or indirectly over target company will requirement is now reduced to 50 per

trigger open offer. cent.

• Delisting under IGP framework shall be h. Reduction in Time Period for Unblocking/
considered successful if the post offer Refund of Application Money
acquirer/promoter shareholding, taken Vide circular dated March 31, 2021, time period
together with the shares tendered and for unblocking /refund of application money
accepted, reaches 75 per cent of the total was reduced from 15 days to four days from
issued shares of that class and at least 50 closure of the issue in case of non-receipt of
per cent shares of the public shareholders minimum subscription, and from seven days
are tendered and accepted. to four days in case the issuer fails to obtain
listing or trading permission from the stock
• Further, for delisting under IGP exchanges where the specified securities were
framework, the reverse book building to be listed.
mechanism shall not be applicable and
i. Social Stock Exchange
for computation of offer price, the floor
price will be determined in terms of In the financial year 2019-20, pursuant to
Takeover Regulations, 2011, along with announcement made by Hon’ble Finance
delisting premium as justified by the Minister in her budget speech, SEBI had
acquirer/promoter. constituted a Working Group (WG) on Social
Stock Exchange (SSE). The WG finalized its
• Presently for a company not satisfying report which was made available for public
the conditions of profitability, net assets, comments on June 01, 2020. In order to
net worth etc., migration from IGP operationalize the recommendations of the WG,
to main board requires a company to before comprehensively firming up views in the
have 75 per cent of its capital held by matter, SEBI constituted a Technical Group (TG)
qualified institutional buyers (QIBs) as on SSE. A brief on the recommendations of the
on date of application for migration. This WG and TG, are provided at Box Item 3.1.

21
Securities and Exchange Board of India Annual Report : 2020-21

Box Item 3.1: Social Stock Exchange

The Working Group on Social Stock Exchange was constituted under the Chairmanship of Shri. Ishaat
Hussain to examine and make recommendations with respect to possible structures and mechanisms, within
the securities market domain, to facilitate raising of funds by social enterprises and voluntary organizations.
The WG consisted of representatives of the stakeholders active in the space of social welfare, social impact
investing, representatives from Ministry of Finance, the stock exchanges and NGOs. Pursuant to consultations
with various stakeholders, the WG finalized its report which was made available for public comments on
June 01, 2020.

In order to operationalize the recommendations of the WG and to bring clarity on certain critical
issues, SEBI constituted a Technical Group on SSE under the Chairmanship of Dr. Harsh Kumar Bhanwala
(Ex-Chairman, NABARD) in September, 2020. The terms of reference for the TG included building upon
the recommendations of the WG and developing framework for on boarding Non-Profit Organisations
(NPOs) and for Profit Social Enterprises (FPEs) on the SSE, prescribing disclosure requirements relating
to financials, governance, operational performance and social impact. TG was also tasked with providing
recommendations on matters relating to social auditors, their scope of work, and eligibility criteria. Several
meetings of the Technical Group were held, including consultations with various stakeholders, during the
year.

Some of the key recommendations of the WG and TG on the SSE include the following:

(i) A social enterprise, For Profit Enterprise and Not for Profit Organisation, to qualify for participation
on the Social Stock Exchange , should be able to demonstrate that social intent and impact are its
primary goals.

(ii) Two new means of raising finance for NPOs have been recommended namely, Zero Coupon Zero
Principal Bond (ZCZP) and Development Impact Bond under the securities market domain.

a. 
ZCZP: Innovative means of finance in the form of Zero Coupon Zero Principal Bond (ZCZP) for
non-profit organisations was recommended. ZCZP bonds are envisaged to be issued by NPOs
for a specific social development project. ZCZP have zero coupon and while having no principal
payment at maturity will have to show “social return” of the social development project for
which the funds were raised.

b. 
Development Impact Bonds: These are structured finance products where upon completion of
a project that meets pre-agreed social metrics at pre-agreed costs/rates, the NPO receives grants
from the donor, who is called the “outcomes funder”. Since the outcomes funder provides
funding on a post facto basis, a “risk funder” provides the financing to the NPO through an
Alternative Investment Fund- Social Venture Funds (AIF-SVF) to fund the operations on a pre-
payment basis, and also undertakes the risk of non-delivery of social metrics by the NPO. The
risk funder is compensated through a small return if the social metrics are delivered.
(iii) Further, NPOs can continue to raise funds through existing means under securities market domain
such as Mutual Funds, AIF-SVF, equity (in case of Section 8 companies).

22
 Chapter - 3 : Primary Market

(iv) Regulations governing AIF-SVFs may be amended so as to reduce minimum corpus size from `20
crore to Rupees five crore, reduce minimum subscription from Rupees one crore to Rupees two lakh,
allow 100 per cent grants, grants out under SVFs, allow corporates to invest CSR funds into SVFs with
a 100 per cent grants-in, grants out model and change nomenclature of SVF to Social Impact Funds etc.

(v) In order to improve the ability of all stakeholders to navigate SSE, its process, instruments etc.
a Capacity Building Fund (CBF) may be housed in NABARD with other developmental agencies,
stock exchanges, philanthropic agencies etc. also to contribute. CSR funds should also be permitted to
contribute towards CBF.

(vi) Reputed firms/institutions having expertise in the area of social audit may be allowed to carry out
social audits, in the initial phase. Such institutions may employ social auditors who have qualified
certification course conducted by NISM. Social Auditors may be required to be empanelled with an
SRO which is proposed to be under ICAI as a separate Sustainability Directorate.

II. CORPORATE RESTRUCTURING iii. 

Amendments in SEBI (Substantial
i. 
Streamlining the processing of Draft Schemes Acquisition of Shares and Takeovers)
of Arrangement filed with the Stock Exchanges Regulations, 2011

Vide circular dated November 3, 2020, stock • Acquisitions through stock exchange
exchanges were empowered to return the settlement process through bulk and/
schemes which were non-compliant with or block deals were permitted during
securities laws. the open offer, subject to conditions
mentioned in regulation 22(2A) of SAST
The aforesaid circular also widened the scope
Regulations.
of the audit committee wherein it was required
to comment on the need for the proposed • In case of indirect acquisitions where
amalgamation, rationale of the scheme, public announcement of an open offer
synergies of business and the impact of the has been made, an amount equivalent to
scheme on the shareholders. Additionally, 100 per cent of the consideration payable
the circular mandated submission of a report under the open offer must be deposited
from the committee of independent directors two working days before the date of
recommending the draft scheme including detailed public statement. The escrow
that the scheme is not detrimental to the account shall continue to be in the form
shareholders. of cash and/ or bank guarantee.

ii. 
Master Circular for Schemes of Arrangement • In case of delays in making open offer
Filed with the Stock Exchanges attributable to the acts of omission or
commission of the acquirer, a simple
A master circular, which was a compilation
interest of ten per cent shall be paid to all
of seven circulars on schemes of arrangement
the shareholders who have tendered the
by listed entities,was issued on December 22,
2020. shares in the open offer.

23
Securities and Exchange Board of India Annual Report : 2020-21

• It was decided to grant exemption from a. Promoter / acquirer will be required
the reverse book building process for to disclose their intention to delist the
delisting of listed subsidiary, where it company by making an initial public
becomes the wholly owned subsidiary announcement.
of the listed parent pursuant to a scheme
b. The Committee of Independent Directors
of arrangement. To be eligible to take
will be required to provide their reasoned
this route, the listed holding company
recommendations on the proposal for
and the listed subsidiary should be
delisting.
in the same line of business. Both the
companies should be compliant with the c. 
Introduction / revision of time lines for
LODR Regulations, 2015, specifically, the completion of various activities forming
regulations pertaining to processing of part of delisting process, to make the
the schemes of arrangement. To protect process more efficient.
the interests of investors in the listed d. Promoter / acquirer will be permitted to
subsidiary, it was stipulated that the specify an indicative price for delisting
votes cast by public shareholders of the which shall not be less than the floor price.
listed subsidiary in favour of the proposal
e. Promoter will be bound to accept the price
will be at least two times the number of
discovered through reverse book building
votes cast against it, in line with the SEBI
if the same is equal to the floor price /
(Delisting of Equity Shares) Regulations,
indicative price.
2009 (Delisting Regulations). Further,
the shares of the parent listed company f. Elaboration of the role of merchant banker
and the listed subsidiary entity should involved in the delisting process.
be listed for at least three years, should III. 
MEASURES TAKEN IN THE EQUITY
not be suspended at the time of taking MARKETS IN THE BACKDROP OF
this route, and the subsidiary should COVID-19 PANDEMIC
have been a listed subsidiary of the listed
In the wake of COVID-19 pandemic, SEBI
holding entity for at least three preceding
and stock exchanges received several
years.
representations from companies, industry
iv. 
Revamp of SEBI (Delisting of Equity Shares) bodies and professionals requesting for certain
Regulations, 2009 relaxations in compliances under various SEBI
Given the revamp of substantial portion of Regulations. Keeping in mind the difficulties
the Delisting Regulations, it was decided that faced by listed entities and professionals, SEBI
Delisting Regulations, 2021 shall be notified granted certain temporary relaxations, gist of
to account for these changes. Some of the key which is given at Box Item 3.2 and details of
amendments are as under - which is given in the following paras.

24
 Chapter - 3 : Primary Market

Box Item 3.2: Measures Taken in the Equity Markets in the Backdrop of COVID-19 Pandemic

In the wake of challenges for the Indian economy arising out of the COVID-19 pandemic and with
a view to improving access to funding to the corporates through capital markets, to ease the compliance
burden on listed entities and to protect the interests of investors, certain temporary relaxations were granted
under various SEBI Regulations, in the following areas:

a. Capital raising through initial public offerings (IPOs), rights issue and preferential issue

i. Relaxations in respect of eligibility conditions, minimum subscription and procedural requirements

related to rights issues;

ii. Extension of validity of SEBI observations on offer documents;

iii. Introduction of greater flexibility in variation of issue size;

iv. Relaxations in respect of eligibility conditions for fast track follow-on public offers (FPOs);

v. Relaxations in pricing of preferential issue; and

vi. Relaxation in filling fees for public and rights issue.

b. Restructuring through takeovers and buybacks

i. Relaxations in threshold of creeping acquisition for promoters pursuant to a preferential allotment;

ii. Relaxation in conditions to voluntary open offer in case of purchase in previous 52 weeks by
acquirer / persons acting in concert (PAC);

iii. Relaxation in timelines for filing annual disclosures; and

iv. Reduction in timeline for raising further capital by a company to six months of expiry of buy-back
period from 12 months.

c.  ompliance with certain provisions of SEBI (Listing Obligations and Disclosure Requirements)
C
Regulations 2015 aimed at easing the compliance burden and facilitating conduct of business, through
measures such as:

i. Extension in filings of financial results and other reports;

ii. Flexibility in conducting general meeting and meetings of the Board & Board committees; and

iii. Exemption from sending physical copies of annual report / other forms.

a. Issue Related Measures • Eligibility Conditions for Fast Track Rights

Issue
i. Relaxations in respect of Rights Issue
Towards expanding the universe of listed
Vide circular dated April 21, 2020, following
entities for the purpose of fast track rights
temporary relaxations were introduced
issuances, following relaxations were given-
in the provisions related to rights issues
as contained in ICDR Regulations. These  Eligibility requirement of average market
relaxations were applicable until March 31, capitalisation of public shareholding from
2021. existing `250 crore to `100 crore.

25
Securities and Exchange Board of India Annual Report : 2020-21

 The requirement related to equity shares 2020, the validity of the SEBI observations
having been listed for at least three years expiring between October 01, 2020 and March
was relaxed to 18 months only. 31, 2021 was extended until March 31, 2021.

 The condition related to no audit iii. Flexibility on Issue Size

qualifications on issuer’s audited accounts Vide circular dated April 21, 2020, an issuer
was replaced with the requirement to was permitted to increase or decrease the
disclose the impact of audit qualifications fresh issue size by up to 50 per cent of the
on issuer’s financials. estimated issue size without being required
 Certain other eligibility conditions with to file fresh draft offer document with SEBI
respect to period of compliance with subject to conditions mentioned therein, until
the provisions of the listing regulations, December 31, 2020. Subsequently, vide circular
ongoing action initiated by SEBI against the dated September 29, 2020, the timeline for such
issuer / promoters / directors and settlement relaxation was further extended till March 31,
of violation of securities laws were also 2021.
relaxed. iv. 
Relaxations in Eligibility Conditions for Fast
• Minimum Subscription Requirement for Track Further Public Offer
Rights Issues Vide circular dated June 09, 2020, the eligibility
To provide greater flexibility in fund raising, conditions for fast track public offers opening
the threshold for minimum subscription on or before March 31, 2021 were relaxed. The
requirements for a rights issue was reduced requirement of average market capitalisation
from existing 90 per cent to 75 per cent of the of public shareholding of `1,000 crore was
offer size, subject to certain conditions. reduced to `500 crore. The  condition related
to impact of audit qualifications on the
• Minimum Threshold requirement for Rights
audited accounts of the issuer was replaced
Issue to File Draft Offer Document
with the requirement to disclose the impact
To reduce the time involved in fund raising of audit qualifications on issuer’s financials.
and ease compliance requirements, the existing Certain other eligibility conditions with respect
threshold to file draft offer document with to ongoing action initiated by SEBI against the
SEBI was increased in case of rights issue from issuer / promoters / directors and settlement of
`10 crore to listed entities raising funds up to violation of securities laws were also relaxed.
`25 crore.
v. 
Relaxations relating to Procedural Matters –
ii. 
One Time Relaxation with respect to validity In respect of Rights Issue
of SEBI Observations
Vide circular dated May 06, 2020, a one-time
Vide circular dated April 21, 2020, the validity relaxation was granted from strict enforcement
of SEBI observations, where the same had of the regulations of ICDR Regulations,
expired/would be expiring between March 01, pertaining to rights issue, opening upto July
2020 and September 30, 2020, was extended by 31, 2020. Issuers were permitted to serve the
six months from the date of such observation. abridged letter of offer and other issue material
Further, vide circular dated September 29, to shareholders by electronic means. Pursuant

26
 Chapter - 3 : Primary Market

to the introduction of dematerialized rights vii. 

Relaxation in Filing Fees for Public issue,
entitlements, SEBI also permitted the physical Right issue and Buy-back of shares
shareholders to submit their rights application
SEBI has been calibrating its fee structure
in physical form, in case they had not been
from time to time so as to keep a balance
able to open a demat account on account of
between the financial resources required to
the ongoing lockdown subject to stipulated
ensure regulatory efficiency and maintaining
conditions.
reasonableness of fees.
Further, in order to ensure that all eligible
Further, considering the developments relating
shareholders are able to apply to rights
to the COVID-19 pandemic and in view of the
issue during COVID-19 times, issuers were
stress on account of this crisis, with a view to
mandated to institute an optional mechanism
provide some financial relief to the participants
(non-cash mode only) to accept the applications
in capital markets, it was decided to reduce the
of the shareholders, subject to ensuring that
filing fees for a limited period. Accordingly, the
no third party payments shall be allowed in filing fees for all kinds of public issues, rights
respect of any application. issue and buy-back of shares was reduced by
Vide circular dated July 24, 2020, the aforesaid 50 per cent for the period from June 2020 to
provisions were further extended for rights December 2020.
issues opening up to December 31, 2020.
b. Corporate Restructuring
Additionally, vide circular dated January 19,
i. Relaxation in Regulation 3(2) of SAST
2021, the said mandate regarding an optional
Regulations, 2011
mechanism was further extended for rights
issues opening up to March 31, 2021. SAST Regulations allows an acquirer along
with persons acting in concert (PAC) holding
vi. 
Temporary Relaxation in Pricing of
25 per cent or more shares in a target company
Preferential Issues
to acquire additional shares in the target

Vide amendment in ICDR Regulations,
company up to five per cent within a financial
relaxation was granted and an additional
year without making an open offer. Limit of
option was provided to the existing pricing
five per cent was increased to 10 per cent for
methodology for preferential issuance. Issuers
acquisition, only in the form of preferential
were permitted to consider the average of
issue to promoters for 2020-21 without the
weekly high and low of the volume weighted
requirement of making the open offer, thereby
average price (VWAP) of the related equity enabling the companies to have infusion of
shares during the twelve weeks preceding the capital directly from the promoters. This
relevant date or the average of weekly high and relaxation provided flexibility to raise capital
low of the VWAP of the related equity shares in the wake of developments relating to
during the two weeks preceding the relevant COVID-19.
date subject to the lock in conditions stipulated
ii. 
Relaxation in Regulation 6(1) of SAST
therein. This additional pricing option was
Regulations, 2011
available in case of allotment by preferential
issue made till December 31, 2020. SAST Regulations provide that a voluntary

27
Securities and Exchange Board of India Annual Report : 2020-21

open offer can be made by an acquirer who Service of the letter of offer and/or tender form
along with PACs holds 25 per cent or more and other offer related material to shareholders
shares or voting rights in the company. may be undertaken by electronic transmission
However, if the acquirer / PAC acquired shares as already provided under Regulation 18(2)
of the company in the preceding 52 weeks, he of the SAST Regulations and Regulation 9(ii)
is not eligible to make a voluntary open offer. of Buy-back Regulations, subject to certain
requirements.
Due to the COVID-19 pandemic, the stock
prices of the companies across all geographies v. Relaxation in Disclosure Filings

had fallen. The voluntary open offers provide The disclosure filings under Regulations
temporary support to the falling prices and 30(1), 30(2) and 31(4) of the SAST Regulations,
create demand. Therefore, this restriction was require the shareholders to submit to the
temporarily relaxed for 2020-21 so as to permit company and the stock exchanges their
voluntary open offers, even if acquirer/ PAC aggregate shareholding and voting rights as
purchased shares in the preceding 52 weeks. of the thirty-first day of March and whether
any encumbrance, directly or indirectly, made
iii. 
Relaxation in Regulation 24(i)(f) of Buy-Back
during the financial year respectively within
Regulations, 2018
seven working days from the end of the
Regulation 24(i)(f) of SEBI (Buy-back of financial year. These reports as per the 2020
Securities) Regulations, 2018 (Buy-back calendar were required to be filed by April 15,
Regulations) provides that the companies shall 2020. Due to the prevailing travel restrictions
not raise further capital for a period of one year and various other logistical challenges,
from the expiry of buyback period, except in temporary relaxations were provided by
discharge of their subsisting obligations. It was extending the due date of filing disclosures,
represented that the said period of one year in terms of Regulations 30(1), 30(2) and 31(4)

may be reduced to six months, which would of the SAST Regulations for the financial year

be in line with section 68(8) of the Companies ending March 31, 2020 to June 01, 2020.

Act, 2013. In order to enable relatively quicker c. Listing Compliance Related

access to capital, SEBI temporarily relaxed the i. 
Relaxations in Submission of Financial
period of restriction provided in Regulation Results
24(i)(f) of the Buy-back Regulations from ‘one
• The timeline for submission of financial
year’ to ‘six months’, till December 31, 2020.
results for the quarter and the year
iv. Relaxations relating to Procedural Matters ended March 31, 2020 was extended by
One time relaxations were granted from two months to July 31, 2020 from May 31,
strict enforcement of certain regulations of 2020.

SAST Regulations and Buy-back Regulations • Timeline for submission of financial

pertaining to open offers and buy-back tender results for the quarter ended June 30,
offers,opening up to July 31, 2020. These 2020 was extended by one month to
relaxations were further extended up to September 15, 2020, from August 15,
December 31, 2020. 2020.

28
 Chapter - 3 : Primary Market

• Listed companies which are banking • Extension had been granted for
and / or insurance companies or having conducting Nomination and
subsidiaries which are banking and / or Remuneration Committee meeting,
insurance companies, were permitted to Stakeholder Relationship Committee
submit standalone financial results for meeting and Risk Management
quarter ending June 30, 2020 instead of Committee meeting till June 30, 2020,
consolidated financial results, along- which were due to be conducted by
with reasons for the same. March 31, 2020.]
ii. Relaxation in Submission of Reports iv. 
Relaxation in Conduct of Annual General
• Filing of quarterly shareholding pattern Meetings
and quarterly statement on investor
The timeline for holding Annual General
complaints for which due date was April
Meetings (AGMs) by top 100 listed entities (by
21, 2020 was extended by approximately
market capitalisation), whose financial year
three weeks to May 15, 2020.
ended on March 31, 2020, was extended by
• Filing of quarterly corporate governance one month till September 30, 2020 in place of
report for which due date was April 15, August 31, 2020. Further, the top 100 entities
2020 was extended by one month to May whose financial year ended on December 31,
15, 2020. 2019 were also permitted to hold their AGMs
• Submission of annual secretarial by September 30, 2020.
compliance report for which due date
v. 
Relaxation in Minimum Public Shareholding
was May 30, 2020 - extended by one
Compliance
month to June 30, 2020.
Stock exchanges / depositories were advised
• Submission of half-yearly compliance
not to take any penal action, such as levy of
certificate on share transfer facility and
fines, freezing of promoter holding etc., for
half-yearly compliance certificate from
listed entities where the deadline to comply
practicing Company Secretary on timely
with MPS requirements was due in the period
issue of share certificates for which due
from March 01, 2020 to August 31, 2020.
date was April 30, 2020 - extended by one
month to May 31, 2020. vi. Relaxation in sending Physical Copies

iii. 
Relaxation in Meetings of the Board of • The requirement of sending hard copy of
Directors / its Committees of listed entities statement containing the salient features

• Relaxation was provided on the of all the documents to the shareholders

maximum time gap of 120 days required who have not registered their email
between two Board / Audit Committee addresses and hard copies of full annual
meetings for the period December 01, reports to those shareholders, who
2019 and July 31, 2020. However, the request for the same was dispensed with,
board / Audit Committee were required for listed entities that conducted their
to ensure that they meet at least four AGMs during the calendar years 2020
times a year. and 2021.

29
Securities and Exchange Board of India Annual Report : 2020-21

• The requirement of sending proxy forms penalty on listed entities for any delay in
to holders of securities (mentioning intimating to stock exchange regarding loss
that a holder may vote either for or of share certificate and issue of duplicate
against a resolution) was dispensed certificates, beyond two days.
with temporarily, in case of AGMs held d. Requirement of five days prior intimation to
through electronic mode during the stock exchanges about board meetings, where
calendar years 2020 and 2021. certain specified items are to be discussed, was
• The requirement of sending ‘payable-at- reduced to two days for meetings held till July
par’ warrants or cheques for dividends 31, 2020.
through speed post was made applicable e. Listed entities were allowed to use digital
upon normalization of postal services. signature certifications for authentication /
However, in cases where email addresses certification of filings / submissions made
of shareholders are available, listed under the LODR Regulations, to the stock
entities were required to endeavour to exchanges till December 31, 2020.
obtain their bank account details for
IV. ADVISORY COMMITTEES
electronic modes of payment.
The Primary Market Advisory Committee
• Relaxation from publication of
(PMAC) continued its deliberations all through the
advertisements such as notice of the
year, despite challenges of COVID-19 pandemic. In
board meeting, financial results etc. in
the current year, three virtual meetings of PMAC
newspapers, for all events scheduled till
were held wherein thirteen policy issues were
June 30, 2020.
discussed. Also, twelve policy issues were discussed
vii. 
Other Extensions and Relaxations pertaining through circulation over email.
to LODR Regulations, and Circulars Issued
B. Market Activity and Trends Observed
thereunder
Fund raising during 2020-21 was comparatively
• The date for compliance with Stewardship
better than that in 2019-20 for both public issues and
Code for all mutual funds and all categories
rights issues, despite the overall gloomy economic
of alternative investment funds was
condition prevailing in the 2020-21 owing to
extended from April 01, 2020 to July 01,
COVID-19 pandemic. Though the number of IPOs
2020.
listed during 2020-21 decreased as compared to
• Implementation of SEBI circular dated 2019-20, the average size of the IPOs increased to
January 22, 2020 on revised ‘Standard `564.2 crore during 2020-21 as against `355.8 crore
Operating Procedure’ (SOP) for imposition
in 2019-20. Further, there were 33 mega issues in
of fines and other enforcement actions for
2020-21 as compared to 17 mega issues in 2019-20.
non-compliances with provisions of the
Apart from IPOs, during 2020-21, the amount raised
LODR Regulations, was extended till the
through rights issue was higher compared to that
compliance period ending on and after June
previous year. During 2020-21, Reliance Industries
30, 2020, in place of March 31, 2020. The
Limited raised `53,124.2 crore through right issues.
SOP circular dated May 03, 2018 continued
The largest public issues in 2020-21 were for `15,000
to be applicable till June 30, 2020.
crore by Yes Bank Ltd (FPO) and for `6,479.6 crore
• Relaxation was granted from levying by Gland Pharma Limited (IPO).

30
 Chapter - 3 : Primary Market

a. 
Resource Mobilisation through Public and The number of IPOs declined to 55 in 2020-21
Rights Issues as against 60 in 2019-20. However, the number of
rights issues increased from 17 in 2019-20 to 21 in
During 2020-21, `46,059.7 crore and `64,058.6
2020-21. Further, there were only two FPOs in 2020-
crore was raised through public issues and
21. Of the total resources mobilized in 2020-21, 41.8
rights issues respectively as against `21,382.4
per cent was through public issues and the remaining
crore and `55,669.8 crore raised during previous
58.2 per cent through rights issues whereas 27.7 per
year. 78 companies accessed securities market
cent of resources mobilized in 2019-20 was through
through public and rights issues in 2020-21 as
public issues and 72.3 per cent through rights issues
compared to 79 companies in 2019-20.
(Table 3.1).

Table 3.1: Resource Mobilisation through Public and Rights Issues (Amount in ` crore)

Percentage Share in Total

2019-20 2020-21
Particulars Amount Raised

No. Amount No. Amount 2019-20 2020-21

1) Public Issues, of which 62 21,382.35 57 46,059.73 27.75 41.83

A) IPOs of which 60 21345.11 55 31,029.71 27.70 28.18

a) OFS* Component 5 5644.59 6 6757.62 7.33 6.14

b)
Fresh Issue 43 1248.08 25 1086.32 1.62 0.99

c) Both (OFS+ Fresh Issue) 12 14452.44 24 23185.77 18.76 21.06

Breakup of Both (OFS+ Fresh Issue) (in crore)

OFS - 12703.88 - 14761.73 16.49 13.41

Fresh - 1748.56 - 8424.04 2.27 7.65

B) FPOs 2 37.24 2 15,030.02 0.05 13.65

2) Rights Issues 17 55,669.79 21 64,058.61 72.25 58.17

Total (1+2) 79 77,052.14 78 1,10,118.34 100.00 100.00

Note: The primary market resource mobilization is inclusive of amount raised on the SME platform.
*OFS -Offer for Sale
Source: BSE and NSE

i. Sector-wise Resource Mobilisation joint (public-private) sector in 2019-20. In

75 companies from the private sector and 2020-21, companies from private sector
three companies from the public sector mobilized `1,04,222 crore thereby constituting
mobilised funds through primary market in 94.6 per cent of the total resource mobilisation
2020-21 as compared to 77 companies from in 2020-21 as compared to 98.5 percent in
the private sector and two companies from 2019-20 (Table 3.2).

31
Securities and Exchange Board of India Annual Report : 2020-21

Table 3.2: Sector-wise Resource Mobilisation (Amount in ` crore)

Percentage Share in Total

2019-20 2020-21
Sector Amount raised during the Year

No. Amount No. Amount 2019-20 2020-21

Private 77 75,937.07 75 1,04,222.03 98.55 94.65

Joint 2 1,115.07 0 0.00 1.45 0.00

Public 0 0.00 3 5,896.31 0.00 5.35

Total 79 77,052.14 78 1,10,118.34 100.00 100.00

Source: BSE and NSE

ii. Size-wise Resource Mobilisation

During 2020-21, the bulk of the resource than `500 crore each of which collectively raised
mobilization comprised of 28 issues with size more `1,05,381.1 crore (Table 3.3).

Table 3.3: Size-wise Resource Mobilisation (Amount in ` crore)

Percentage Share in
2019-20 2020-21 Total Amount raised
Issue Size during the Year

No. Amount No. Amount 2019-20 2020-21

< `5 crore 19 60.47 14 46.29 0.08 0.04

≥ `5 crore & < `10 crore 12 89.88 6 47.41 0.12 0.04

≥ `10 crore & < `50 crore 27 567.46 12 273.68 0.74 0.25

≥ `50 crore & < `100 crore 1 60 4 293.28 0.08 0.27

≥ `100 crore & < `500 crore 9 3,106.63 14 4,076.55 4.03 3.70

≥ `500 crore 11 73,167.70 28 1,05,381.13 94.96 95.70

Total 79 77,052.14 78 1,10,118.33 100.00 100.00

Source: BSE and NSE

Mega issues mobilized `1,07,801.2 crore which 2020-21. Mega issues have been defined as the ones
comprise 97.9 per cent of the resource mobilization in with issue size of `300 crore and above (Table 3.4).

32
 Chapter - 3 : Primary Market

Table 3.4: Details of Mega Issues during 2020-21

Percentage Share
Type of Issue in Total Amount
Name of the Issuer Type of Issue Offer Size
Instrument (Listing Date) Raised during the
Year
Reliance Industries Ltd. Rights Issue Equity 15-Jun-20 53,124.20 49.28
Rossari Biotech Ltd. IPO Equity 23-Jul-20 496.25 0.46
Yes Bank Ltd. FPO Equity 27-Jul-20 15,000.00 13.91
Arvind Fashions Ltd. Rights Issue Equity 29-Jul-20 399.79 0.37
Aditya Birla Fashion and Retail Ltd Rights Issue Equity 3-Aug-20 995.12 0.92
Shriram Transport Finance Co. Ltd. Rights Issue Equity 11-Aug-20 1,492.19 1.38
Mahindra & Mahindra Financial
Rights Issue Equity 20-Aug-20 3,088.82 2.87
Services Ltd.
Happiest Minds Technologies Ltd. IPO Equity 17-Sep-20 702.02 0.65
Route Mobile Ltd. IPO Equity 21-Sep-20 600.00 0.56
Computer Age Management
IPO Equity 1-Oct-20 2,242.11 2.08
Services Ltd.
UTI Asset Management Company Ltd. IPO Equity 12-Oct-20 2,159.89 2.00
Angel Broking Ltd. IPO Equity 5-Oct-20 600.00 0.56
Mazagon Dock Shipbuilders Ltd. IPO Equity 12-Oct-20 443.69 0.41
EIH LTD Rights Issue Equity 27-Oct-20 349.66 0.32
Chemcon Speciality Chemicals Ltd. IPO Equity 1-Oct-20 318.00 0.29
Equitas Small Finance Bank Ltd. IPO Equity 2-Nov-20 517.60 0.48
Gland Pharma Ltd. IPO Equity 20-Nov-20 6,479.55 6.01
Burger King India Ltd. IPO Equity 14-Dec-20 810.00 0.75
Mrs. Bectors Food Specialities Ltd. IPO Equity 24-Dec-20 540.54 0.50
Indian Railway Finance
IPO Equity 29-Jan-21 4,633.38 4.30
Corporation Ltd.
Indigo Paints Ltd. IPO Equity 2-Feb-21 1,169.12 1.08
Home First Finance Company India Ltd. IPO Equity 3-Feb-21 1,153.72 1.07
Stove Kraft Ltd. IPO Equity 5-Feb-21 412.63 0.38
RailTel Corporation of India Ltd. IPO Equity 26-Feb-21 819.24 0.76
L & T Finance Holdings Ltd Rights Issue Equity 26-Feb-21 2,998.61 2.78
Heranba Industries Ltd. IPO Equity 5-Mar-21 625.24 0.58
MTAR Technologies Ltd. IPO Equity 15-Mar-21 596.41 0.55
Easy Trip Planners Ltd. IPO Equity 19-Mar-21 510.00 0.47
Anupam Rasayan India Ltd. IPO Equity 24-Mar-21 760.00 0.71
Craftsman Automation Ltd. IPO Equity 25-Mar-21 823.70 0.76
Laxmi Organic Industries Ltd. IPO Equity 25-Mar-21 600.00 0.56
Kalyan Jewellers India Ltd. IPO Equity 26-Mar-21 1,175.00 1.09
Suryoday Small Finance Bank Ltd. IPO Equity 26-Mar-21 581.98 0.54
Nazara Technologies Ltd. IPO Equity 30-Mar-21 582.69 0.54
Total 107,801.15 100.00
Note: Mega issues relate to issue size of `300 crore and above.
Source: BSE and NSE

33
Securities and Exchange Board of India Annual Report : 2020-21

iii. Industry-wise Resource Mobilisation finance (13.6 per cent). Incidentally, there was
no resource mobilization under the ‘oil and
Highest resource mobilization in 2020-21
industry-wise was under ‘oil and natural gas’ natural gas’ category in the previous year, while

category which accounted for 48.3 per cent the finance sector mobilized funds constituting

of the total mobilization followed by banks/ 13.6 per cent of total resources mobilized, in
financial institutions (FIs) (13.8 per cent) and both the current and previous year.

Table 3.5: Industry-wise Resource Mobilisation (Amount in ` crore)

2019-20 2020-21
Percentage Percentage
Industry No. Share in No. Share in
of Amount Total Amount of Amount Total Amount
Issues Raised during Issues Raised during
the year the year
Airlines 0 0 0 0 0 0
Automobiles 0 0 0 1 29.70 0.03
Banks/FIs 3 2,345.48 3.04 2 15,119.90 13.73
Cement/ Constructions 5 274.94 0.36 3 22.65 0.02
Chemical 4 152.66 0.20 5 2,353.17 2.14
Consumer Services 4 105.89 0.14 5 786.22 0.71
Electronic Equipment/ Products 5 4,217.97 5.47 1 6.89 0.01
Engineering 5 1,992.09 2.59 7 2,026.88 1.84
Entertainment 1 2.27 0 4 888.89 0.81
Finance 3 10,446.41 13.56 9 14,924.64 13.55
Food processing 3 71.31 0.09 2 1,350.54 1.23
Healthcare 8 4,726.76 6.13 2 6,579.55 5.97
Hotels 1 3.6 0 1 349.66 0.32
Info Tech 4 484.01 0.63 8 1,340.26 1.22
Miscellaneous 27 1727.71 2.24 17 9,281.79 8.43
Roads & Highways 0 0 0 1 9.50 0.01
Telecom 3 49,969.65 64.85 1 819.24 0.74
Textile 1 24.81 0.03 3 1,041.85 0.95
Plastic 1 500 0.65 2 10.55 0.01
Power 0 0 0 1 25.00 0.02
Printing 1 6.58 0.01 1 2.40 0.00
Oil & Natural Gas 0 0 0 2 53,149.07 48.27
Insurance 0 0 0 0 0 0
Total 79 77,052.14 100.00 78 1,10,118.33 100.00
Source: BSE and NSE

34
 Chapter - 3 : Primary Market

b. Resource Mobilisation on Small and Medium Table 3.6: S

 ize-wise Resource Mobilisation by SME
Enterprises Platform Issuers during 2020-21
The Small and Medium Enterprises (SME) (Amount in ` crore)
platform witnessed a drop in 2020-21 both in
terms of number of companies accessing the Percentage
IPOs as well as the amount raised through of Total amount
Issue Size Number Amount
SME IPOs as against 2019-20. In 2020-21, 26 Raised during
companies were listed in the SME platform the Year
raising a total amount of `215.7 crore as
<`5 crore 14 46.29 18.83
compared to `517.6 crore raised through 46
issues in 2019-20 (Figure 3.1). Further, in 2020- ≥ `5 crore &
5 37.91 15.42
21, one company raised `30 crore via FPO route. <`10 crore

Figure 3.1: R
 esource Mobilisation through ≥ `10 crore &
5 56.72 23.08
the SME IPOs < `25 crore

≥ `25 crore 3 104.86 42.67

Total 27 245.77 100.00

Source: BSE and NSE

As on year ending 2020-21, 146 companies

were listed on NSE - SME exchange as against 178
companies, as on year ending 2019-20. Similarly, 237
companies were listed on BSE– SME exchange as on
Source: BSE and NSE
year ending 2020-21 as against 240 companies, as on
During 2020-21, out of a total 27 issues on the year ending 2019-20. During 2020-21, 39 companies
SME platform, 14 were of issue size less than `5 migrated from SME platform to main platform on
crore, five were of issue size of Rupees five crore or NSE compared to 24 companies in 2019-20. Similarly,
more but less than `10 crore, five were of issue size during 2020-21, 18 companies migrated from SME
of `10 crore or more but less than `25 crore and three platform to main platform on BSE compared to 19
were of issue size of `25 crore or more (Table 3.6). companies in 2019-20 (Table 3.7).

Table 3.7: Number of SME Issuers Migrating to Main Board

Particulars 2019-20 2020-21

No. of Companies Migrated at NSE 24 39

No. of Companies Migrated at BSE 19 18

Source: BSE and NSE

35
Securities and Exchange Board of India Annual Report : 2020-21

c. 
Resource Mobilisation through Qualified 2020-21, `78,738 crore were raised through QIPs
Institutional Placement (including institutional placement programme
The Qualified institutional placement is an - IIP as against `54,389 crore raised during 2019-
alternative mechanism for the listed companies 20. This reflected a 44.8 per cent increase in funds
to raise funds from the domestic market. During raised through QIPs over 2019-20 (Table 3.8).

Table 3.8: R
 esource Mobilisation through Qualified Institutional Placement (Amount in ` crore)

Total
Year
Number of Issues Amount
2019-20 14 54,389
2020-21 31 78,738
Source: BSE and NSE

During 2020-21, all the issues were of issue- or more (97.6 per cent of total resource mobilization
size of more than `100 crore. Out of a total of 31 QIPs through QIPs) and six QIPs were of size between
in 2020-21, 25 QIPs were of issue size of `500 crore `100 crore and `500 crore (Table 3.9).

Table 3.9: Size-wise Resource Mobilisation through Qualified Institutional Placements

(Amount in ` crore)

Percentage Share in
2019-20 2020-21 Total Amount Raised
Issue Size during the Year
No. of No. of
Amount Amount 2019-20 2020-21
Issues Issues
≥ `100 crore & < `500 crore 1 463 6 1,880 0.85 2.39
≥ `500 crore 13 53,927 25 76,858 99.15 97.61
Total 14 54,389 31 78,738 100.00 100.00
Source: BSE and NSE

d. 
Resource Mobilisation through Preferential used by the listed companies to issue shares
Allotments or convertible securities to a selected group
Preferential allotments are covered under of investors. During 2020-21, `40,930 crore
Chapter V of SEBI ICDR Regulations. It is an were raised through preferential issue
alternative mode for resource mobilization against `1,74,886 crore raised during 2019-20
(Table 3.10).

36
 Chapter - 3 : Primary Market

Table 3.10: Resource Mobilisation through Preferential Allotments (Amount in ` crore)

Only NSE Only BSE Only MSEI Common Total

Year No. of No. of No. of No. of No. of
Amount Amount Amount Amount Amount
Issues Issues Issues Issues Issues
2019-20 14 76 130 1,853 4 11 136 1,72,946 284 1,74,886
2020-21 17 175 105 1,064 5 16 108 39,675 235 40,930
Source: BSE, MSEI and NSE

e. 
Applications for Pubic Issuance (Equity) on situation, median time for processing of
the Main Board of Exchanges applications was 23 working days in 2020-
During 2020-21, SEBI received 30 applications 21 as compared to 42 working days in 2019-
for public issuances (i.e. IPOs and FPOs) as 20. Further, 11 applications (received during
compared to 29 in 2019-20. Further, during February -March 2021) remained pending with
2020-21, SEBI issued observations on 25 offer SEBI in 2020-21 as compared to six (of which
documents as compared to 31 offer documents five were received during February -March
in 2019-20. Despite the COVID-19 pandemic 2020) in 2019-20 (Table 3.11).

Table 3.11: Time Taken for Regulatory Approval of Applications for Public Issuance

Median Time
Total Applications
Year Processed Pending for Processing of
Received
Applications
2019-20 29 31 6 42 (44.62)**
2020-21 30 25 11 23 (30.80)**
Note –
Time taken at SEBI for processing of applications (excluding time for which the application is pending at
intermediary’s end or at other regulators end). The time taken is in terms of number of working days.
**The figures in bracket represent average working days taken at SEBI for processing of applications (excluding time
for which the application is pending at intermediary’s end or at other regulators end).

3.2 DEBT MARKETS AND HYBRIDS

I. POLICY DEVELOPMENTS
A. Corporate Bonds

a. 
Guidelines for Issuance, Listing and Trading instruments to retail investors, SEBI on October
of Additional Tier 1 Instruments Proposed to 06, 2020, inter-alia, mandated the following for
be Listed issuers of AT1 instruments intending to list on
the stock exchanges-
Considering the complex structure and riskier
nature of Additional Tier 1 (AT1) instruments i. Issuance of AT1 instruments shall be
and in order to curb mis-selling of these done mandatorily on electronic book

37
Securities and Exchange Board of India Annual Report : 2020-21

provider (EBP) platform irrespective of Interface and Streamlining the process of

issue size and only QIBs are allowed to Public issues of Securities
participate in such issuances. Vide circular dated November 23, 2020, an
ii. Minimum allotment and trading lot option was provided to investors to apply in
of the AT1 instruments required to be public issues of non-convertible debentures
Rupees one crore. (NCDs), non-convertible redeemable
preference shares (NCRPS), securitised debt
b. 
Standardization of Timelines for Listing of
instruments (SDIs), municipal bonds etc.,
Securities Issued on Private Placement Basis
through the online interface of stock exchanges
In order to standardize the timelines for listing with a facility to block funds through Unified
of debt securities, non-convertible redeemable Payment Interface (UPI) mechanism for
preference shares, securitized debt instruments, application value up to Rupees two lakh and
security receipts and municipal debt securities permitting the UPI mechanism to block funds
issued on a private placement basis, vide through UPI for application value up to Rupees
circular dated October 05, 2020 issuers of two lakh.
such securities issued on private placement
II. 
MARKET ACTIVITY AND TRENDS
basis were mandated to submit the listing
OBSERVED
application to the stock exchange by T+4
A. CORPORATE BONDS
trading day where T is the issue closure day.
During 2020-21, `7,82,428 crore were mobilised
c. Introduction of Unified Payments Interface
through 2,013 issues of corporate bonds as compared
mechanism and Application through Online
to `6,89,686 crore raised through 1,821 issues during
the previous year.

Table 3.12: Resource Mobilization through Public Issues and Private Placement of Corporate Bonds
(Amount in ` crore)

2019-20 2020-21
Period
No. of Issues Amount No. of Issues Amount

Public Issues# 34 14,984.02 18 10,588.02

Private Placement* 1,787 6,74,702.17 1,995 7,71,840.00

Total 1,821 6,89,686.19 2,013 7,82,428.02

EBP Issues 713 5,94,101.00 1,147 7,07,681.30

# Data for debt public issues have been taken on the basis of their closing date.
* listed issues; EBP-Electronic Book Provider Platform

Out of `10,588 crore mobilised through mobilised by private sector and `4,429 crore was
public issues of corporate bonds, `6,159.0 crore was mobilised by public sector.

38
 Chapter - 3 : Primary Market

Table 3.13: Sector-wise Resource Mobilization through Public Issues of Corporate Bonds
(Amount in ` crore)

2019-20 2020-21
Sector*
No. of Issues Amount No. of Issues Amount

Public Sector 0 0 1 4,429.00

Private Sector 34 14,984.02 17 6,159.02

Total 34 14,984.02 18 10,588.02

Data for debt issues have been taken on the basis of their closing date.
* Public sector includes Government Companies, Statutory Organisations and Public Sector Undertakings. Private sector
includes companies other than public sector companies

Table 3.14: Size-wise Resource Mobilisation through Public Issues of Corporate Bonds
(Amount in ` crore)

2019-20 2020-21
Issue Size
No. of Issues Amount No. of Issues Amount

≥ `50 crore & < `100 crore 4 356.35 0 0

≥ `100 crore & < `500 crore 23 5,722.33 15 3488.16

≥ `500 crore 7 8,905.34 3 7,099.86

Total 34 14,984.02 18 10,588.02

Data for debt issues have been taken on the basis of their closing date.

Table 3.15: Mega Public Issues* of Corporate Bonds (Amount in ` crore)

Sl Date of Date of
Type of Type of Offer Size
Name of the Entity Opening of Closing of
No. Issue Instrument Amount
Issue Issue

1 Kosamattam Finance Ltd. Public Bond 16/09/2020 08/10/2020 300

2 Muthoot Fincorp Ltd. Public Bond 28/09/2020 23/10/2020 397

3 Muthoot Finance Ltd. Public Bond 27/10/2020 29/10/2020 2000

4 Power Finance Corporation Ltd Public Bond 15/01/2021 18/01/2021 4429

5 Kosamattam Finance Ltd. Public Bond 23/12/2020 19/01/2021 325.6

6 Muthoot Fincorp Ltd. Public Bond 31/12/2020 25/01/2021 352.7

7 IIFL Finance Ltd. Public Bond 03/03/2021 18/03/2021 670.9

Total 8475.1
*MEGA ISSUES: Issues with an issue size of `300 crore or more

39
Securities and Exchange Board of India Annual Report : 2020-21

The only industry to mobilise the resources B. COMMERCIAL PAPERS LISTED

through pubic issues of corporate bonds during There were 253 issuances of commercial
the year similar to previous year was the Finance papers (CPs) during 2020-21 vis-à-vis 193 issuances
category. during the last year.(SEBI introduced a framework
for listing of CPs vide circulars dated October 22,
2019 and December 24, 2019).

Table 3.16: Commercial Papers Listed

Year No. of Issuers Listed CPs No. of Unique ISINs Amount (` crore)

2019-20 193 1,796 7,71,147.85

2020-21 253 3,223 16,97,296.95

C. 
Funds Raised through Issuance of Municipal
Bonds
Since 2015, there are 11 issues of municipal of municipal bonds amounting to `350 crore
bonds. In the year 2020-21, there were two issues (Table 3.17).

Table 3.17: Issuance of Municipal Bonds in 2020 - 21

Amount
Name of Municipality Date of Issue
(` crore)

Lucknow Municipal Corporation November 13, 2020 200.00

Ghaziabad Nagar Nigam March 31, 2021 150.00

3.3 
CORPORATE GOVERNANCE AND dated October 08, 2020 to LODR Regulations, listed
CORPORATE RESTRUCTURING entities were mandated to make the following

I. 
INITIATIVES TAKEN BY SEBI FOR disclosures to stock exchanges, without any
ENHANCING TRANSPARENCY AND application of materiality:
IMPROVING GOVERNANCE a. The fact of initiation of forensic audit (by
The following measures were taken by SEBI for whatever name called) along-with name of
enhancing transparency and improving governance entity initiating the forensic audit and reasons
of listed entities. for the same, if available;

A. 
Disclosure of Information related to Forensic b. Final forensic audit report (other than for
Audit of Listed Entities forensic audit initiated by regulatory /
In order to ensure equal access to disclosures enforcement agencies), on receipt by the
and address the gaps in availability of information listed entity, along with comments of the
on forensic audit of listed entities, vide amendment management, if any.

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 Chapter - 3 : Primary Market

B. 
Advisory on Disclosure of Material Impact of
COVID-19 on Listed Entities

Vide circular dated May 20, 2020 an advisory COVID-19 pandemic on listed entities, details of
was issued on disclosure of material impact of which are given at Box item 3.3.

Box Item 3.3: Advisory on Disclosure of Material Impact of COVID-19 on Listed Entities

The COVID-19 pandemic and the consequent lockdown restrictions had significant implications on
the financials and operations of listed entities, resulting in an environment of heightened uncertainty. In such
a scenario, to ensure that investors have access to reliable, timely and adequate information that is material
to investment decisions, SEBI vide circular dated May 20, 2020 issued an advisory on disclosure of material
impact of COVID-19 pandemic on listed entities.

The said circular encouraged listed entities to evaluate the impact of the COVID-19 pandemic on
their business, performance and financials, both qualitatively and quantitatively, to the extent possible and
disseminate the same. Further, the circular provided an illustrative list of information that listed entities may
consider disclosing, such as the impact of COVID-19 on the issuer’s operation, financial position, liquidity,
ability to service debt, internal financial controls and future prospects. Listed entities were also advised to
specify the impact of the COVID-19 pandemic in their financial statements.

The circular specified that while disclosing material information related to the impact of COVID-19,
listed entities should not resort to selective disclosures. Further, listed entities were also advised to provide
regular updates, as and when there were material developments.

C. E-voting Facility provided by Listed Entities circular), retail demat account shareholders would
have the option of accessing various ESP portals
In order to increase the efficiency of the
directly from their demat accounts or through
voting process, pursuant to public consultation, it
registering on the websites of the depositories. A
was decided to enable e-voting for all retail demat
confirmatory SMS that the vote has been cast shall
account holders by way of a single login credential,
also be sent by the depository to the shareholder. In
through their demat accounts or through websites
Phase 2 (implementation within 12 months of the
of depositories/ depository participants. This would
circular), the depositories shall allow login through
enable such account holders to cast their vote without
registered mobile number / e-mail based one-time
having to register again with the e-voting service
password (OTP) verification as an alternate to login
providers (ESPs), thereby, not only facilitating
through user name and password.
seamless authentication but also enhancing ease and
convenience of participating in e-voting process. D. 
Applicability and Role of Risk Management
Committee
Accordingly, vide circular dated December 09,
2020, implementation of this decision was mandated Considering the multitude of risks faced by
in a phased manner. In terms of the said circular, in listed entities, risk management has emerged as a
Phase 1 (implementation within six months of the very important function. The COVID-19 pandemic

41
Securities and Exchange Board of India Annual Report : 2020-21

also reinforced the need for companies to have a • Certain procedural requirements of
robust risk management framework. In view of the promoter re-classification in case of open
same, SEBI in its Board meeting dated March 25, offer or scheme of arrangement, if the
2021 decided to extend the requirement to constitute intent of the erstwhile promoter(s) to
the Risk Management Committee (RMC) to top 1000 reclassify has been disclosed in the letter
listed entities by market capitalization from the of offer or scheme of arrangement.
existing top 500 listed entities. Further, the following
• The reclassification procedure pursuant
was decided -
to an order of the regulator under any
a. RMC shall have a minimum three members, law.
with majority of them being members of
b. Streamlining Timelines -
the board of directors including at least one
• Reduction of time period between the
independent director.
board and shareholders’ meeting to a
b. Specify the roles and responsibilities of the minimum of one month and a maximum
RMC to inter-alia include the formulation of three months.
of a detailed risk management policy and
• Listed entities to place the reclassification
monitoring its implementation; periodic review
request before their boards in the next
of such policy and review of the appointment,
board meeting or within three months
removal and terms of remuneration of the
from the date of receipt of request from
Chief Risk Officer (if any).
its promoter(s)/ promoter group entities,
E. 
Review of Norms for Re-Classification of whichever is earlier.
Promoter/ Promoter Group Entities
F. 
Review of Disclosures Pertaining to Analyst
With the objective of reducing the compliance Meets, Investor Meets and Conference Calls
burden on listed entities, the procedure for re-
With a view to strengthen disclosures and
classification of promoter(s) prescribed under
bridge the information asymmetry arising out of
Regulation 31A of LODR Regulations, was reviewed
information sharing with a few select investors/
to provide certain relaxations from procedural
analysts in post earning calls, SEBI in its Board
requirements and streamline timelines. Accordingly,
meeting dated March 25, 2021 decided to mandate
SEBI in its Board meeting dated March 25, 2021
disclosure of the following, on the website of stock
decided the following:
exchanges and respective listed entity:
a. Provide Exemption/ Relaxations from - a. Schedule of analysts or institutional investors
• Requirement of approval of shareholders group meets, conducted physically or through
in cases where promoter(s)/ persons digital means and presentations made therein,
related to the promoter(s) seeking within twenty-four hours of conclusion of such
reclassification, together do not hold meet.
more than one per cent of voting rights b. Audio/ video recordings of post earnings/
and in cases of divorce. quarterly calls, by whatever name called,

42
 Chapter - 3 : Primary Market

conducted physically or through digital to a listed entity on the basis of paid-up capital
means, before the next trading day or within and net-worth shall continue to apply to
twenty-four hours from the conclusion of such such entity unless the paid-up capital or net-
calls, whichever is earlier. worth falls and continues to remain below the
threshold for a period of three consecutive
c. The transcripts of such calls, within five
financial years.
working days of the conclusion of such calls.
v. The requirement to seek stock exchange
The above disclosures are voluntary for 2021-
approval for change of name of a listed entity
22 and mandatory from 2022-23.
shall be dispensed with.
G. Review of the SEBI (Listing Obligations and
vi. The requirement to publish newspaper
Disclosure Requirements) Regulations, 2015
advertisements for the notice to board meetings
A comprehensive review of the LODR where financial results are to be discussed and
Regulations was undertaken with the objectives quarterly statement on deviation or variation
to strengthen corporate governance practices and in use of funds shall be dispensed with.
disclosure requirements, ease compliance burden on
vii. The timeline for submission of periodic
listed entities, harmonize certain provisions of the
reports viz., statement of investor complaints,
LODR Regulations with the Companies Act, 2013
corporate governance report and shareholding
and to ensure gender neutrality in the text of the
pattern, is harmonized to 21 days from the end
regulations. Based on the review, SEBI in its Board
of each quarter.
meeting dated March 25, 2021 decided to make
various changes to the LODR Regulations. Some of viii. Frequency of submission of compliance
the key decisions are given below - certificates relating to share transfer facility
and issuance of share certificates within 30
i. Extending the formulation of dividend
days of lodgement for transfer, sub-division,
distribution policy to top 1000 listed entities
etc. is revised from half-yearly to annual.
(based on market capitalization) from the
existing top 500 listed entities. H. 
Applicability of Corporate Governance
Provisions to Listed Entities
ii. In case of board meetings held for more than
one day, the financial results shall be disclosed Regulation 15 (2)(b) of the LODR Regulations
by listed entities within 30 minutes of end of contains a proviso which provides a special
the board meeting on the day on which the dispensation to listed entities which are not
financial results are considered. companies but are body corporates or are subject to
regulation under other statutes, thereby limiting the
iii. The provisions of the LODR Regulations
applicability of the corporate governance provisions
which become applicable to listed entities
of the LODR Regulations to such entities. With a
based on the market capitalisation criteria,
view to ensure uniform applicability of the minimum
shall continue to apply even if such entities fall
standards of corporate governance as specified in the
below the specified thresholds.
LODR Regulations to all listed entities, SEBI in its
iv. The corporate governance provisions of the Board meeting dated March 25, 2021 decided to delete
LODR Regulations which become applicable this proviso, with effect from September 01, 2021.

43
Securities and Exchange Board of India Annual Report : 2020-21

I. 
Business Responsibility and Sustainability principle is divided into essential and leadership
Reporting by Listed Entities indicators. The essential indicators are required to be
SEBI in its Board meeting dated March 25, reported on a mandatory basis while the reporting
2021, decided to introduce new requirements for of leadership indicators is on a voluntary basis.
sustainability reporting by listed entities. This new
Listed entities already preparing and disclosing
report shall be called the Business Responsibility and
sustainability reports based on internationally
Sustainability Report (BRSR) and shall replace the
accepted reporting frameworks (such as Global
existing Business Responsibility Report (BRR).
Reporting Initiative (GRI), Sustainability Accounting
The reporting requirements were finalized
Standards Board (SASB), Task Force for Climate
based on feedback received from public
related Financial Disclosures (TCFD) or Integrated
consultation and extensive deliberations with
Reporting) may cross-referthe disclosures made
stakeholders including corporate and institutional
under such framework to the disclosures sought
investors. Further, a benchmarking exercise with
under the BRSR.
internationally accepted disclosure frameworks was
also undertaken. The BRSR shall be applicable to the top
The BRSR seeks disclosures from listed entities 1000 listed entities (by market capitalization), for
on their performance against the nine principles of reporting on a voluntary basis for 2021-22 and on a
the ‘National Guidelines on Responsible Business mandatory basis from 2022-23. Details of the BRSR
Conduct’ (NGBRCs) and reporting under each are given at Box Item 3.4.

Box Item 3.4: Business Responsibility and Sustainability Reporting by Listed Entities
A. Objectives
The BRSR is a notable departure from the existing Business Responsibility Report (BRR) and a significant
step towards bringing sustainability reporting at par with financial reporting. It is aimed at ensuring
that investors have access to standardized disclosures on environmental, social and Governance (ESG)
parameters. Access to relevant and comparable information, will enable investors to identify and assess
sustainability-related risks and opportunities of companies and make better investment decisions.
At the same time, companies will be able to better demonstrate their sustainability objectives, position
and performance resulting into long term value creation. Overall, higher standards of ESG disclosures
and transparency, will help in attracting more capital and investment.
B. Key Disclosures in the BRSR
A few key disclosures sought in the BRSR are highlighted below:
1. Sustainability Related Risks and Opportunities
In order to enable stakeholders to understand the resilience of an entity’s business, the BRSR seeks
disclosure of entity’s material environment and social related risks and opportunities, rationale for
identifying the same and approach to mitigate or adapt to the risks along-with financial implications
of such risks and opportunities.

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 Chapter - 3 : Primary Market

2. Sustainability Related Goals / Targets and Performance

To capture how the entity views and prioritizes sustainability, the BRSR seeks disclosures of an
entity’s sustainability related goals & targets and performance against the same. Further, the BRSR
also seeks a statement by the director responsible for the report which highlights the vision and
strategy for managing the significant environmental, and social impacts of the entity and outlook
on the entity’s main challenges and targets.

3. Environment Related Parameters

The BRSR seeks granular details of performance of the entity on environment related parameters in
quantifiable and measurable terms, as given below:

a. Resource usage: Energy consumption – total and through renewable sources; Water withdrawal,
consumption and discharge – total and in areas of water stress.

b. Air emissions: Green-house gases (GHG) and air pollutant emissions.

c. Waste management: Quantum of hazardous and non-hazardous waste generated, re-used and
recycled along-with waste management practices; reclaimed products (as per cent of products
sold).

d. Compliance with Extended Producer Responsibility (EPR) plan submitted to Pollution Control
Boards.

e. Impact on bio-diversity.
4. Social Related Parameters
The social related disclosures in the BRSR cover the workforce, value chain, communities and
consumers, as given below:
a. Employees / workers: Gender and social diversity including measures for differently abled
employees and workers, turnover rates, median wages, welfare benefits to permanent and
contractual employees / workers, occupational health and safety, trainings etc.
b. Communities: disclosures on Social Impact Assessments (SIA), Rehabilitation and Resettlement,
Corporate Social Responsibility etc.
c. Consumers: disclosures on product labelling, product recall, consumer complaints in respect of
data privacy, cyber security etc.
5. Engagement with Stakeholders
In addition to information on the internal and external stakeholders identified by entities and
the process for identification, the BRSR additionally seeks disclosure on how the feedback from
stakeholder consultation is provided to the Board and used to support the identification and
management of environmental, and social topics.
This disclosure will be useful for companies to demonstrate the outcomes of stakeholder
engagement.

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Securities and Exchange Board of India Annual Report : 2020-21

II. 
COMPLIANCE AND MONITORING OF b. Offsite Monitoring of Listed Companies
LISTED ENTITIES The primary responsibility of monitoring the
SEBI has been increasing its focus on reports filed by the listed entity is of the stock
exchange including levy of penalty. In order to
monitoring the quality of post-listing disclosures.
ascertain the accuracy and adequacy of such
Towards this end, SEBI has regular interactions with
filings, SEBI initiated offsite monitoring of such
all the stock exchanges including review meetings on disclosures and filings shortlisted on a sample
a bi-monthly basis. In addition to enhancing the co- basis, based on the feedback from stakeholders.
ordination on monitoring, these meetings facilitate The offsite monitoring included checking the
discussions on various issues including major non- quality and accuracy of disclosures related
compliances observed by stock exchanges, actions to related party transactions, material events,
financial results, statement of deviation etc.
taken against listed entities, status of fines levied/
collected, challenges, if any, faced by the exchanges c. 
Details of Defaulter Companies Listed at
in monitoring and corrective actions in this regard. Exchanges and Penal Action

These bimonthly meetings have been helpful in SEBI issued a SOP specifying the penal actions
aiding the coordinated efforts of stock exchanges to be taken by the stock exchanges in respect
and SEBI for strengthening the regulatory and of non-compliances by listed entities with
the LODR Regulations. The SOP prescribes a
monitoring framework for listed companies.
well-defined procedure of levy of fines and
a. Inspection of Stock Exchanges subsequent actions by stock exchanges, thereby
As per LODR Regulations, stock exchanges promoting a better compliance culture. Some
are required to monitor the compliance by listed companies have defaulted in compliance
listed entities with the provisions of these with LODR Regulations for which various
actions have been taken by the exchanges
regulations. SEBI initiated inspection of stock
under the SOP in the past two years, details of
exchanges in February-March 2021, as detailed
which are enumerated in the following tables:
at Chapter 10.

Table 3.18: N
 umber of Companies in which Demat Account of Promoter(s) was Frozen

Exchange 2019-20 2020-21

BSE 535 496
NSE 69 75
MSEI 45 54

Table 3.19: Total Number of Companies Suspended (Non-Compliance with various SOP Provisions)

Exchange 2019-20 2020-21

BSE 91 98
NSE 29 24
MSEI 12 7

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 Chapter - 3 : Primary Market

Table 3.20: Fines Levied (in ` crore)

Exchange 2019-20 2020-21

BSE 143.04 77.57

NSE 40.35 25.93

MSEI 6.12 1.96

d. 
Details of Listed Companies being Wound listed companies that are being wound up due
Up to liquidation orders by National Company
The following table provides the number of
Law Tribunal (NCLT) -

Table 3.21: Number of Listed Companies being Wound Up

Year NSE BSE MSEI Reasons

2019-20 15 28 0 Liquidation
2020-21 9 8 0 order by NCLT

III. CORPORATE RESTRUCTURING

a. Open Offer

During 2020-21, 47 open offers with open offer the objective of change in control, three open
size of `9,820.4 crore were closed as compared offers of size `373.5 crore were made with
to 57 open offers with offer size of `20,527 the objective of consolidation of holdings and
crore during 2019-20. Out of the 47 open offers nine open offers with offer size of `286.8 crore
closed during the year, 35 open offers with were made with the objective of substantial
offer size of `9,160.1 crore were made with acquisition of shares (Table 3.22).

Table 3.22: Trends in Open Offers (Amount in ` crore)

Objectives Total

Consolidation of Substantial
Change in Control
Year Holdings Acquisition
No. of
Amount
Issues
No. of No. of No. of
Amount Amount Amount
Issues Issues Issues

2019-20 50 16,407 4 3,642 3 478 57 20,527

2020-21 35 9,160 3 374 9 287 47 9,820

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Securities and Exchange Board of India Annual Report : 2020-21

b. 
Issuance Of Observations On Offer observations were issued in respect of 51 letter
Documents of offers during 2020-21, while one letter of
During the financial year 2020-21, 62 draft letter offer was withdrawn and 10 draft letter of
of offers were processed by SEBI, of which 49 offers are pending with SEBI for issuance
draft letter of offers were filed during 2020-21. of observation letter as on March 31, 2021
Out of the 62 draft letter of offers processed, (Table 3.23).

Table 3.23: Status of Draft Letter of Offers for Open Offers

Status 2019-20 2020-21

Draft letter of offers for open offers

Pending draft letter of offers at the beginning of the year 20 13

Draft letter of offers received during (under Old Takeover Regulations) 1 1

Draft letters of offers received during (under New Takeover Regulations) 55 48

Total 76 62

Observations issued by SEBI during the year 63 51

Offer/s withdrawn 0 1

Draft letter of offers in process at the end of the year 13 10

During 2020-21, SEBI had received complaints 2020-21, 23 additional applications were filed
regarding inadequate offer price in respect of open with SEBI seeking exemption as compared to 36
offers in infrequently traded companies. SEBI applications filed during 2019-20. Among the 50
appointed independent valuers in some of the applications with SEBI, 28 applications were granted
cases for conduct independent valuation in terms exemption from open offer vis-à-vis 26 applications
of the provisions of Regulation 8(16) of Takeover which were granted exemption during 2019-20,
Regulations. five applications were returned/ withdrawn/ not
Regulation 11 of the Takeover Regulations maintainable (disposed without passing an order),
deals with applications for seeking exemption in one application exemption was not granted and 16
from open offer obligations. As on March 31, 2020, applications were in process with SEBI as on March
27 applications were in process with SEBI. During 31, 2021 (Table 3.24).

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 Chapter - 3 : Primary Market

Table 3.24: Exemption Applications under Regulation 11 of Takeover Regulations

Status 2019-20 2020-21

Application pending at the beginning of year 22 27
Applications received during the year 36 23
Total applications 58 50
Applications disposed during the year 31 34
Of which
Exemption granted 26 28
Exemption not granted 0 1
Returned / withdrawn/ Not maintainable (without passing order) 5 5
Applications in process at the end of the year 27 16

c. Buy-Back were received during 2020-21, of which 22 were

through the open market purchase method and
Buy-back is one of the ways in which a company
47 were through the tender offer, as compared
can return money to its shareholders. The total
buyback offer size during 2020-21 was `39,710 to 58 buyback offers in 2019-20 (16 through

crore compared to the buyback offer size of open market purchase method and 42 through

`21,634 crore during 2019-20, an increase of 84 tender offer). Out of the 22 offers in 2020-21 for

per cent. It is also observed from the buyback buyback through the open market purchase
offers which opened and closed during method, 12 offers had been closed and 10 offers
2020-21 that the average utilization was 93.6 are yet to close. Further, out of the 47 offers for
per cent of the total offer size compared to 98.1 buyback through tender offer, 38 offers were
per cent of the buyback offers which opened closed and nine offers were not closed during
and closed during 2019-20. 69 buy-back offers 2020-21 (Table 3.25).

Table 3.25: Buy-back Cases (Amount in ` crore)

2019-20 2020-21
Actual
Actual Amount
Particulars Buy- Amount
No. of Buy-back Utilized for No. of
back Utilized for
cases size Buy- back of cases
size Buy- back of
Securities
Securities
Buy-back through open market
Cases Received and Closed 7 405 398 12 1,264 803
Cases Received but not Closed 9 2,964 NA 10 3,243 NA
Buy-back through Tender Offer
Cases Received and Closed 35 17,418 17,086 38 25,065 23,815
Cases Received but not Closed 7 847 NA 9 10,138 NA

49
Securities and Exchange Board of India Annual Report : 2020-21

d. Schemes of Arrangement 3.4 INTERMEDIARIES ASSOCIATED

Listed entities undertaking a scheme of I. POLICY DEVELOPMENTS

arrangement are required to file the draft
A. Prior Approval for Change in control
documents related to scheme of arrangement
SEBI has been receiving various applications
with the stock exchange(s) for obtaining
/ references from intermediaries and Market
observation letter or no-objection letter, before
Infrastructure Institutions (MIIs) seeking
filing such scheme with any Court or Tribunal.
guidance with respect to transfer of shareholdings
SEBI also receives the draft documents from
among immediate relatives and transmission of
stock exchanges and issues observations. shareholdings and its effect on change in control.
SEBI issued observations on total 64 draft Therefore, various scenarios involving of transfer

schemes documents in 2020-21 as against 53 in of shareholdings among relatives and transmission

2019-20 (Table 3.26). of shareholding were clarified and guidance was

provided to the intermediaries and MIIs to deal with
Table 3.26: Scheme of Arrangement such scenarios, vide circular dated March 25, 2021.

Year Observations Issued B. 

Transfer of Business by SEBI Registered
Intermediaries to Other Legal Entity
2019-20 53
SEBI has been receiving various applications
2020-21 64 / references from intermediaries and MIIs seeking
guidance with respect to transfer of business
IV. REGULATORY COORDINATION WITH
through regulatory process (pursuant to merger /
MINISTRY OF CORPORATE AFFAIRS amalgamation / corporate restructuring by way of
order of primary regulator / government / National
SEBI regularly coordinates with the Ministry
Company Law Tribunal etc.) or non-regulatory
of Corporate affairs (MCA) on policy initiatives
process (as per private agreement /Memorandum
and regulatory aspects pertaining to overlapping
of Understanding (MoU) pursuant to commercial
provisions of SEBI regulations and the Companies
dealing / private arrangement).
Act, 2013. MCA also provides its inputs and
Vide circular dated March 26, 2021, procedure
suggestions on various policy initiatives through
to be followed by the intermediaries w.r.t. registration
its representation on the SEBI Board and Primary
application pursuant to transfer of business (SEBI
Market Advisory Committee (PMAC). regulated business activity) from one legal entity
In the current year, in the wake of COVID-19 which is a SEBI registered Intermediary (transferor)

pandemic, SEBI had extensive consultations with to other legal entity (transferee) was clarified.

MCA on the impact of lockdown restrictions on C. 

Use of Technology for Know Your Client
businesses and the issuance of COVID-19 related Process
relaxations to reduce the disruptive impact of the To facilitate the use of technology in the process
pandemic on the listed entities. of know your client (KYC) in the securities market,

50
 Chapter - 3 : Primary Market

so that the investors can get their KYC done without the SEBI registered intermediaries / mutual
visiting the offices of intermediaries, vide circular funds distributors to undertake Aadhaar
dated April 24, 2020, usage of eSign, DigiLocker, authentication of their clients for the purpose
online / App based KYC in-person verification of KYC. Those SEBI registered intermediaries
through video, online submission of Officially Valid / mutual funds distributors, who want to
Document (OVD) / other documents under eSign undertake Aadhaar authentication services
was enabled. through KUAs, are required to enter into an

 This allowed the investor to complete the agreement with KUA and get themselves

KYC process by filling the online KYC form and registered with UIDAI as sub-KUAs.

submitting such completed form to the intermediary: d. The KUAs and their sub-KUAs are required
a. By taking a print out of the completed KYC to follow and comply with the process such
form and after affixing their wet signature, as sharing, security and storage of e-KYC
sending the scanned copy / photograph of the data, exception-handling mechanisms,
same to the intermediary under eSign, or backup identity authentication mechanism,
monitoring of irregular transactions, etc. as
b. By affixing cropped signature online on the
detailed in circular dated November 05, 2019
filled KYC form and submit the same to the
and as may be prescribed by UIDAI from time
intermediary under eSign.
to time.
D. 
Entities permitted to undertake e-KYC
E. 
Entities Permitted to Undertake e-KYC
Aadhaar Authentication service of UIDAI in
Aadhaar Authentication Service of UIDAI in
Securities Market
Securities Market – Addition of NSE to the
a. To notify the entities permitted to undertake List
e-KYC Aadhaar Authentication service of
Government of India, Department of Revenue
Unique Identification Authority of India
(DoR), vide Gazette Notification No. G.S.R. 516(E)
(UIDAI) in the securities market, vide circular
dated August 20, 2020, notified NSE as per the
dated November 05, 2019, following processes
recommendation by UIDAI and SEBI to undertake
were detailed for Aadhaar e-KYC of resident
Aadhaar authentication service of the UIDAI under
investors in the Securities Market:
section 11A of the Prevention of Money-Laundering
i. Online Portal based Investor (Resident) Act, 2002. In view of the same, vide circular dated
e-KYC Process (Aadhaar as an OVD) September 08, 2020, National Stock Exchange of
ii. Assisted Investor (Resident) e-KYC India Limited (NSE) was allowed to undertake
process (Aadhaar as an OVD) Aadhaar authentication service of the UIDAI subject

b. Entities in the securities market, as notified by to compliance of the conditions as laid down in this

the Central Government and as permitted by regard.

SEBI, vide circular dated May 12, 2020, were F. Rollout of Legal Entity Template
allowed to undertake Aadhaar authentication
a. Central KYC Registry (CKYCR), in its
under section 11A of the PMLA.
communication no. CKYC/2020/11 dated
c. These entities have to be registered with UIDAI January 04, 2021 had specified that since
as KYC user agency (KUA) and shall allow CKYCR is fully operational for individual

51
Securities and Exchange Board of India Annual Report : 2020-21

clients, it had been decided to extend CKYCR reports/ certificates and shall issue ‘due
to legal entities (LE) as well. Accordingly, diligence certificate’ to issuer company. The
registered intermediaries (RIs) were required due diligence certificate shall be submitted
to upload the KYC records of LE accounts by issuer company to stock exchange before
opened on or after April 01, 2021 on to CKYCR opening of issue.
in terms of Rule 9 (1A) of the Prevention of
c. Issuer company shall create security and

Money Laundering (Maintenance of Records)
execute debenture trust deed, based on which
Rules, 2005.
debenture trustee will issue second due
b. To bring the format for legal entity being diligence certificate to the issuer company
followed for KYC in securities market, in before the issuer company submits listing
line with the format prescribed by Central application for the debt securities. Issuer
Registry of Securitisation Asset Reconstruction companies are required to submit second due
and Security Interest of India, a Legal Entity diligence certificate to stock exchanges before
Template was prescribed vide circular dated making listing application.
March 10, 2021. d. Issuer shall disclose the due diligence carried
c. RIs were advised to ensure that in case of LE out by debenture trustee in the offer document/
accounts opened prior to April 01, 2021, the information memorandum.
KYC records are uploaded on to CKYCR when Vide circular dated December 31, 2020 timeline
the updated KYC information is obtained/ for implementation of the circular dated November
received from the client. RIs were also 03, 2020 with respect to creation of security in
required to ensure that during such receipt of issuance of listed debt securities and ‘due diligence’
updated information, the clients’ KYC details by debenture trustees was extended from January 01,
are migrated to current client due diligence 2021 to April 01, 2021 after taking into consideration
standards. the challenges arising out of the prevailing business
and market conditions due to COVID-19 pandemic.
G. 
Due Diligence by Debenture Trustees with
respect to Creation of Security H. 
Monitoring and Disclosures by Debenture
Trustee(s)
Vide circular dated November 03, 2020,
guidelines issued pertaining to creation of security a. 
Vide circular dated November 12, 2020,
in issuance of listed debt securities and due diligence guidelines regarding the periodical monitoring
by debenture trustees are summarised as under: to be carried out by the debenture trustee(s)
and the due diligence to be carried out therein
a. Issuer companies, at the time of entering into
were issued. Listed entities were mandated to
debenture trustee agreement, shall provide
provide relevant documents/ information, as
necessary information/ documents viz.
applicable, to enable the debenture trustee(s)
documents pertaining to assets of company on
to submit the reports/ certifications such as
which charge is proposed to be created, consent/
asset cover certificates, valuation report and
no-objection certificate from existing lenders.
title search report for the immovable/movable
b. 
Debenture trustees shall verify documents/ assets, etc. to stock exchange(s) within the
information provided by issuer and prepare prescribed timelines as applicable.

52
 Chapter - 3 : Primary Market

b. 
The circular further provided directions guidelines were issued pertaining to standardisation
in respect of the disclosures to be made by of procedure to be followed by debenture trustees
the debenture trustee(s) on their website in case of default by issuers of listed debt securities.
and format of certificate for asset cover by These guidelines are summarised as under:
debenture trustee in respect of listed debt
a. ‘Event of default’ shall be reckoned at the ISIN
securities of the listed entity.
level, as all terms and conditions of issuance
I. 
Contribution by Issuers of Listed or Proposed of security are same under a single ISIN even
to be Listed Debt Securities towards Creation though it might have been issued under
of ‘Recovery Expense Fund’ multiple information memorandums (IMs).

To enable the debenture trustee(s) to take b. The process to be followed by debenture

prompt action for enforcement of security in case of trustees for sending notice to investors, calling
‘default’ in listed debt securities, SEBI vide amendment of meeting of investors in the event of default
dated October 08, 2020 in SEBI (Debenture Trustees) had been standardised.
Regulations, 1993 and SEBI (Issue and Listing of Debt
c. The conditions for joining inter-creditor
Securities) Regulations, 2008 had mandated issuer
agreement by debenture trustee had been laid
companies to create a ‘Recovery Expense Fund’ (REF)
out.
which shall be used by debenture trustee towards
enforcement of security in the event of default by II. 
MARKET ACTIVITY AND TRENDS

listed entity. The guidelines regarding creation of OBSERVED

recovery expense fund were issued vide circular A. Registered Intermediaries Associated with
dated October 22, 2020. the Primary Market

J. 
Standardisation of Procedure to be followed During 2020-21, six merchant bankers, two
by Debenture Trustee(s) in case of ‘Default’ debenture trustees, one registrar to an issue & share
by Issuers of Listed Debt Securities transfer agent, and one bankers to an issue applicants

Vide circular dated October 13, 2020, were granted registration (Table 3.27).

Table 3.27: Registration of Intermediaries Associated with the Primary Market

Applications Registration Registration

Pending as on
Received Granted Rejected
Type of Intermediary March
during during during
31, 2021
2020-21 2020-21 2020-21
Merchant Banker 9 6 0 3
Registrar to Issue and Share Transfer Agent 4 1 1 2
Bankers to an Issue 1 1 0 0
Debenture Trustee 2 2 0 0

53
Securities and Exchange Board of India Annual Report : 2020-21

As on March 31, 2021, there were 215 merchant agents (RTAs), one underwriter, 65 bankers to an
bankers, 78 registrar to issue and share transfer issue and 30 debenture trustees, registered with SEBI
(Table 3.28).

Table 3.28: R
 egistered Intermediaries Associated with the Primary Market

No. of other Registered Intermediaries

Type of Intermediary
March 31, 2020 March 31, 2021
Merchant Banker 215 215
Registrar to Issue and Share Transfer Agent 80 78
Underwriter 2 1
Bankers to an Issue 66 65
Debenture Trustee 31 30

During 2020 – 21, details of registration intermediaries associated with the primary market,
applications received and granted to various are given in Table 3.29.

Table 3.29: M
 edian Time Taken for Approval of Registrations for Intermediaries Associated with the Primary
Market during 2020-21

Median Time for

Applications Applications Applications processing
Type of Intermediary
Received Granted Rejected Applications
(in working days)
Merchant Banker 9 6 0 41
Registrar to an Issue and Share Transfer Agent 4 1 1 20
Bankers to an Issue 1 1 0 137
Debenture Trustee 2 2 0 37

There was one suspension and two associated with the primary market during the year
cancellations of registrations of intermediaries (Table 3.30).

Table 3.30: D
 etails of Suspension/Cancellation of Registration of Intermediaries Associated with the Primary
Market

2019-20 2020-21
Type of Intermediary
Suspension Cancellation Suspension Cancellation
Merchant Banker 0 0 1 0
Registrar to an Issue and Share Transfer Agent 0 0 0 2

54
 Chapter - 4 : Secondary Market

CHAPTER FOUR:
Secondary Market

S
econdary markets serve as a barometer value traded in the secondary market is shown in
reflecting the country’s financial health. (Figure 4.1).
Aside from providing liquidity to investors, Figure 4.1: Share in Traded Value in the Secondary
secondary market aids in the valuation of a company Market during 2020-21
because the economic forces of supply and demand (Per cent)

determine the prices. Commodity Corporate Bond

Equity Cash, Derivatives, 1.3% Market, 0.3%
2.3%
A vibrant secondary market, makes it easier for Currency Derivatives, Interest Rate
2.4% Derivatives, 0%
companies to raise additional capital subsequently
through secondary offerings like rights issue and
follow on public offering. The derivatives markets
provide important tool to investors to manage their
Equity Derivatives,
risk while also enabling better price discovery. The 93.8%

balanced growth of cash and derivatives markets are Source: National Exchanges

important for overall development of the securities 4.1. CASH MARKETS

market.
I. EQUITY MARKETS
During 2020-21, equity derivatives segment in
a. Policy Developments
India had the highest market share of 93.8 per cent
in the gross or notional turnover across the segments i. 
Framework to Enable Verification of Upfront
(compared to 90.1 per cent in the previous year. Collection of Margins from Clients in Cash
Second highest turnover was recorded in the currency and Derivatives Segments
derivatives segment with total market share of 2.4 In order to align and streamline the risk
per cent followed by equity cash segment (2.3 per management framework of both cash and
cent), commodity derivatives (1.3 per cent), corporate derivatives segments, operational guidelines
bonds (0.3 per cent) and interest rate derivatives were issued to stock exchanges (SEs) and
(0.0 per cent). The segment-wise composition of the clearing corporations (CCs) to adopt a

55
Securities and Exchange Board of India Annual Report : 2020-21

framework to enable verification of up front derivatives segments. The details of the new
collection of margins from clients in cash and framework are discussed in Box Item 4.1.

Box Item 4.1: Margins Related Reforms

Review of Margin Framework for Cash and Derivatives segments (except for Commodity Derivatives
segment)

SEBI has, from time to time, put in place various risk containment measures to address the risks
involved in the cash and derivatives market. With a view to keeping up pace with the changing market
dynamics and to bring more efficiency in the risk management framework, vide circular dated February
24, 2020, a comprehensive review of the margin framework had been done in consultation with the Risk
Management Review Committee (RMRC) of SEBI.

The new margin framework, inter-alia, provides for:

• Adoption of six sigma based approach so as to widen the coverage of margins.
• Changing the weightages in the Exponentially Weighted Moving Average (EWMA) volatility estimation
process, so as to achieve stable counter - cyclical margins.
• Increasing the price scan range in SPAN while reducing/ discontinuing the notional components of
extreme loss margin and short option minimum charge, so as to encourage portfolio based trades.
The new margin framework came into effect from June 01, 2020.

Framework to Enable Verification of Upfront Collection of Margins from Clients in Cash and Derivatives
segments

Stock exchanges/ clearing corporations have mandated clearing members/ trading members, in equity
derivatives and currency derivatives segments, to collect applicable margins from their clients/ constituents
on an upfront basis. SEBI has also directed clearing members/ trading members, in commodity derivatives
and cash segments, to collect applicable margins upfront from their clients. Upfront collection of margin
serves as an effective risk management tool, whilst also ensuring clients’ skin in the game in addition to
reducing undesirable over leveraged speculation and also preventing misuse of clients’ funds.

With an objective to enable uniform verification of upfront collection of margins from clients by trading
member/ clearing member across segments, a framework has been specified, vide circular dated July 20,
2020, for the purpose of regular monitoring of and levying of penalty for short-collection/ non-collection of
margins from clients.

The framework provides for intra-day and end-of-day monitoring of collection of upfront margins.
Under this framework, clearing corporations have been directed to send minimum four snapshots, in a day,
of client wise margin requirement to trading members/ clearing members. The member is required to report
the margin collected from each client, as at end of the day and peak margin collected during the day. Higher
of the shortfall in collection of the end-of-day margin obligation and the peak margin obligation, across the
snapshots, of the client shall be considered for levying of penalty as per the extant provisions.

The framework came into effect from December 01, 2020, in a phased manner.

56
 Chapter - 4 : Secondary Market

b. Advisory Committees on Market Regulation iii. Risk Management Review Committee

i. Secondary Market Advisory Committee 

Risk Management Review Committee


Secondary Market Advisory Committee (RMRC), chaired by Prof. Jayanth R. Varma,

(SMAC), chaired by Prof. Jayanth R. Varma Indian Institute of Management, Ahmedabad

from Indian Institute of Management, reviews, inter alia, the risk management

Ahmedabad, reviews the developments framework for cash and derivatives

in the secondary market and recommends (including commodity derivatives) segments

measures for changes and improvements in and recommends changes, if required,

market structure for improving market safety, in the regulatory provisions related to

efficiency, transparency, and integrity, etc. The risk management framework including

Committee, during 2020-21, discussed issues margining system. During 2020-21, the

such as proposal for independent flexing of RMRC discussed matters related to review

dynamic price bands for partly paid up shares, of stress testing norms, withdrawal of excess

applicability of individual scrip-wise price contribution made by stock exchanges from

bands on futures and options (F&O) scrips, core settlement guarantee fund (SGF) of one

T+1 settlement cycle for cash segment, running clearing corporation to deposit into core

account authorization/ settlement of funds, SGF of another clearing corporation in inter-

review of net worth criteria of trading member operable scenario and orderly winding down

(TM)/ clearing member (CM), etc. of critical operations and services of clearing
corporations etc.
ii. Technical Advisory Committee
iv. 
High Powered Steering Committee on Cyber
The Technical Advisory Committee (TAC),
Security
chaired by Prof. Ashok Jhunjhunwala, IIT
Chennai, advises SEBI to take informed High Powered Steering Committee on Cyber
decisions in matters relating to securities Security (HPSC-CS) is chaired by Whole
market which require advanced understanding Time Member, SEBI. Other members of the
and knowledge of technology. The Committee Committee are - a member of SEBI’s Technical
met six times during 2020-21 and discussed Advisory Committee (TAC), a cyber-security
matters relating to technical glitches including expert from a Government organization
trading halt at National Stock Exchange of India and Executive Director - Market Regulation
Limited (NSE) on February 24, 2021, advisory Department of SEBI. The Committee guides
regarding remote access and telecommuting, SEBI on issues related to cyber security
guidelines on business continuity planning in the securities market. During the last
and disaster recovery including unannounced financial year under the guidance of HPSC-
live trading session from Disaster Recovery CS, the matters discussed were cyber audit
Site (DRS), etc. This has helped SEBI to keep reports submitted by market infrastructure
pace with technological advancements and institutions (MIIs), cyber capability index
frame appropriate regulations and policy reports, Incident reporting module of cyber
guidelines accordingly. audit, etc.

57
Securities and Exchange Board of India Annual Report : 2020-21

c. Market Activity and Trends Observed Figure 4.2: 

Movement of Stock Market Bluechip
Indices
i. Snapshot of the Equity Markets in India
55000 16000
After witnessing a turbulent month of March 15000
50000
14000
2020, the financial markets in India recovered 45000
13000

strongly in 2020-21. As the uncertainty 40000 12000

11000

Sensex
35000

Nifty
relating to possible impact of COVID-19 30000
10000
9000

started subsiding, the equity market too began 25000 8000

1
0
-2

-2

-2

-2

-2

-2

-2

-2

-2

-2

-2

-2
-2
its recovery and steadily rose to the pre-

ar

ay

un

ul

ug

ep

ct

ov

ec

an

eb

ar
pr

-J

-O
-M

-M
-A

-M

-N

-D
-J

-A

-S

-J

-F
31

31
30

31
31

30

28

31
31

30

30

31
31
pandemic levels. Market rally during 2020-21 Sensex (LHS) Nifty 50 (RHS)

was primarily driven by large foreign portfolio Source: BSE and NSE
investors (FPIs) investment inflows, on the
The rally of 2020-21 was broad based. The
back of monetary easing by the central banks
mid-cap and small-cap indices rose strongly in
across the globe and large fiscal stimulus in 2020-21 compared to the large cap indices. While
United States of America (USA), Europe and Nifty Mid-cap 100 and Nifty Small-cap 100 index
many other advanced countries. increased by 102.4 per cent and 125.7 per cent

India’s benchmark indices S&P BSE Sensex respectively, during 2020-21, Nifty rose by 70.9 per
cent during the same period.
(henceforth referred to as Sensex) and Nifty
50 (henceforth referred to as Nifty) recorded During 2020-21, FPIs made a net investment of
a strong positive growth during 2020-21. Both `2.74 lakh crore in the Indian equity markets which
Sensex and Nifty rose by 68 per cent and 70.9 was the highest ever net investment made by FPIs
per cent respectively during 2020-21, after in equity segment in a financial year. Prior to 2020-

witnessing a fall of 23.8 per cent and 26 per 21, the highest ever net investment made by FPIs in
equity segment was in 2012-13 (`1.4 lakh crore).
cent, respectively during 2019-20. Annual
returns for Sensex and Nifty were the highest The volatility index of India, India VIX, the

since 2009-10 when they had bounced back measure of investors’ perception about the risk of
sharp swings based on options prices, smoothened to
from the lows reached during global financial
20.6 level on March 31, 2021 after reaching its lifetime
crisis of 2008-09.
high of 83.6 (intraday high of 86.6) in the previous
Sensex and Nifty closed at 49,509 and 14,690.7 year on March 24, 2020, reflecting moderation in the
on March 31, 2021 respectively registering an uncertainty during 2020-21.
increase of 20,040.7 points and 6,093 points as Trading activity in India, combined across
compared to the close of previous financial BSE Limited (BSE), NSE and Metropolitan Stock
year. Both Sensex and Nifty reached their Exchange of India Limited (MSEI), witnessed
respective all-time high of 52,517 and 15,432 upswing. The pan India turnover in equity cash
respectively, on February 16, 2021. On April 03, segment and equity derivatives segment registered
2020, Sensex and Nifty 50 had recorded their strong growth of 70.2 per cent and 96.8 per cent
lowest level of 27,501 and 8,056 respectively for respectively during 2020-21 over 2019-20. During the
2020-21. same period, while currency derivatives segment

58
 Chapter - 4 : Secondary Market

witnessed modest growth of 5.8 per cent in total of interest rate derivatives declined sharply by
turnover across nationwide exchanges in India, 69.7 per cent during 2020-21 (Table 4.1) provides
growth in commodity derivatives segment remained a snapshot of the key indicators of the domestic
almost constant. On the flip side, pan-India turnover securities market for 2019-20 and 2020-21.

Table 4.1: Major Indicators of the Indian Securities Market

Change year -on year

Item 2019-20 2020-21
(Per cent)
A. Equity Indices
S&P BSE Sensex
Year-end 29,468 49,509 68.0
Average 38,757 40,826 5.3
Nifty 50
Year-end 8,598 14,691 70.9
Average 11,500 12,017 4.5
SX40
Year-end 17,121 29,011 69.4
Average 22,636 23,840 5.3
B. Annualised Volatility (per cent)
S&P BSE Sensex 27.9 23.0 -17.5
Nifty 50 27.1 22.5 -17.0
SX40 27.5 22.4 -18.7
C. No. of Listed Companies
BSE 5,377 5,477 1.9
NSE 1,949 1,968 1.0
MSEI 295 298 1.0
Source: BSE, MSEI and NSE.

ii. Performance of Broader Market Indices and at NSE, Nifty 500 index and Nifty 100 index
Sectoral Indices increased by 76 per cent and 69.6 per cent,
During 2020-21, equity markets remained respectively, during 2020-21. Similarly, the
buoyant throughout. As stated earlier, India’s broad-based indices at BSE, viz., S&P BSE 500
leading equity blue-chip indices, Nifty and and S&P BSE 100 index also increased by 77
Sensex, increased by 70 per cent 68 per cent per cent and 71 per cent, respectively, during
respectively. Among the broad-based indices 2020-21. (Figure 4.3)

59
Securities and Exchange Board of India Annual Report : 2020-21

Figure 4.3: Performance of Major Stock Indices Among the selected sectoral indices at NSE, the
115.0%
102.4%
125.7% highest percentage increase was observed in Nifty
90.9%
Metal Index (150.8 per cent), followed by Nifty Auto
71.0% 77.0% 70.9% 76.0%
68.0% 69.6%

Index (108.5 per cent) and Nifty IT Index (102.6 per

cent). Among the selected sectoral indices at BSE, BSE
-23.8% -26.6% -27.5% -31.7% -36.1% -26.0% 25.9% -27.6% -35.9% -46.1%
BSE Sensex

Metal Index recorded the highest gain of 151 per cent,

BSE 100

BSE 500

Small cap 100

BSE Midcap

Small Cap
S&P BSE

Midcap 100
Nifty 100

Nifty 500
Nifty 50
S&P

S&P
S&P

S&P

Nifty

Nifty
BSE NSE
followed by BSE Auto Index (107 per cent) and BSE IT
2019-20 2020-21 Index (107 per cent) (Figure 4.4).
Source: NSE and BSE

Figure 4.4: Annual Change in the Sectoral Indices of BSE and NSE during 2020-21

NSE Indices BSE Indices

Nifty Metal 150.8% BSE Metal 151.0%
Nifty Auto 108.5% BSE Auto 107.0%
Nifty IT 102.6% BSE IT 107.0%
Nifty Realty 90.4% BSE Realty 97.0%
Nifty Bank 74.0% BSE Healthcare 76.0%
Nifty Consumer Durables 73.7% BSE Finance 71.0%
Nifty Pharma 71.0% BSE Consumer Durables 70.0%
Nifty Energy 70.1% BANKEX 70.0%
Nifty Fin Service 68.7% BSE OIL 48.0%
Nifty FMCG 27.9% BSE FMOG 26.0%

Source: BSE and NSE

iii. Turnover in the Indian Stock Market the previous year. However, during the same
Combined turnover of all stock exchanges in period, MSEI witnessed a decline of 60.1 per
the equity cash segment increased by 70.2 per centin turnover to `11 crore from `28 crore in
cent from `96.6 lakh crore in 2019-20 to `164.4 the previous year (Table 4.2).
lakh crore in 2020-21, reflecting buoyance In terms of traded volumes (quantity of shares
in the securities market. Of the aggregate traded), pan-India total trading volumes in
turnover, NSE accounted for 93.6 per cent and the cash segment (combined for BSE, NSE
BSE accounted for 6.4 per cent turnover. NSE’s and MSEI) increased by 61.5 per cent during
turnover in the cash segment increased by 71.1 2020-21 over the previous year. While trading
per cent to `154 lakh crore in 2020-21 from `90 volumes at BSE and NSE increased by 82.3
lakh crore in 2019-20. Cash segment turnover per cent and 59 per cent, respectively, in
of BSE too increased by 58.1 per cent to `10.5 2020-21, that of MSEI declined by 64 per cent
lakh crore in 2020-21 from `6.6 lakh crore in (Table 4.2).

60
 Chapter - 4 : Secondary Market

Table 4.2: Exchange-wise Trading Statistics

Share of Share of
Change year -on
Stock Exchange 2019-20 2020-21 Exchanges in Exchanges in
year (per cent)
2019-20 2020-21
Turnover (` crore) (per cent)
BSE 6,60,896 10,45,090 6.8 6.4 58.1
MSEI 28 11 0.0 0.0 -60.1
NSE 89,98,811 1,53,97,908 93.2 93.6 71.1
Total 96,59,735 1,64,43,009 100.0 100.0 70.2
Quantity Traded (in crore) (per cent)
BSE 5,735 10,456 10.9 12.3 82.3
MSEI 0.13 0.05 0.0 0.0 -64.0
NSE 46,741 74,296 89.1 87.7 59.0
Total 52,476 84,752 100.0 100.0 61.5
Source: National Exchanges

Trading data for the top-20 cities in India Second highest participation was from Delhi/
shows that 67 per cent of NSE’s total turnover in the Ghaziabad at NSE which contributed 5.2 per cent to
equity cash segment was concentrated in Mumbai the total turnover followed by Kolkata / Howrah (4.3
(including Thane) in 2020-21, the financial hub of per cent). At BSE, Gurgaon contributed 11.2 per cent
the country registering an increase of 4.7 per cent to the total turnover followed by Ahmedabad (9.9
over the previous year On BSE, percentage share per cent) The trading activity in the cash segment
of Mumbai in the total turnover in cash segment surged at both the exchanges in Ahmedabad during
reduced sharply to 40.9 per cent in 2020-21 from 51.1 2020-21 (Table 4.3).
per cent in 2019-20 (Table 4.3).

Table 4.3: Turnover at the Top-20 Cities in the Cash Segment of BSE and NSE (Per cent)

BSE NSE
City 2019-20 2020-21 City 2019-20 2020-21
Mumbai 51.1 40.9 Mumbai / Thane 64 67
Gurgaon 17.4 11.2 Delhi/Ghaziabad 5.9 5.2
Ahmedabad 2.2 9.9 Calcutta / Howrah 5.2 4.3
Kolkata 3.4 3.6 Ahmedabad 1.7 4.1
New Delhi 1.1 1.3 Hyderabad/Secunderabad/ Kukatpally 3.1 3.5
Rajkot 1.6 1.3 Bangalore 3.2 2
Noida 0.2 1.1 Rajkot 1.1 0.9
Ghaziabad 0.9 1.0 Cochin/Ernakulam/Parur/ Kalamserry/Alwaye 0.7 0.7
Vadodara 0.7 0.5 Chennai 0.9 0.6
Bengaluru 1.2 0.4 Indore 0.3 0.4
Jaipur 0.5 0.3 Jaipur 0.3 0.3

61
Securities and Exchange Board of India Annual Report : 2020-21

BSE NSE
City 2019-20 2020-21 City 2019-20 2020-21
Chennai 0.7 0.3 Baroda 0.2 0.2
Indore 0.2 0.3 Kanpur 0.1 0.1
Surat 0.3 0.3 Pune 0.1 0.1
Kanpur 0.3 0.2 Ludhiana 0.1 0.1
Faridabad 0.1 0.2 Coimbatore 0 0.1
Pune 0.3 0.2 Guwahati 0 0
Ichalkaranji 0.0 0.1 Bhubaneshwar 0 0
Hyderabad 0.3 0.1 Mangalore 0 0
Navi Mumbai 0.1 0.1 Patna 0 0
Other 17.4 26.5 Others 13 10.6
Total 100.0 100.0 Total 100.0 100.0
Note: city-wise turnover calculated on gross basis i.e. purchases +sales
Source: BSE and NSE

iv. Market Capitalisation The free float market capitalisation as a


At the end of 2020-21, total market percentage of total market capitalisation at
capitalisation at NSE and BSE increased by NSE and BSE stood at 47.3 per cent and 47 per
80 per cent and 80.5 per cent, respectively, cent, respectively at the end of March 2021
to `203 lakh crore and `204.3 lakh crore. (Table 4.4).

Table 4.4: Market Capitalisation at BSE and NSE

Change
Exchange 31-Mar-20 31-Mar-21
year -on year (per cent)

Free Float Market Capitalisation (in ` crore)

NSE 52,11,496 96,04,846 84.3

BSE 52,34,867 95,96,949 83.3

Total Market Capitalisation (in ` crore)

NSE 1,12,43,112 2,02,95,813 80.5

BSE 1,13,48,757 2,04,30,815 80.0

Free Float Market Capitalisation (as per cent of Total Market Capitalisation)

NSE 46.4 47.3

BSE 46.1 47.0

Source: BSE and NSE

62
 Chapter - 4 : Secondary Market

v. Stock Market Indicators also increased from 55.3 per cent to 104.2 per
cent during the same period. All India equity

Market capitalization-to-Gross domestic
cash segment turnover to GDP ratio increased
product (GDP) ratio is used to measure
to 84.4 per cent in 2020-21 (compared to 47.5
whether the stock market is undervalued or per cent in 2019-20). The turnover to GDP ratio
overvalued. BSE’s market capitalisation to for the equity derivatives segment in India
GDP ratio increased from 55.8 per cent in (combined for NSE and BSE) increased to
2019-20 to 104.9 per cent in 2020-21. Similarly, 34.8 times in 2020-21, compared to 17 times in
the NSE’s market capitalisation to GDP ratio 2019-20 (Table 4.5).

Table 4.5: S
 elect Ratios Relating to the Stock Market (Per cent)

Total Turnover to GDP Ratio

Year BSE NSE
Cash Segment Equity Derivatives Segment
(All-India) (BSE + NSE)*
Market Capitalisation to GDP Ratio
2019-20# 55.8 55.3 47.5 1,695.2
2020-21## 104.9 104.2 84.4 3,483.6

Notes: # provisional estimate of GDP at current prices for 2019-20; ## 1st advance estimated of GDP at current prices for
2020-21; * Notional turnover of equity derivatives has been considered
Source: National Exchanges and Central Statistical Office

The price to earnings ratio (P/E) is a measure for 2020. The P/E ratio of BSE Midcap and NSE Midcap
evaluating the relative attractiveness of a company’s 100 increased to 57.1 and 41.9, respectively, as on
stock price compared to the earnings of a firm. As March 31, 2021 from 19.9 and 17.5, respectively, as
on March 31, 2021, the P/E ratio of the Sensex and on March 31, 2020. Amongst select indices, the BSE
Nifty index surged to 34.4 and 33.2, respectively, as small cap index and Nifty small cap 100 index have
compared to 17.8 and 19.4, respectively on March 31, the highest P/E ratio of 76.9 and 55.9, respectively, as
on March 31, 2021. (Figure 4.5).

Figure 4.5: Price to Earnings Ratio

149.9

76.9
57.1 55.9
34.4 35.1 38.1 33.2 34.4 35.9 41.9
17.8 16.4 18.2 19.9 19.4 21.3 21.8 17.5

S&P BSE S&P BSE S&P BSE BSE BSE Nifty 50 Nifty 100 Nifty 500 Nifty Nifty Small
Sensex 100 500 Midcap Small Midcap cap 100
Cap 100
BSE NSE
2019-20 2020-21

Notes: P/E ratio is as at the end of the respective year. P/E Ratio for Nifty Small cap 100 is not available for March 2020
and is available only after June 26, 2020.
Source: BSE and NSE

63
Securities and Exchange Board of India Annual Report : 2020-21

The price to book (P/B) ratio is used to compare index rose to 3.3 and 4.2, respectively, as compared
market value of a stock to its book value. As on to 2.3 and 2.5, respectively as on March 31, 2020
March 31, 2021, the P/B ratio of the Sensex and Nifty (Figure 4.6).

Figure 4.6: Price-to-Book Value Ratio

4.2 4.3
4.0
3.3 3.2 3.3
3.1 3.0
2.8 2.9
2.5 2.5
2.3 2.3
2.1 1.9
1.7 1.7
1.4 1.2

S&P BSE S&P BSE S&P BSE BSE BSE Small Nifty 50 Nifty 100 Nifty 500 Nifty Nifty Small
Sensex 100 500 Midcap Cap Midcap cap 100
100
BSE NSE
2019-20 2020-21

Source: BSE and NSE

vi. Stock Market Volatility

During 2020-21, the annualized volatility of respectively as compared to 28.2 and 27.1
the Sensex and Nifty decreased to 23 and 22.1, respectively during 2019-20. (Figure 4.7).

Figure 4.7: Annualized Volatility of Benchmark Indices

28.2 27.6 27.0 27.1 27.3

25.9 26.7 26.1 26.7
25.4
23.0 22.1
21.8 20.7 21.3 21.0 21.3
20.0 20.4
18.7

S&P BSE S&P BSE S&P BSE BSE BSE Small Nifty 50 Nifty 100 Nifty 500 Nifty Nifty Small
Sensex 100 500 Midcap Cap Midcap cap 100
100
BSE NSE
2019-20 2020-21

Note: Annualized volatility is computed as the standard deviation of the logarithmic returns of the closing levels of the
indices multiplied with the square root of the number of trading days during the period.
Source: BSE and NSE

vii. Trading Frequency at NSE increased by 4.9 per cent to 2,229 during
The trading frequency of stocks listed is one of the same period. In terms of trading frequency,
the indicators of liquidity. Number of stocks 85.3 per cent of the total stocks listed at NSE
traded in the cash segment of BSE increased by and 59.1 per cent of the total stocks listed at
2.1 per cent to 5,685 in 2020-21 from 5,570 in BSE traded for more than 100 trading days out
2019-20, whereas the number of stocks traded of 249 trading days during 2020-21 (Table 4.6).

64
 Chapter - 4 : Secondary Market

Table 4.6: Trading Frequency of Listed Stocks

2019-20 2020-21
Trading BSE NSE BSE NSE
Frequency No. of Share in No. of Share in No. of Share in No. of Share in
(Range of Days) Stocks Total Stocks Total Stocks Total Stocks Total
Traded* (per cent) Traded (per cent) Traded* (per cent) Traded (per cent)
Above 100 2,991 53.7 1,846 86.9 3,361 59.1 1,902 85.3
91-100 106 1.9 17 0.8 87 1.5 17 0.8
81-90 102 1.8 26 1.2 113 2.0 18 0.8
71-80 111 2 20 0.9 126 2.2 14 0.6
61-70 136 2.4 14 0.7 127 2.2 19 0.9
51-60 161 2.9 26 1.2 125 2.2 17 0.8
41-50 175 3.1 20 0.9 144 2.5 23 1.0
31-40 189 3.4 32 1.5 166 2.9 28 1.3
21-30 256 4.6 23 1.1 199 3.5 41 1.8
11-20 346 6.2 31 1.5 259 4.6 29 1.3
1-10 997 17.9 70 3.3 978 17.2 121 5.4
Total 5,570 100 2,125 100 5,685 100.0 2,229 100.0
Note: *Data for No. of stocks traded includes Government securities, Exchange Traded Funds& Mutual Funds. Further, this
may include details of multiple number securities traded for the period but listed under one company.
Source: BSE and NSE

viii. Settlement Corporation Limited (ICCL) and NSE Clearing

In terms of delivery statistics, total quantity of Limited (NCL) increased by 45.6 per cent
shares delivered and value of shares delivered and 42 per cent, respectively, in 2020-21. No
combined for all exchanges increased by 43.9 settlement took place at Metropolitan Clearing
per cent and 42.3 per cent, respectively in 2020- Corporation of India Limited (MCCIL) during
21. The delivery volumes at Indian Clearing 2020-21 (Table 4.7).

Table 4.7: C
 learing Corporation-wise Delivery Statistics

Clearing
2019-20 2020-21 Share in 2019-20 Share in 2020-21 Change YoY
Corporation
Value of Shares Delivered (` crore) (per cent)
ICCL 1,93,663 2,81,918 8.5 8.7 45.6
MCCIL 27 0 0.0 0.0 -100.0
NCL 20,75,813 29,48,629 91.5 91.3 42.0
Total 22,69,503 32,30,546 100.0 100.0 42.3
Quantity of Shares Delivered (in crore)
ICCL 2,043 2,896 16.1 15.8 41.8
MCCIL 17 0 0.1 0.0 -100.0
NCL 10,656 15,398 83.8 84.2 44.5
Total 12,716 18,294 100.0 100.0 43.9
Source: ICCL, MCCIL and NCL

65
Securities and Exchange Board of India Annual Report : 2020-21

During 2020-21, at pan-India level, 21.6 per cent ix. Dematerialisation

of the total trades resulted in the delivery of shares The number of demat accounts registered

(compared to 24.2 per cent in the previous year),
with Central Depository Services Ltd
indicating rise in the churning or intraday trading in the
(CDSL) registered a strong growth of 57.5
cash segment. The quantity delivered as a percentage
per cent year on year to 334 lakh at the end
of quantity traded fell to 20.7 per cent at NCL and
of March 2021 (compared to 212 lakh in the
27.7 per cent at ICCL during 2020-21 (compared to
previous year). The number of demat account
22.8 per cent and 35.6 per cent,respectively last year)
at National Securities Depository Limited
(Table 4.8).
(NSDL) too increased by modest 10.2 per
Table 4.8: Delivery to Trade Ratios (Per cent)
cent to 217 lakh at the end of March 2021
Quantity Value (compared to 197 lakh in the previous year).
Delivered Delivered The number of listed companies signed up
Clearing
(as a percentage of (as a percentage for dematerialization with CDSL and NSDL
Corporation
Quantity Traded) of Value Traded)
increased by 1.3 per cent and 0.8 per cent year
2019-20 2020-21 2019-20 2020-21 on year to 5,764 and 5,681, respectively, at the
NCL 22.8 20.7 23.1 19.1 end of March 2021.
ICCL 35.6 27.7 29.3 27.0
Total 24.2 21.6 23.5 19.6
Source: ICCL and NCL

Box Item 4.2: Trend of Increased Investor Participation including use of Technology during 2020-21
Inspite of increased volatility and economic disruption as a result of pandemic during the 2020-
21, the secondary market turnover witnessed a healthy uptick. For example, during 2020-21, the combined
turnover in cash segment of stock exchanges (NSE, BSE, MSEI) increased by 70 per cent from `96.59 lakh
crore to `164.43 lakh crore.
Alongwith the overall increase in turnover, the participation of different classes of investors also
increased. The average daily turnover in equity cash segment of retail investors, who are classified as
individuals, increased by more than 110 per cent as compared to previous financial year.
Supporting the turnover was the increase in the accounts opened with the Depositories. As on March
31, 2021, the number of total demat accounts crossed 5.5 crore which is an increase of 35 per cent over the last
financial year. While the increase in demat accounts from three crore to four crore took around 28 months,
increase from four crore to five crore only took 10 months. Out of the new demat accounts opened in the
2020-21, approximately 98 per cent of the new accounts were opened by retail clients.
Additionally, in the equity segment, the percentage share of mobile trading increased significantly
at both BSE and NSE. In the cash segment of NSE, 23.1 per cent of the total trades in 2020-21 were through
mobile trading route, compared to 13.9 per cent in 2019-20. Similarly, at BSE, 15.2 per cent of the total trades
in the cash segment during 2020-21 were through mobile trading route, compared to 5.7 per cent in 2019-20.
Further, in the equity derivatives segment at NSE, the percentage share of mobile trading increased to 10.9
per cent from 6.2 per cent in 2019-20 (Figure 4.9 and 4.12).

66
 Chapter - 4 : Secondary Market

The value of securities in the demat form at in the demat form and 89.9 per cent market share in
CDSL and NSDL increased by 64.1 per cent and 52 terms of value of securities held in the demat form
per cent, respectively, to `27.4 lakh crore and `243.7 while CDSL had a share of 16.3 per cent and 10.1 per
lakh crore, respectively, at the end of March 2021. cent respectively. The ratio of dematerialised equity
At the end of March 2021, NSDL had 83.7 per cent shares to total outstanding shares of listed companies
market share in terms of number of securities held was 86.1 per cent at NSDL and 11.5 per cent at CDSL
at the end of 2020-21 (Table 4.9).
Table 4.9: Depository Statistics (as on March 31)

NSDL CDSL
Particulars
2019-20 2020-21 2019-20 2020-21
Number of Investor Accounts (lakh) 197 217 212 334
Number of Companies Signed up (Listed and Unlisted) 30,335 34,225 14,762 16,464
Of which No. of Companies that are Listed 5,636 5,681 5,692 5,764
Quantity of Securities in Demat Form (crore) 2,35,160 2,43,351 45,573 47,443
Value of Securities in Demat Form (` crore) 1,60,32,792 2,43,74,524 16,71,972 27,43,936
Market Capitalisation of Listed Companies Joined in
1,14,03,048 2,07,76,010 1,13,44,264 2,03,52,629
Demat (` crore)
Custody Value of Shares of Listed Companies (` crore) 98,95,616 1,78,91,666 13,29,811 23,25,563
Ratio of Dematerialised Equity Shares to Total
86.8 86.1 11.7 11.5
Outstanding Shares Listed (per cent)
Source: NSDL and CDSL

During 2020-21, CDSL witnessed a strong The percentage share of CDSL in the number
growth in terms of quantity and value of shares of shares settled in demat form increased from 37.9
settled (186.4 per cent and 162 per cent) in demat per cent during 2019-20 to 55.7 per cent in 2020-21,
form. NSDL too witnessed a growth of 39 per cent whereas the market share in terms of value of shares
and 30.7 per cent in terms of quantity and value of settled increased from 18.4 per cent in 2019-20 to 31.2
shares settled respectively during the same period. per cent in 2020-21 (Table 4.10).

Table 4.10: Depository-wise Settlement Statistics

Quantity of Shares Settled in Demat (crore) Value of Shares Settled in Demat (` crore)
Particulars
2019-20 2020-21 2019-20 2020-21
NSDL 13,356 18,565 33,08,113 43,22,164
CDSL 8,138 23,307 7,46,580 19,55,760
Total 21,493 41,872 40,54,693 62,77,924
Percentage Share
NSDL 62.1 44.3 81.6 68.8
CDSL 37.9 55.7 18.4 31.2
Total 100.0 100.0 100.0 100.0
Source: NSDL and CDSL

67
Securities and Exchange Board of India Annual Report : 2020-21

As on March 31, 2021, the total value of On the other hand, the total value of commercial
debentures held with NSDL and CDSL in the demat papers held with NSDL and CDSL in the demat
form increased by 11.2 per cent to `37.9 lakh crore form decreased by 7.8 per cent to `4.5 lakh crore as
from `34.1 lakh crore as on March 31, 2020. The on March 31, 2021,from `4.9 lakh croreas on March
demat value of debentures at NSDL increased by 31, 2020. The demat value of commercial papers at
11.6 per cent, whereas that of CDSL decreased by 2.8 NSDL and CDSL decreased by 7.7 per cent and 18.2
per cent respectively (Table 4.11)
per cent.

Table 4.11: Depository Statistics: Debentures/Bonds and Commercial Papers

Debentures / Bonds Commercial Papers

Particulars NSDL CDSL NSDL CDSL
31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21
No. of Issuers as on 2,717 3,119 873 938 321 300 143 151
No. of Active
15,756 17,173 8,532 9,118 1,625 1,431 829 791
Instruments as on
Demat Value
32,99,882 36,83,875 1,07,802 1,04,789 4,85,164 4,47,900 3,659 2,992
(` crore) as on
Source: NSDL and CDSL

The geographical coverage of depository B. DEBT MARKETS AND HYBRIDS

participants (DPs) at NSDL increased while that of a. Policy Developments
CDSL declined slightly during 2020-21 as compared
i. 
Framework for Transactions in Defaulted
to the previous year. DP locations for NSDL increased
Debt Securities Post Maturity Date/
to 1,985 cities at the end of March 2021 compared to
Redemption Date
1,925 cities at the end of previous year whereas that
of CDSL decreased from 4,051 to 3,766 during the To enable bond holders to transact and
same period (Table 4.12). liquidate their holdings in debt securities
where redemption amount has not been paid
Table 4.12: Geographical Spread of DP Locations
on maturity/redemption date (defaulted debt

No. of DP NSDL CDSL securities), an operational framework for

Locations 2019-20 2020-21 transactions in such defaulted debt securities
2019-20 2020-21
was introduced on June 23, 2020. Obligations
0 > 10 1,460 1,459 3,798 3,524
of issuers, debenture trustee (s), depositories
11-20 203 207 123 103
and stock exchange (s) while permitting such
21-50 148 183 77 79
transactions were also prescribed.
51-100 68 80 30 34
ii. 
Uniform Structure for Imposing Fines for
> 100 46 56 23 26
Issuers of Listed Non-Convertible Debt
Total 1,925 1,985 4,051 3,766
Securities or Non-Convertible Redeemable
Note: 
The number of DP locations for CDSL includes
Preference Shares or Commercial Papers not
locations that have back office connected DP
centers.
in Compliance with Continuous Disclosure
Source: NSDL and CDSL Requirements.

68
 Chapter - 4 : Secondary Market

To ensure effective enforcement of continuous sector, which is vital for the growth of an
disclosure obligations, vide circular dated economy. Though the government securities
November 13, 2020 a uniform structure was market in India had experienced a tremendous
prescribed for imposing fines on issuers of growth in the last decade, however, despite
listed non-convertible debt securities (NCDs), a lot of policy and regulatory attention in the
non-convertible redeemable preference past, the corporate debt segment in India still
shares (NCRPS), commercial papers (CPs) for lacks the desired liquidity.
non-compliance with continuous disclosure The total value of corporate bonds trades
obligations. These fines had been specified for reported at NSE decreased by 10.8 per cent
disclosures to be made to stock exchanges and to `12.1 lakh crore in 2020-21 from `13.6 lakh
for which timelines had been specified. crore in the previous year whereas that of BSE

b. Market Activity and Trends Observed decreased by 6.5 per cent to `6.6 lakh crore
from `7.1 lakh crore during the same period. In
i. Corporate Bond Market terms of number of trades, the trades reported
Deep, vibrant and robust corporate bond at BSE increased by 29.2 per cent to 69,095 in
market is essential to enhance stability of 2020-21 from 53,494 in 2019-20 whereas that
financial system of a country, mitigate financial at NSE decreased by 6.5 per cent to 69,659 in
crises and support the credit needs of corporate 2020-21 from 74,463 in 2019-20 (Table 4.13).

Table 4.13: Secondary Market: Corporate Bond Trades (Reported Trades) (Amount in ` crore)

BSE NSE Total

 Year Number of Number of Number of
Amount Amount Amount
Trades Trades Trades
2019-20 53,494 7,05,787 74,463 13,59,020 1,27,957 20,64,807
2020-21 69,095 6,60,214 69,659 12,12,504 1,38,754 18,72,718
Source: BSE, NSE

In value terms, turnover on NSE contributed The value of corporate bond trades settled
64.7 per cent to the total trading in corporate bond through clearing corporations decreased by 7.3 per cent
market (compared to 65.7 per cent in the previous to `14.3 lakh crore in 2020-21 from `15.4 lakh crore
year). NSE’s share in total trades of corporate bonds in 2019-20. While the value of corporate bond trades
decreased to 50.2 per cent in 2020-21 from 58.2 per settled at BSE during 2020-21 grew by 4.1 per cent,
cent in 2019-20. that at NSE declined by 8.6 per cent (Table 4.14).

Table 4.14: Settlement of Corporate Bonds (Amount in ` crore)

BSE NSE Total

Year No. of Trades Number of Number of
Amount Amount Amount
Settled Trades Trades
2019-20 29,946 1,63,312 70,401 13,78,946 1,00,347 15,42,258
2020-21 47,490 1,69,949 66,970 12,60,280 1,14,460 14,30,229
Source: BSE, NSE

69
Securities and Exchange Board of India Annual Report : 2020-21

ii. Wholesale Debt Market the turnover in the BSE’s WDM segment
Turnover in the wholesale debt market (WDM) decreased by 8.8 per cent to `10 lakh crore
in India, combined for NSE and BSE, declined from `11 lakh crore during the same period.
by 15.8 per cent year on year in 2020-21. At During 2020-21, the BSE remained the leading
NSE, the turnover in the WDM decreased exchange in this segment, with a market
by 34.5 per cent to `2.7 lakh crore in 2020- share of 78.6 per cent, in terms of turnover
21 from `4.1 lakh crore in 2019-20. Further, (Table 4.15).

Table 4.15: Business Growth in the WDM Segments at NSE and BSE (Amount in ` crore)

No. of Net Traded Average Daily No. of Net Traded Average Daily
Year Trades Value Traded Value Trades Value Traded Value

NSE BSE

2019-20 7,177 4,14,828 1,714 2,74,920 11,00,454 4,510

2020-21 3,717 2,71,696 1,114 3,37,089 10,03,816 4,036

Note: Average daily traded value is calculated as net traded value divided by the total number of trading days in the year.
Source: NSE and BSE

c. Request for Quote platform includes corporate bonds, securitized debt

BSE and NSE launched the Request for instruments, commercial papers, certificate
Quote (RFQ) platform in February 2020 in of deposits, municipal debt securities,
order to provide a single interface for price Government securities, treasury bills and
givers and price takers in the debt market state development loans. Although still in the
from a diverse set of clients to enhance price early stages, the trading on RFQ platform has
discovery and bring pre-trade transparency in started gaining traction. During 2020-21, 3,665
transactions of eligible securities. Currently, trades amounting to `1.8 lakh crore took place
the list of eligible securities on RFQ platform through RFQ platform (Table 4.16, Figure 4.8).

Table 4.16: Activity and Trend on Request for Quote Platform

No. of No. of Total No. Total No. of Amount of

Number of
Year Participants Participants of RFQs Responses Trades
Trades
Registered Participated Initiated to the RFQs (in ` crore)

2019-20 120 140 220 50 5 26

2020-21 333 4,984 10,798 4,673 3,665 1,84,275

Source: BSE and NSE

70
 Chapter - 4 : Secondary Market

Figure 4.8: Monthly Trend in Trades done through Request for Quote Platform

Amount of Trades (` Crore)

40000 750 800
675
35000 626 700

Number of Trades
543 567
30000 600
476
25000 500
20000 400
15000 300
10000 200
5000 0 0 0 3 11 14 100
0 0

20

20

20

1
r-2

-2

-2

-2

-2

-2

-2
ly-

g-

p-

v-

c-
ay

ct

ar
Ap

No

De
Ju

Au

Se

Ja

Fe
Ju

M
M Amount of trades (` in Crs) Number of trades

Source: BSE and NSE

C. RISK MANAGEMENT MEASURES includes violation of Regulations 31, 33, 34

and 76 of SEBI (Depositories and Participants)
a. During 2020-21, 110 scrips were suspended at
Regulation 2018. At BSE, 19 companies were
BSE (compared to 239 in the last year) and 34
suspended for non-compliance with the listing
scrips were suspended at NSE (compared to
agreement and nine companies were suspended
60 in the last year). At BSE, the majority of the
under surveillance measures (Table 4.17).
suspensions were into ‘others’ category that

Table 4.17: Scrips Suspended from Trading at BSE and NSE

BSE NSE
Reason for Suspension
2019-20 2020-21 2019-20 2020-21
Non Payment of Annual Fees # 102 1 17 0
Surveillance Measure 10 9 0 0
Non-compliance of LODR
Regulations (Corporate Governance Related) 29 19 26 29
[Regulation 17 (1), 18 (1), 27 (2)]
Any Other (Reg. 31, 33, 34 and Reg. 76
of SEBI (Depositories and Participant) 69 72 17 5
Regulation 2018
Procedural 29 9 0 0
Total 239 110 60 34
Suspensions Revoked during the Year 22 10 3 5
Note: #The difference in the number of companies is due to large number of companies exclusively listed at BSE
Source: BSE and NSE

During 2020-21, 39 scrips were delisted from followed by compulsory delisting (14). At NSE,
BSE and 32 from NSE. At BSE, the main reason for the main reason for delisting is delisting pursuant
delisting was voluntary delisting (17 companies) to liquidation (12), followed by voluntary and
compulsory delisting (nine each) (Table 4.18).

71
Securities and Exchange Board of India Annual Report : 2020-21

Table 4.18: Scrips Delisted from Trading at BSE and NSE

BSE NSE
Reason for Delisting
2019-20 2020-21 2019-20 2020-21
Voluntary Delisting 9 17 12 9
Compulsory Delisting 0 14 1 9
Delisting pursuant to Liquidation #  0 0 15 12

Delisting pursuant to Gazette Notification issued by

0 0 0 1
Department of Financial Services, Ministry of Finance.

IDR Delisting 0 0 0 1
Any Other (procedural delisting) 28 8 0 0
Total 37 39 28 32
Note: # These companies were suspended on account of liquidation and have been delisted by NSE and therefore, pursuant
to provisions of Rule 21 (2) (b) of the Securities Contracts (Regulation) Rules 1957, these companies have been
delisted by BSE.
Source: BSE, NSE

During 2020-21, at BSE, while 11 scrips moved moved to ASM-IBC category and the same number
to additional surveillance measures (ASM)/ graded of companies came out of it. The ASM-IBC section
surveillance measures (GSM) platform, 13 scrips was introduced by exchanges in 2018 for companies
came out of it (compared to 21 scrips moving to that are undergoing Insolvency Resolution Process
ASM/GSM and 27 scrips coming out of it in the (IRP) as per Insolvency and Bankruptcy Code (IBC)
previous year). At BSE, three companies were (Table 4.19).

Table 4.19: Surveillance Measures

BSE NSE
Surveillance Measures
2019-20 2020-21 2019-20 2020-21
Scrips Moved to ASM 13 10 12 6
Scrips Moved out of ASM 14 10 12 6
Scrips Moved to GSM 8 1 2 0
Scrips Moved out of GSM 13 3 14 1
Scrips Moved to Promoter “Encumbrance” 1 2 0 0
Scrips Moved out of Promoter “Encumbrance” 1 2 0 0
Scrips Moved to ASM Insolvency Resolution Proceedings
4 3 5 3
(IBC Inclusions)
Scrips Moved out of ASM Insolvency Resolution
4 3 5 3
Proceedings (IBC exclusions)
Total 58 34 50 19
Source: BSE and NSE

72
 Chapter - 4 : Secondary Market

b. 
Share of Participants in Annual Cash Market At NSE, the percentage share of participants
Turnover in the annual cash market turnover in 2020-
21 shows that proprietary trades, FPIs and
The percentage share of proprietary traders in
mutual funds had contributed 25.1 per cent,
annual cash market turnover (NSE and BSE
11.4 per cent and 5.1 per cent, respectively. At
combined) increased by 2.3 percentage points
BSE, proprietary trades, FPIs, and mutual funds
during 2020-21 while that of mutual funds
contributed 32.4 per cent, 12.2 per cent, and 2.9
and FPIs decreased by 2.4 and 3.8 percentage
per cent, respectively, in 2020-21 (Table 4.20).
points, respectively.

Table 4.20: Share of Participants in Annual Cash Market Turnover (Per cent)

NSE BSE
Category
2019-20 2020-21 2019-20 2020-21
Proprietary Traders 22.7 25.1 27.6 32.4
Domestic Institutions (excluding MFs, Banks and Insurance) 0.1 0.1 0.1 0.1
FPIs 15.2 11.4 10.0 12.2
MFs 7.5 5.1 7.3 2.9
Insurance Companies 2.5 1.8 2.1 1.7
Banks 0.2 0.1 0.1 0.1
Corporates 5.3 4.6 10.9 5.9
Others 46.5 51.8 41.9 44.8
 Total 100.0 100.0 100.0 100.0
Notes: 1. Domestic institutions (excluding mutual funds) include banks, DFIs, insurance companies and the New Pension
Scheme.
2. Others include individual domestic investors, Partnership Firms/LLP, Trust / Society, AIF, Depository Receipts,
PMS clients, Statutory Bodies, VC Funds, NBFC, etc.
Source: BSE and NSE

During 2020-21, the percentage share of co- trading route, compared to 13.9 per cent in 2019-20.
location trades in the cash segment of BSE and Similarly, at BSE, 15.2 per cent of the total trades in the
NSE increased to 37.2 per cent and 33.2 per cent, cash segment during 2020-21 were through mobile
respectively, compared to 36.5 per cent and 31.7 per trading route, compared to 5.7 per cent in 2019-20.
cent, respectively, in 2019-20. The percentage share The percentage share of non-algo trades in the cash
of mobile trading increased significantly at both BSE segment of BSE reduced by 6.8 percentage points to
and NSE. In the cash segment of NSE, 23.1 per cent 30.8 per cent in 2020-21, while that at NSE reduced by
of the total trades in 2020-21 were through mobile 6.2 percentage points to 17.3 per cent. (Figure 4.9).

73
Securities and Exchange Board of India Annual Report : 2020-21

Figure 4.9: Mode of Trading in the Cash market during 2020-21 (Per cent)

0.9%

2020-21 2020-21
0.1% Co-location
6.2%
11.8%
Mobile
0.1% 1.0%
7.9% 10.1% Non-ALGO
15.3%
2019-20 33.2% Internet Based Trading
2019-20 37.2% 31.7%
6.4% ALGO
36.5% 12.8%
Direct Market Access
BSE 13.2% NSE Smart Order Routing
FOW-NOW

30.8%
37.6% 5.7% 17.3% 13.9%
23.5%

15.2% 23.1%

Source: NSE and BSE

c. 
Share of Top-100 Brokers/Securities in  owever, concentration of trading activity
H
Annual Cash Market Turnover in the top 100 securities got reduced slightly
during 2020-21. Percentage share of the top100
The concentration of top 100 brokers in the
securities in the annual equity cash market
annual equity cash market turnover in 2020-21
turnover decreased to 67 per cent at BSE
increased to 89.6 per cent at BSE (compared to (compared to 68.1 per cent in the previous
85.8 per cent in the previous year) and to 89.5 year) and to 76.6 per cent at NSE (compared
per cent at NSE (compared to 87.7 per cent in to 77.9 per cent in the previous year)
the previous year). (Table 4.21).

Table 4.21: S
 hare of Top-100 Brokers/Securities in Annual Cash Market Turnover (Per cent)

BSE NSE
Particulars
2019-20 2020-21 2019-20 2020-21

Share of Top-100 Brokers in Annual Cash Market Turnover 85.8 89.6 87.7 89.5

Share of Top-100 Scrips/Securities in Annual Cash Market Turnover 68.1 67.0 77.9 76.6
Source: BSE and NSE

The top 10 brokers in the cash segment of in the cash segment of NSE, who represent 49.1 per
BSE who represent 16.8 per cent of the total clients, cent of the total clients, contributed 43.3 per cent to
contributed 50.5 per cent of the total gross turnover the total gross turnover in NSE in 2020-21 (Table 4.22
in BSE in 2020-21. On the other hand, top 10 brokers and Table 4.23).

74
 Chapter - 4 : Secondary Market

Table 4.22: Top 10 Brokers in the Equity Segment of BSE (Per cent)

Percentage Share of Top10 in Percentage Share of Top10 in

Gross / Notional Turnover Total Clients (as on)

2019-20 2020-21 31-Mar-20 31-Mar-21

32.4 50.5 14.9 16.8
Note: the top 10 brokers are selected based on the criteria of highest percentage share in gross turnover
Source: BSE

Table 4.23: Top 10 brokers in the Equity Segment of NSE (Per cent)

Percentage Share of Top10 in Percentage Share of Top10 in

Gross / Notional Turnover Total Clients (as on)
2019-20 2020-21 31-Mar-20 31-Mar-21
34.4 43.3 43.3 49.1
Note: the top 10 brokers are selected based on the criteria of highest percentage share in gross turnover
Source: NSE

The trend in the instrument-wise share of per cent, respectively, in 2020-21 from 5.6 per cent
securities traded in the WDM segment at NSE shows and 7.6 per cent respectively during 2019-20.
that the share of T-bills increased by 11.1 percentage
At BSE, on the contrary, the PSU/ institutional
points to 38.3 per cent in 2020-21 from 27.2 per cent
bonds remained the highest traded instruments,
in the previous year whereas the percentage share
with market share of 49.4 per cent in 2020-21 (48.6
of government securities (G-Secs) in WDM segment
per cent in 2019-20). The percentage share of G-Secs
of NSE decreased by 4.3 percentage points to 55.3
and treasury bills (T-Bills) at BSE increased by
per cent from 59.6 per cent during the same period.
Similarly, the share of ‘Public Sector Undertakings 7.3 percentage points and 1.6 percentage points,

(PSUs) and Institutional Bonds’ and the share of respectively to 27.3 per cent and 11.5 per cent,
‘Others’ category decreased to 2.2 per cent and 4.2 respectively in 2020-21 (Table 4.24).

Table 4.24: Instrument-wise Share of Securities Traded on the WDM Segment (Per cent)

NSE BSE
Category
2019-20 2020-21 2019-20 2020-21
Govt. Dated Securities 59.6 55.3 20.0 27.3
Treasury Bills 27.2 38.3 9.9 11.5
PSU / Institutional Bonds 5.6 2.2 48.6 49.4
Others 7.6 4.2 21.5 11.8
Total 100.0 100.0 100.0 100.0
Source: NSE and BSE

Percentage share of trading members in the cent market share in the previous year. The share of
total turnover in the WDM segment of NSE increased Indian banks decreased to 16.4 per cent in 2020-21
to 69.5 per cent during 2020-21, compared to 45.7 per from 29.7 per cent in the previous year (Table 4.25).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 4.25: Participant-wise share in the Turnover of the WDM Segment at NSE (Per cent)

Category 2019-20 2020-21

Trading Members 45.7 69.5
Indian Banks 29.7 16.4
Foreign Banks 12.1 6.5
Mutual Funds 3.4 3.8
Primary Dealers 2.6 1.9
Domestic Financial Institutions (other than MFs, Insurance, Banks) 4.3 1.3
Corporates 2.1 0.7
 Total 100.0 100.0
Note: Category-wise classification not available for BSE.
Source: NSE

Percentage share of mutual funds in the total 4.2. EQUITY DERIVATIVES MARKETS
turnover in the corporate bonds segment of NSE fell
I. POLICY DEVELOPMENTS
to 34.9 per cent during 2020-21, compared to 37.3 per
cent market share in the previous year. The share of A. 
Rationalisation of Strikes on Long Dated
Indian banks increased to 18.1 per cent in 2020-21 Options and Framework to Disable Existing
from 17.1 per cent in the previous year (Table 4.26). Long Dated Strikes

Table 4.26: 
Participant-wise Trading in the As per the recommendation of Secondary
Corporate Bond Market of NSE Market Advisory Committee (SMAC) and
(Per cent) discussions with the stock exchanges, it was decided
2019-20 2020-21 to rationalise strike intervals for long dated index
Mutual Funds 37.3 34.9 options and also to put in place a framework to
disable existing long dated strikes. Accordingly,
Indian Banks 17.1 18.1
the exchanges decided that strike scheme for the
Insurance Companies 7.5 8.3
respective indices would be minimum of 1 – 1 – 1
Trading Members 6.3 8.2
and maximum of 5 – 1 – 5. Also, the exchanges were
Corporates 7.2 7.9 required to have a ‘minimum percentage-based
Primary Dealers 4.6 6.6 coverage’of the strike intervals and adhere to the
Others 6.0 5.1 suggested strike scheme at the same time. As per
FPIs 7.1 4.3 the new framework, the strike intervals were to be

Domestic Financial designed to ensure a minimum coverage of five per

Institutions (other than 3.6 4.2 cent on either side of the index value. The above
MFs, Insurance, Banks) conditions of minimum and maximum strike scheme
Foreign Banks 3.2 2.4 and minimum percentage-based coverage of strikes
Total 100.0 100.0 on either side was to ensure lower number of strikes
Note: Category-wise classification not available for BSE. at the time of introduction as well as opening of new
Source: NSE strikes due to index movement over the period of

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 Chapter - 4 : Secondary Market

the contract. Additionally, the stock exchanges were times to 33.8 crore in 2020-21 from 0.3 crore in 2019-20,
required to conduct periodic review of available on account of rise in index options trading activity in
strikes in long dated options and disable the illiquid BSE. The turnover of BSE also increased by 133 times
option contracts outside the strike scheme. to `350.6 lakh crore in 2020-21 from `2.6 lakh crore

II. 
MARKET ACTIVITY AND TRENDS in 2019-20. Despite this surge, the percentage share of

OBSERVED BSE in the equity derivatives segment was 5.2 per cent
of the total turnover during 2020-21.
The equity derivatives segment in India
has grown exponentially over the years and has NSE, on the other hand, which accounts for
continued its momentum in 2020-21 as well. In 2020- 94.8 per cent share in turnover of the equity derivatives
21, the total turnover in equity derivatives segment segment, witnessed a big surge in volumes during
increased by 96.8 per cent over the previous year. 2020-21. The number of equity derivative contracts
The ratio of turnover in equity derivatives to that in traded at NSE increased by 66.5 per cent to 853.5
cash segment has increased from 35.7 times in 2019- crore in 2020-21 from 512.5 crore in 2019-20. This was
20 to 41.3 times in 2020-21. driven largely by the growth in the index options.
During 2020-21, BSE witnessed significant The notional turnover at NSE increased by 86.8 per
trading activity in its equity derivatives segment. The cent to `6,436.2 lakh crore in 2020-21 from `3,445.3
number of contracts traded at BSE increased by 125 lakh crore in 2019-20 (Table 4.27).

Table 4.27: Trends in Turnover and Open Interest in the Equity Derivatives Segment

No. of Contracts Turnover Open Interest at the end of the Year

Year Traded (crore) (` lakh crore) No. of Contracts Value (` crore)
NSE BSE NSE BSE NSE BSE NSE BSE
2019-20 512.5 0.3 3,445.3 2.6 31,62,958 515 1,63,122 38
2020-21 853.5 33.8 6,436.2 350.6 61,06,951 1,895 5,80,514 218
Source: BSE and NSE

In total, there were 156 stocks on which year. In terms of number of contracts traded too, index
derivatives products were available for trading at options and stock options’ volume surged by 71 per
NSE and BSE at the end of 2020-21, compared to 144 cent and 67 per cent year on year, respectively, during
stocks at the end of previous year. Index products 2020-21. In terms of number of contracts traded, while
were permitted on four indices of NSE and BSE each. index futures segment grew by 35.1 per cent year on
year in 2020-21, that of stock futures declined by 1.5
At NSE, index options and stock options
per cent year on year (Figure 4.10).
segment witnessed tremendous growth during 2020-
21. The notional turnover of index options and stock For BSE, 100 per cent of the total turnover in
options grew by 89.9 per cent and 114.6 per cent equity derivatives segment was contributed by index
respectively, during 2020-21, compared to previous options.

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Securities and Exchange Board of India Annual Report : 2020-21

Figure 4.10: Trends in Equity Derivatives Segment of NSE

No. of Contracts in Crore Turnover in ` Lakh Crore

Index Index 90.5

12.8 2020-21 2020-21
Futures 9.4 Futures 66.8
2019-20 2019-20

Stock 25.3 Stock 181.0

Futures 25.7 Futures 148.7

Stock 33.0 Stock 263.7

Options 19.8 Options 122.9

Index 782.4 Index 5901.0

Options 457.6 Options 3106.9

0 200 400 600 800 0 2,000 4,000 6,000

Source: NSE

a. Details of New Products in Equity Derivatives Segment

The details of new products approved by SEBI during 2020-21 are mentioned below:

Table 4.28: Time Taken for Regulatory Approval of New product in Equity Derivatives

Sr. Product Relevance of the product for Market Time Taken for
Segment
No. Name Participants and Development of Markets Approval*

1 Equity Nifty • The Nifty Financial Services Index reflects 10 working

Derivatives Financial the behaviour and performance of the Indian days
Services financial services sector which includes banks,
Index financial institutions, housing finance, insurance
Derivatives companies and other financial services companies

• The financial services sector is an important sector

for the economy. It is the largest sector accounting
for ~33 per cent weight in the Nifty 500 index.
FPI assets under management has the largest
exposure to the financial services sector

• Cash settled futures and options in seven serial

weekly excluding the monthly expiry and three
serial monthly contracts are available. The option
contracts are European styled Call Option and Put
Option with strike scheme of 30-1-30 and strike
interval of 100.

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 Chapter - 4 : Secondary Market

Sr. Product Relevance of the product for Market Time Taken for
Segment
No. Name Participants and Development of Markets Approval*

2 Equity Quarterly • NIFTY Bank Index comprises of the most liquid 10 working
Derivatives index and large capitalized Indian Banking stocks. It days
options on provides investors and market intermediaries
Nifty Bank with a benchmark that captures the capital market
Index performance of Indian Banks.

• Providing quarterly index options in addition

to the existing weekly and month expiration
contracts would provide investors with means to
hedge their stock holdings in the long term

3 Equity Futures and • D

 erivatives on single stock allows participant to 15 working
Derivatives options on hedge their risk on a specific underlying. They days
additional are useful in implementing asset allocation
stocks strategies on account of their property of low cost
of diversification

*after Receipt of Complete Information and Documents

III. RISK MANAGEMENT MEASURES cent to 4.1 per cent. However, the per cent share
of single stock futures and index futures dropped
Over the years, index options have emerged
to 2.8 per cent and 1.4 per cent, respectively, in
as the most traded instrument in the Indian equity
2020-21 compared to 4.3 per cent, and 1.9 per cent,
derivatives market. During 2020-21, the share of respectively, in 2019-20 (Table 4.29)
index options in total turnover at NSE consolidated
At BSE, in 2020-21 almost entire trading in
further to 91.7 per cent from 90.2 per cent in the the derivatives segment was in index options only
previous year. Similarly, the percentage share of as compared to 2019-20 wherein trading in index
single stock options at NSE increased from 3.6 per futures constituted 5.7 per cent of the total turnover.

Table 4.29: Product-wise Market Share in Equity Derivatives Segment (Per cent)

NSE BSE
Category\Year
2019-20 2020-21 2019-20 2020-21

Index Futures 1.9 1.4 5.7 0.0

Index Options 90.2 91.7 93.8 100.0

Single Stock Futures 4.3 2.8 0.1 0.0

Single Stock Options 3.6 4.1 0.5 0.0

Total 100.0 100.0 100.0 100.0

Source: BSE and NSE

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Securities and Exchange Board of India Annual Report : 2020-21

Amongst index derivatives, the percentage to 49.4 per cent. On the other hand, the percentage
share of Bank Nifty futures, increased from 41.9 per share of Nifty options increased from 38.6 per cent in
cent in 2019-20 to 50.6 per cent in 2020-21 whereas 2019-20 to 44.8 per cent in 2020-21 and that of Bank
Nifty options decreased from 61.4 per cent to 55.1
that of Nifty futures decreased from 58.1 per cent
per cent (Table 4.30).

Table 4.30: Instrument-wise Share in Index Futures and Options at NSE (Per cent)

Futures Options
Index
2019-20 2020-21 2019-20 2020-21

BANKNIFTY 41.9 50.6 61.4 55.1

NIFTY 58.1 49.4 38.6 44.8
NIFTYIT 0.0 0.0 0.0 0.0
FINNIFTY 0.0 0.1 0.0 0.1
Total 100.0 100.0 100.0 100.0
Source: NSE

NSE introduced weekly expiry options of Bank share of weekly expiry options in total index options
Nifty Index and Nifty 50 Index with effect from May turnover at NSE was 72 per cent as compared to 72.1
27, 2016 and February 11, 2019, respectively. Since, per cent in the previous year. Further, the share of
the introduction of weekly expiry of options of Bank near month options (one-month expiry) in total
Nifty and Nifty, these weekly options emerged as index options turnover at NSE increased slightly
the most traded instrument in the Indian equity to 27.3 per cent from 27 per cent during the same
derivatives market at NSE. During 2020-21, the period (Figure 4.11).

Figure 4.11: Maturity-wise Share in Index Options at NSE

(Per cent)

2019-20
0.9% 2020-21
>1 Months
0.6%

27.0%
1 Month
27.3%

72.1%
Week
72.0%

Source: NSE

Participant-wise analysis in the NSE futures the same (around 85 per cent) at BSE. On the contrary,
and options (F&O) segment shows that the the percentage share of FPIs in the F&O segment
percentage share of proprietary traders in the total of NSE decreased to 13.2 per cent in 2020-21 from
turnover increased to 42.6 per cent in 2020-21 from 19.2 per cent in 2019-20 and the share of ‘corporates’
33.2 per cent in 2019-20, whereas it remained almost category dropped to 6.6 per cent from 9.2 per cent,
during the same period.

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 Chapter - 4 : Secondary Market

The ‘Others’ category (comprising retail and with a total market share of 37.4 per cent in 2020-21,
high net worth individuals (HNIs)), on the other compared to 38.1 per cent in 2019-20. Mutual funds
hand, continues to represent a significant market constituted a miniscule share of 0.1 per cent at NSE
share in the equity derivatives segment of NSE, during 2020-21 (Table 4.31).

Table 4.31: Participant-wise Share in the Equity Derivatives Segment (Per cent)

NSE BSE
Category\Year
2019-20 2020-21 2019-20 2020-21
Proprietary trades 33.2 42.6 85.5 85.1
Domestic Institutions (excluding MFs, Banks and Insurance) 0.0 0.0 0.0 0.0
FPIs 19.2 13.2 0.1 0.0
MFs 0.3 0.1 0.0 0.0
Insurance Companies 0.0 0.0 0.0 0.0
Banks 0.0 0.0 0.0 0.0
Corporate 9.2 6.6 4.3 0.8
Others 38.1 37.4 10.1 14.0
Total 100.0 100.0 100.0 100.0
Source: BSE and NSE

In terms of member category-wise, 37.6 percent trading members who can clear trades of self as well as
of the total turnover in the equity derivatives segment other trading members (TM-CM) (32.5 per cent) and
of NSE was contributed by trading members who were only TM (29.9 per cent). At BSE, 91.7 per cent trades
also self-clearing members (TM-SCM) followed by were done solely by the TM category (Table 4.32).

Table 4.32: Category-wise Share in the Turnover of the Equity Derivatives Segment (Per cent)

BSE NSE
Member Category
2019-20 2020-21 2019-20 2020-21
TM 99.9 91.7 28.8 29.9
TM_CM 0.0 0.0 36.7 32.5
TM_SCM 0.1 8.3 34.4 37.6
PCM 0.0 0.0 0.0 0.0
Total 100.0 100.0 100.0 100.0
Source: BSE and NSE

The top 10 brokers in the equity derivatives other hand, top 10 brokers in the equity derivatives
segment of BSE, who represented just about 0.2 per of NSE, who represented about 21.5 per cent of the
cent of the total clients, contributed 98.5 per cent of total clients, contributed 50.9 per cent to the notional
the total notional turnover in BSE in 2020-21. On the turnover in NSE in 2020-21 (Table 4.33 and 4.34).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 4.33: Top 10 Brokers in the Equity Derivatives Segment of BSE (Per cent)

Percentage Share of Top10 in Percentage Share of Top10 in

Gross / Notional Turnover Total Clients (as on)

2019-20 2020-21 31-Mar-20 31-Mar-21

52.8 98.5 0.2 0.2

Note: the top 10 brokers are selected based on the criteria of highest percentage share in the notional turnover in theequity
derivatives segment of BSE
Source: BSE

Table 4.34: Top 10 Brokers in the Equity Derivatives Segment of NSE (Per cent)

Percentage Share of Top10 in Percentage Share of Top10 in

Gross / Notional Turnover Total Clients (as on)
2019-20 2020-21 31-Mar-20 31-Mar-21
31.7 50.9 13.0 21.5
Note: the top 10 brokers are selected based on the criteria of highest percentage share in the notional turnover in the equity
derivatives segment of NSE
Source: NSE

During 2020-21, in the equity derivatives 4.3. COMMODITY DERIVATIVES MARKETS

segment of NSE, 39.3 per cent trading was through
The year 2020-21 had been a turbulent and
co-location route, followed by non-algo (18.3 per
challenging year for commodity markets in the
cent), direct market access (14.3 per cent), internet
wake of widespread supply chain disruptions and
based trading (13.4 per cent), mobile trading (10.9
demand contraction in most traded commodities.
per cent) and algo (3.7 per cent). In case of BSE’s total
However, in the latter half of the year, prices of major
equity derivatives turnover, 68.7 per cent trading was
commodities rallied, surpassed pre-pandemic levels
through co-location, followed by algo (24.5 per cent)
and reached multiyear highs in few cases. While the
and fast Trade on Web – Neat on the Web route (FOW-
non-agri commodities were influenced by demand-
NOW) (5.5 per cent) (Figure 4.12).
supply imbalance and other global factors like
Figure 4.12: 
Mode of Trading in the Equity China’s swift industrial recovery, strong US dollar,
Derivatives Segment of NSE during rising bond yields and unprecedented scale of fiscal
2020-21 (Per cent) and monetary stimulus; the agri prices were driven

3.7%
by resilience of domestic agri sector, favorable
10.9%
6.2%
5.1% 2020 - 21 Co-location monsoons and commodity specific demand-supply
Non-ALGO
2019 - 20 Direct Market Access factors.
12.7% 34.5%39.3%
13.4% Internet Based Trading

NSE
Mobile The activities in Indian commodity derivatives
ALGO
15.5%
market recovered gradually after recording
14.3%
historically lowest activity in April 2020. In spite
26.1%
of the unprecedented limiting factors, many new
18.3%
commodity products were launched and additional
Source: NSE new segments commenced trading in stock

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 Chapter - 4 : Secondary Market

exchanges during the year. Introduction of futures exchanges by corporates, hedgers and institutional
trading in commodity indices, agri futures segment investors is still nascent. SEBI has been undertaking
at NSE, options in goods contracts at BSE and policies for the development and further expansion of
NSE, options in goods and metal futures segment markets, increase its liquidity with wider participation
at National Commodity & Derivatives Exchange and enhance the ease of doing business. SEBI has also
Limited (NCDEX) - all indicate the robust path been continuously monitoring the markets for any
forward for commodity derivatives markets. price aberration or irregularities.

Commodity derivative markets have an In order to have an effective price discovery

immense potential in Indian economy as they enable of gold on domestic trading platforms, the Union
price discovery, facilitate better risk management, act Budget 2021-22 had proposed for the setting up
as price barometer for agri commodities, and help in of gold spot exchanges with SEBI as the market
price integration. However, scale of participation in regulator (details in Box Item 4.3).

Box Item 4.3: Proposed Framework for Gold Exchange in India and Draft
SEBI (Vault Managers) Regulations, 2021

The Hon’ble Finance Minister in the budget speech for 2021-22 has announced that SEBI will be
regulator for gold exchange. Post the budget announcement, following a discussion between the Ministry of
Finance and SEBI, it had been decided that SEBI would regulate the entire ecosystem of the proposed gold
exchange and SEBI would be the sole regulator for gold exchange including for vaulting, assaying and gold
quality and delivery standards.

To implement the budget announcement, SEBI constituted two working groups. The first working
group was constituted to examine and recommend suitable framework for trading of the “instrument”
representing gold on the exchange platform and settlement by clearing corporation. The second working
group was constituted to understand the Gold ecosystem in India and suggest measures for setting up of the
Gold Exchange including Regulations for Vault Managers.

After extensive consultations, discussions with various stakeholders and considering the
recommendations made by the two working groups, SEBI has issued Consultation Paper on “Proposed
framework for Gold Exchange in India and draft SEBI (Vault Managers) Regulations, 2021”.

Salient features of the proposed framework for Gold Exchange in India

1. Transaction Flow: The entire transaction has been divided into three tranches. In first tranche, physical
gold deposited in the vaults will be converted into the instrument termed as “electronic gold receipt
(EGR)” created by the vault manager. Second tranche will involve trading of EGR on stock exchanges
and its clearing and settlement by Clearing Corporations. In third tranche, the EGR can be converted
into physical gold to be delivered by the vault manager to the beneficial owner.

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Securities and Exchange Board of India Annual Report : 2020-21

2. Single Exchange or Multiple Exchanges: Considering that SEBI has allowed “universal exchanges”,
the existing stock exchanges may deal in EGR through a separate segment or a new exchange may be
set up exclusively for EGR.

3. Product Denomination for Trading and Conversion of EGR into Physical Gold: EGR of one kg /100
grams/50 grams denomination will have the same trading lot and delivery lot. To attract more players to
this market, smaller denominations of say EGR of five grams/10 grams are also proposed to be allowed
for trading but delivery against EGR/s may be permitted once the EGR/s have been accumulated by the
beneficial owner, say, at least, 50 grams or in multiples thereof.

4. Trading and Validity Period of EGR/s: Since EGR will be notified as “securities”, EGR may have
trading features as applicable to other securities and also to have perpetual validity.

5. Fungibility of EGR and Inter-Operability between Vault Managers: Fungibility means that the gold
deposited against EGR-1 can be delivered against surrender of EGR-2. “Inter-operability between Vault
Managers” means that physical gold deposited at one location and with one Vault Manager, can be
withdrawn from different location of same or different Vault Manager. This would allow withdrawal
of physical gold from the preferred location of the buyer, to the extent possible.

6. Settlement Cycle: Settlement of trades shall be carried out on T+1 day.

7. Participants: Banks, FPIs, bullion dealers, jewelers, retail investors, refiners etc. shall be participants on
the proposed Gold Exchange in India.

Salient features of Draft SEBI (Vault Managers) Regulations, 2021

1. Registration: A vault manager seeking registration with SEBI should be a body corporate incorporated
in India. The registration provided will be limited to the storage, safekeeping and other services (as
specified in the regulations) for gold deposited only for the purpose of trading in Electronic Gold
Receipt (EGR).

2. Net worth, security deposit and fees: The vault manager should have a net worth of `50 crore and will
also be required to furnish security deposit. The application fee is `1 lakh and registration fee is `10
lakh.

3. Standard Operating Procedure: The vault manager should have a standard operating procedure
specifying procedures for deposit, storage and delivery, safekeeping of gold, creation of EGR, grievance
redressal, maintenance of infrastructure, etc.

4. 
Deposit and delivery of gold: The gold should be deposited only by the authorized refineries and
nominated agencies and the vault manager should ensure compliance with the good delivery standard
and check necessary documentation. Further, the vault manager should deliver the gold to the Beneficial
Owner only upon communication from depository, after satisfying the vaulting lien.

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 Chapter - 4 : Secondary Market

I. POLICY DEVELOPMENTS alia the eligibility criteria for selection of commodity

futures as underlying for options. According to the
Policy changes undertaken during 2020-21 for
criteria, the underlying ‘futures contracts’ on the
the regulation and development of the commodity
corresponding commodity shall be amongst the
derivatives market are as under:
top five futures contracts in terms of total trading
A. Guidelines for Identification and Selection
turnover value of previous twelve months.
of Location as a Delivery Centre(s)
In order to broaden the choice of the underlying
The delivery centre(s) plays an important
for the launch of options, vide circular dated July
role in the pricing and settlement of the physically
20, 2020, the above-mentioned eligibility criteria
delivered commodity derivatives contract. The
was repealed. Thus, launch of options was allowed
choice of delivery centre(s) is of vital importance
on all the commodity futures traded on the stock
to help the buyers/sellers in arriving at informed
exchanges.
decisions about taking or giving deliveries. Earlier,
C. 
Additional Guidelines on Utilization of Fund
each stock exchange had different criteria for
created out of the Regulatory Fee forgone
identification and selection of a location as a delivery
centre for different commodities, as per its internal In order to encourage the participation of
policy decision. farmers/Farmers Producers Organizations (FPOs)
in agricultural commodity derivatives markets, the
In order to bring uniformity in the guidelines
stock exchanges were directed to create a separate
to be followed by the stock exchanges for selection
fund, out of the regulatory fee so forgone by SEBI
of a location as a delivery centre, vide circular dated
and prescribed guidelines for the utilization of the
May 26, 2020 certain factors were laid down to be
said fund. However, due to low participation by
considered by stock exchanges for identifying a
farmers/ FPOs in agricultural commodity derivatives
particular location as a delivery centre as mentioned
market coupled with the challenges posed by the
below:
pandemic situation, a sizeable portion of the fund
i. Demand/supply dynamics;
had remained unutilized. In light of the same, with
ii. Liquidity of the contract; the objective to ensure optimal utilisation of the said
fund, vide circular dated October 19, 2020 additional
iii. Value chain participants;
activities were permitted for the utilization of the
iv. Infrastructure support; fund as mentioned below:
v. Trade feedback. i. Reimbursement of mandi tax;
B. 
Eligibility Criteria for Selection of ii. Reimbursement of assaying, cleaning, drying,
Underlying Commodity Futures for Options sorting, storage and transportation charges;
on Commodity Futures
iii. Incentivizing option premium;
SEBI vide circular dated June 13, 2017 on
iv. 
Reimbursement of fees levied by clearing
“options on commodity futures -product design and
corporation.
risk management framework” had prescribed inter-

85
Securities and Exchange Board of India Annual Report : 2020-21

Box Item 4.4: Price Protection through Put Options for FPOs/ Farmers

Over the years, farmers have been able to manage their yield related uncertainity due to various
Government policies, improved farm practices and availability of crop insurance. However, price uncertainty
still remains a major challenge for farmers while seeking a minimum income from their crops. Hence, farmers
need to be encouraged to look for price risk management (commodity derivatives market) to lock-in their
price at the time of sowing.

“Put Option” in commodities gives the FPOs/ farmers the right but not the obligation to sell their
produce either on the exchange platform at a pre-decided strike price or at a higher price in the spot market
/mandi, by squaring off the position on the exchange at the prevailing market price. Thus, “Put Option”
works as a perfect tool for FPOs/ farmers through which they can lock the price to ensure minimum income
while also retaining the upside benefits.

For the benefits of FPOs/ farmers, SEBI permitted the exchanges to utilize the regulatory fee forgone
by SEBI, for reimbursement of put option premium for incentivizing the participation of farmers and FPOs
in the contract of options in goods (amongst other activities). NCDEX launched an “Options Familiarization
Program for FPOs” in November, 2020 in Chana and Mustard Seed contracts, wherein FPOs registered as
clients with members of NCDEX were eligible to buy put options and lock-in a price in these two commodities.
The premium cost up to `300 per quintal to purchase the Put options was reimbursed by NCDEX from the
aforesaid regulatory fee forgone by SEBI.

For the said programme, more than 40 FPOs participated in the program and locked in the price on
behalf of farmers for a sale quantity of 1,030 metric tonnes of Chana and 1,980 metric tonnes of Mustard Seed.

The premium cost of buying the put options for more than `80 lakhs was subsidized under the programme.
This helped the FPOs/ farmers to protect their produce worth around `15 crores from a fall in prices between
the sowing and harvesting period. The program concluded during April 2021 with the Final Settlement
Price (FSP) being higher than the strike price. Hence, the FPOs made profits by not exercising the option and
choosing to sell in spot markets/ mandis. However, even if the FSP would have been lower, the FPOs would
have secured price protection as the locked-in price was more than cost of production.

From the encouraging responses received, it seemed that farmers/ FPOs have understood the
nuances and benefits of the product and have become better prepared to participate in such exchange traded
options. The success of the program may further encourage Farmers/FPOs to participate in similar contracts
in other agricultural commodities.

The testimonials of some of the FPOs are available at https://ncdex.com/media/customer-testimonial

D. 
Revision in Daily Price Limits for Commodity commodity derivatives. The DPL in the commodity
Futures Contracts futures market serve an important function of
SEBI vide circulars dated January 15, 2016 and defining the maximum range within which the
September 07, 2016 had issued norms for Daily Price price of a commodity futures contract can move in
Limits (DPL) for agricultural and non-agricultural one trading session. The defined daily price limits

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 Chapter - 4 : Secondary Market

protect investors from sudden and extreme price G. 

Extension Granted to Exchanges for
movements and provide cooling –off period to re- Conducting Grievance Redressal Committee
assess the information and fundamentals impacting Meeting and Arbitration
the price of the commodity futures contract. Vide
An extension was granted to all the exchanges
circular dated January 11, 2021, norms for DPL for
for conducting Grievance Redressal Committee
commodity futures contract (excluding index futures
meeting and arbitration till December 2020 on the
and options) were revised. This was done in order
ground of COVID -19 situation. Further, exchanges
to simplify the DPL and to have category-wise DPL
had been advised to take steps to ensure that Investor
rather than same DPL for all the commodities.
Service Centers facilitate the investors to attend the
According to the new norms, DPL in agricultural
hearings through video conferencing.
commodities has been linked to classification of
commodities into sensitive, narrow and broad H. 
Guidelines Issued to Conduct at least one
categories. For non-agricultural commodities, DPL third of Total Investor Awareness programs
has been prescribed for energy, metals and alloys, for Farmer Producer Organisations and
precious metals, gems and stones and other non- MSMEs
agricultural categories of goods. In addition to
The exchanges had been advised to conduct
the above, norms have also been prescribed for
one third of their total investor awareness programs
calculation of closing price or daily settlement price
(IAPs) for FPOs. Since Multi Commodity Exchange
of the futures contracts.
of India Limited (MCX) and NSE are also dealing
E. 
Amendments pertaining to Mandatory
with non-agricultural commodity contracts, they
Requirement of Permanent Account Number
were advised to conduct one third of IAPs for FPOs
In order to rationalize the compliance and Micro, Small and Medium Enterprises (MSMEs)
requirement of collecting and maintaining copies in every financial year.
of Permanent Account Number (PAN) of clients by
their respective members, vide circular dated March I. 
Standard Operating Procedure for Handling

08, 2021, certain provisions of the SEBI circular dated Investor Claims
September 16, 2016 were reviewed and amended In order to have uniformity and transparency
to enhance the use of e-PAN facility launched by in handling of claims of investors in the cases of
Income Tax (IT) Department. This will enhance the default by TMs, a standard operating procedure
ease of doing business in the commodity derivatives was issued to all the exchanges having commodity
markets. derivatives segment for handling claims of investors
F. 
Frequently Asked Questions on Commodity
J. Consultative approach
Derivatives Trading
Commodity Derivatives Advisory Committee
Frequently asked questions (FAQs) on
(CDAC) was constituted in 2016 to review the norms
commodity derivatives trading were uploaded on
SEBI website for general investors. These FAQs cover, and practices pertaining to commodity derivatives
inter-alia, the basics of regulatory framework, how market and to advise SEBI in drafting new norms
to start trading in commodity derivatives, clearing for development and deepening of the market.
and settlement, ‘do’s and don’ts’, grievance handling The policy decisions and reform measures taken in
mechanism and recent developments in commodity commodity derivatives segment generally emanate
derivatives etc. after extensive consultative processes through

87
Securities and Exchange Board of India Annual Report : 2020-21

CDAC and comments from the investing public and commodity super cycle. During April-May 2020,
stakeholders at large through the public comments commodity prices spiraled downwards as pandemic
process. induced lockdowns suppressed demand. However,
In the 9th meeting of CDAC held on June 18, prices reverted from their lows as the gradual
2020, it was proposed to constitute two sub-groups withdrawal of restrictions since June 2020 led to
namely ‘Sub-group on Agricultural Goods’ and resumption in economic activity and improvement
‘Sub-group on Base Metals/Industrial Metals/Ores, in demand prospects. The rebound of prices to
Coal’ to assist CDAC on various important policy pre-covid levels varied depending on the end-use
matters in a better way. sectors, region, storage conditions and elasticity of
supply. While metal prices rebounded faster that of
a. 
Sub-group on Agricultural Goods: To
energy recovered with a lag.
deliberate and suggest measures for deepening
of the agricultural commodity derivatives An unprecedented event which shook the
markets, increasing participation of farmers/ commodity markets was the negative crude oil
FPOs, ease of doing business by farmers/FPOs, futures prices recorded in April 2020. The plunging
reduction in cost of transaction including crude oil futures prices in March-April reached its
delivery and storage etc. nadir when West Texas Intermediate prices fell
b. 
Sub-group on Base Metals/Industrial Metals/ below zero to USD-37.63 per barrel on April 20,
Ores, Coal: To deliberate and suggest measures 2020 led by the tight storage conditions. This was
for attracting more and more MSMEs, accentuated by the excess supply situation amidst
nudging corporates to hedge on domestic the rising tensions over Saudi Arabia-Russia price
exchanges, product development, guidelines war and production cuts. According to International
for registration of brands/refineries for base Energy Agency (IEA), the global oil demand fell
metals/industrial metals/ores, coal etc. by 8.1 million barrels/day (mb/d), in April,2020,
During 2020-21, three meetings of CDAC the largest in history. On the supply side, global
were held on June 18, 2020, September 02, 2020 and oil production fell by a massive 12 mb/d in May
February 05, 2021. The two subgroups had held one 2020. To further speed up the market rebalancing,
meeting each on December 10, 2020 and December Organization of the Petroleum Exporting Countries
17, 2020. (OPEC) Plus decided on June 06, 2020 to extend
II. 
GLOBAL COMMODITY PRICE their historic output cut of close to 10 mb/d through
MOVEMENTS July, 2020. Since then, crude oil prices firmed up
helped by continued production cut by OPEC
Prices of major commodities exhibited varying
trends during 2020-21 – commencing with descend Plus and withdrawal of lockdown. Though there

to their multi-year low levels in April 2020 driven by were intermittent declines in crude prices, positive
pandemic shock and lockdown to gradual recovery vaccine news and the rapid economic recovery in
and reversion to pre-covid levels supported by Asia, decision of voluntary production cut by Saudi
the unlocking phase and demand revival and Arabia, attack on Saudi Aramaco, all led to surge
ascending to multi-year highs by end of March in crude prices to USD 70 per barrel by mid-March
2021. The current rally in commodities across the 2021. Prices corrected henceforth amidst rising
globe is increasingly touted as the beginning of next infections and short-term demand concerns.

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 Chapter - 4 : Secondary Market

The base metal prices witnessed bullish trend Towards the end of financial year, the price rally
throughout the year after the initial COVID-19 continued owing to supply disruptions, demand
shock. The uptrend in industrial metals was led revival and high input price pressures. Overall,
by resurgent industrial activity in China and other this may have spillover effect on the inflation not
advanced economies coupled with optimism only in commodity importing countries, but also
about US fiscal stimulus. Supply chain disruptions in developed countries on the back of continued
in key producing countries like Chile and Peru, accommodative monetary policy of central banks
transportation difficulties, container shortages and and large fiscal stimulus.
fiscal stimulus measures across economies also As per the commodity price data released by
propelled the base metal prices. Iron ore and copper World Bank, the spot prices of most commodities
gained the most among the metals. showed an upward movement, except that of energy,
In the first half of financial year, gold prices since unlocking phase commenced in June 2020
remained elevated, crossing the historic high of USD (Figure 4.13). The index (annual average) for Energy
2000 level in August 2020. Gold prices were boosted prices (based on nominal US Dollars) decreased by
by its safe haven appeal amidst the uncertainties and 22.3 per cent in 2020-21, as compared to a decrease of
accommodative policies of central banks. Silver also 16.2 per cent in 2019-20; while the Metal and Minerals
peaked to its seven year high in July 2020, supported index (annual average) recorded a rise of 13.8 per
by improving industrial demand, monetary easing cent during the year against 4.4 per cent decline
and weak USD. However, as optimism returned recorded in 2019-20. The global food and agriculture
with announcement of potential vaccines, there were commodity prices indices (annual average) increased
huge sell offs in bullion leading to waning prices. by 11.8 per cent and nine per cent, respectively, in
Strengthening of USD and rising US bond yields also 2020-21 as compared to a fall of 1.2 per cent and 1.8
reduced the attractiveness of gold. per cent, respectively, in previous year.

Figure 4.13: Movement of World Bank Commodity Price Indices

180
160
140
120
100
80
60
40
20
0
Jan-21
Feb-21
Mar-21
Jul-20
Jul-19
Apr-19

Jan-20

Apr-20

Oct-20
Oct-19
Jun-19

Jun-20
Feb-20
Mar-20

Sep-20

Nov-20
Dec-20
Sep-19

Nov-19
Dec-19

Aug-20
Aug-19

May-20
May-19

Energy Agri Metals & Minerals Precious Metals

Source: World Bank

The movement of international commodity be seen in (Figure 4.14). The decline in the month
futures indices viz., S&P World Commodity index of April 2020, triggered by the pandemic situation
and the Thomson Reuters/Jefferies CRB Index vis-a- globally, was prominent across indices. From May
vis the domestic benchmark commodity indices may 2020, the indices started to bounce back to their pre-
covid levels.

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Securities and Exchange Board of India Annual Report : 2020-21

Figure 4.14: Movement of Domestic and International Commodity Futures Indices

225

175

125

75

Feb-21

Mar-21
Jan-21
May-20

Sep-20

Dec-20
Nov-20
Oct-20
Aug-20
Jun-20
Apr-20

Jul-20
MCX iCOMDEX Composite Index NCDEX Nkirshi Index

S&P WCI Index TR CRB Index

Source: MCX, NCDEX, S&P & Reuters

III. PRICE DISCOVERY IN INDIAN MARKETS NKrishi Index, the annualised volatility increased to
AND PRICES OF SELECT / MAJOR 13.7 per cent during the year, as compared to 12.5 per
COMMODITIES TRADED cent in 2019-20.

a. Movement of Commodity Futures Indices b. Commodity Price Movements

In consonance with global uptrend in The prices of most of the commodities traded in
commodity prices, the benchmark domestic domestic exchanges witnessed uptrend during 2020-
commodity indices, MCX iCOMDEX composite and 21. Global factors were dominant in price discovery
NKrishi index, both recorded an uptrend in 2020-21. in internationally referenceable commodities like
MCX iCOMDEX composite index, which is an excess crude oil, natural gas, and base metals like copper,
return index, increased by 26.2 per cent, while the zinc, aluminium, lead and nickel.
NKrishi - the agri commodity index recorded an
Though crude oil prices touched historic lows
increase of 32.7 per cent during the year. Among the
in April 2020, prices recovered in later months with
component indices of iCOMDEX, base metal index
sharp upward movement triggered by production
registered the highest rise of 47.9 per cent followed
cuts by OPEC plus and on anticipation of stronger
by energy index (19.8 per cent) and bullion index
demand. The bullion prices were driven by its safe
(10.4 per cent).
haven appeal, international price trends and domestic
The uptrend in NKrishi index was higher than demand factors. In August 2020, gold price in India
that of MCX iCOMDEX with a gain of32.7 per cent in touched an all-time high of `56,200 per 10 grams
2020-21, as nine out of its 10 constituent commodities on MCX in consonance with international trend,
viz., castor seed, chana, coriander, cotton seed oil while silver rates almost touched `80,000 per kg.
cake, guar seed, jeera, soy bean, turmeric and rm In the second half of the year, gold prices eased on
seed, registered a rising trend in prices towards the stronger USD and signs of economic recovery.
year end. Among non-agri commodities, crude oil
Despite the buoyancy in indices, annualised futures prices registered the maximum gain of 161
volatility for MCX iCOMDEX in 2020-21 remained per cent during the year followed by base metals
the same at 15.8 per cent as in previous year. In case of led by copper contracts which registered the highest

90
 Chapter - 4 : Secondary Market

gain of 122.3 per cent. Gold futures traded at MCX commodity prices, pan-India commodity derivative
recorded the minimum gain of 3.2 per cent during activities witnessed decline as manifested in nearly
the year (Figure 4.15). 42 per cent fall in volume (lots traded) and marginal
The prices of international referenceable agri decline of 0.2 per cent in traded value during
commodities also witnessed significant gains. Crude 2020-21.
palm oil futures traded at MCX reported the highest
Notwithstanding the descent, during 2020-21,
gain of 66.7 per cent followed by soybean (57.9 per
Indian commodity derivatives market witnessed
cent) and refined soy oil (53 per cent). Decline was
significant developments with introduction of
the highest for cardamom and mentha oil contracts
additional products and segments. Some of these
traded at MCX.
products have been successful in changing the
Figure 4.15: 
Variation in Futures Prices (Year-on- hitherto dimensions of the commodity derivative
Year) of Near-month Contracts Traded segment.
at Exchanges during 2020-21
(Per cent) In June 2020, options in bullion contracts

Crude Oil - MCX 161.0

were introduced for trading at BSE and NSE.
Copper - MCX 122.3 With the introduction of bullion options, BSE has
CPO - MCX 66.7

Silver - MCX 61.5 become the second largest exchange in terms of

turnover in commodity derivatives. At NCDEX,
Soy bean - NCDEX 57.9

Nickel - MCX 53.5

Zinc - MCX 53.3 from July 2020, options in futures contracts were
Refined Soy Oil - NCDEX 53.0

Turmeric - BSE 46.4 discontinued and options in goods contracts

were introduced. At the end of March 31, 2021,
Rubber - ICEX 46.4

Turmeric - NCDEX 46.2

Natural Gas - MCX 45.4

options in goods contracts were traded in six agri
RM Seed - NCDEX 38.2

Aluminium - MCX 34.1 commodities at NCDEX viz., wheat, maize, chana,

Steel - ICEX
soybean, guar seed, guargum refined split and
30.2

Lead - MCX 23.1

Coriander - NCDEX 21.9

refined soy oil.
Chana - NCDEX 21.8

Cotton - MCX 21.6

Castorseed - NCDEX 19.9 Commodity index futures trading started

in domestic exchanges with the launch of Agridex
Pepper - ICEX 15.8

Cotton seed oil cake - NCDEX 15.6

Guargum - NCDEX 14.4 index at NCDEX platform in May 2020. Trading in

Guarseed - NCDEX 13.7

Jeera - NCDEX 4.1 futures on non-agri indices began in August 2020

with introduction of futures on iCOMDEX Bullion
Gold - MCX 3.2

Wheat - NCDEX -0.9

Barley - NCDEX -1.2

index/Bulldex and iCOMDEX Metal index/Metldex
ISABGS - ICEX -4.4

Mentha Oil - MCX -17.7 in October 2020 at MCX. With the launch of crude
Cardamom - MCX
degummed soybean contracts at NSE from December
-27.6

-100 -50 0 50 100 150

01, 2020 and steel long contracts at NCDEX from

Source: MCX, NCDEX, ICEX, BSE
January 18, 2021, all the exchanges now have agri
IV. 
MARKET ACTIVITY AND TRENDS and non-agri segments for trading. (Table 4.35)
OBSERVED provides the statistics on the number of permitted
A. Trends in Turnover and traded contracts during 2020-21.
In consonance with the suppressed spot
market activities and in divergence to uptrend in

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Securities and Exchange Board of India Annual Report : 2020-21

Table 4.35: Permitted and Traded Contracts at Domestic Exchanges

No. of Permitted No. of Permitted No. of Traded Contracts

Exchanges Commodities Contracts during 2020-21

Non-Agri Agri Non-Agri Agri Non-Agri Agri

MCX 11 9 27 9 25 6
NCDEX 1 25 1 30 1 30
BSE 5 2 9 2 5 2
NSE 4 1 8 1 4 1
ICEX 2 12 2 12 2 2
Source: All Exchanges

Table 4.36 provides a snapshot of the key indicators of the domestic commodities derivatives segment for year
2019-20 and 2020-21.

Table 4.36: Major Indicators of the Commodity Derivatives Market

Change year -on

2019-20 2020-21
year (Per cent)
A. Indices
Nkrishi
Year-end 3,180 4,221 32.7
Average 3,457 3,591 3.9
MCX i-COMDEX
Year-end 8,256 10,415 26.2
Average 10,254 9,854 -3.9
B. Annualised Volatility (Per cent)
NCDEX Nkrishi 12.5 13.2 5.6
MCX iCOMDEX 15.8 15.8 0.0
C. Total Turnover (` crore)
All-India 92,24,839 92,22,927 -0.02
MCX, of which 86,89,518 82,64,585 -4.9
Futures 83,97,775 80,25,006 -4.4
Options 2,91,743 2,39,579 -17.9
NCDEX, of which 4,42,009 3,18,814 -27.9
Futures 4,41,967 3,18,781 -27.9
Options 42 33 -21.4
BSE, of which 46,439 6,10,023 1213.6
Futures 46,439 4,959 -89.3

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 Chapter - 4 : Secondary Market

Change year -on

2019-20 2020-21
year (Per cent)
Options 0 6,05,064  NA
NSE, of which 6,362 27,839 337.6
Futures 6,362 5,484 -13.8
Options 0 22,355 Na
ICEX (Futures) 40,511 1,666 -95.9
D. Average Annual Open Interest (` crore)
MCX, of which 17,398  16,820 -3.3
Futures 15,242  14,650 -3.9
Options 2,156  2,170 0.6
NCDEX, of which 4,614 2,706 -41.4
Futures 4,614 2,706 -41.4
Options 0 0.15 0.0
BSE, of which 238 196 -17.6
Futures 238 18 -92.4
Options NA 178 NA
NSE, of which 14 4.8 -65.7
Futures 14 2.7 -80.7
Options NA 2.1 NA
ICEX (Futures) 58 5 -91.4

Note: Trading on commodity Options commenced at BSE and NSE in October 2020.
Source: All Exchanges

A. Trends in Turnover accounted for 6.6 per cent share while NCDEX
contributed 3.5 per cent to the turnover. Share of
The pan-India turnover in commodity
NSE and ICEX in overall turnover was 0.32 per cent
derivative segment during 2020-21 was `92,22,927
together.
crore compared to `92,24,839 crore in 2020-21,
indicating a decline of 0.02 per cent. The marginal a. Segment-wise Turnover
decline in turnover was spread across MCX, NCDEX
While the all-India turnover of futures contracts
and ICEX while BSE and NSE recorded an increase
in commodity derivatives registered a decline
on account of the commencement of options segment,
of 6.1 per cent to `83,55,896 crore, that of
which picked up well at these exchanges.
options contracts witnessed a rise of 197.2 per
Exchange-wise break up of turnover shows cent to `8,67,032 crore over the previous year.
that MCX dominated the value traded with 89.6 per The turnover in options contracts increased
cent share in the overall turnover, down from the mainly due to commencement and surge in
94.2 per cent share recorded in 2019-20. BSE turnover trading volume in bullion options at BSE.

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Securities and Exchange Board of India Annual Report : 2020-21

Overall, the share of options contracts rose to b. Participant-wise Turnover

9.4 per cent of all-India turnover in 2020-21 
Data on participant-wise turnover are
from 3.2 per cent share in 2019-20. disseminated by exchanges which is based on

The decline in turnover during 2020-21 the self-declaration provided by the members
pervaded across the product segments except on the category their clients belong to. Value
that of bullion where the traded value rose chain participants (VCPs)/hedgers, FPOs

by 72.7 per cent. While turnover of energy and farmers are the categories of ‘hedgers

segment declined by 52.5 per cent, that of and producers’ who trade on exchange
platform to hedge the risks arising from their
agri segment declined by 26.5 per cent. Gems
economic activities. Category of domestic
and stones contracts which was a well traded
financial institutions includes Category-3
and unique contract at Indian Commodity
alternative investment funds (AIFs), portfolio
Exchange (ICEX) waned as it registered a
management schemes (PMS) and mutual
turnover of `554 crore in 2020-21 compared to
funds. In addition, eligible foreign entities
`27,720 crore during 2019-20. Turnover in base
(EFEs) had also been permitted to participate
metal contracts declined marginally by 0.2 per
to the extent of their exposure in the respective
cent during 2020-21.
commodities. ’Others’ category mainly include
Share of agri turnover in the total commodity client categories of Hindu undivided family
derivative turnover dwindled to 4.7 per cent (HUF), individual proprietorship firms,
in 2020-21 from 6.3 per cent in previous year. partnership firms/limited liability partnership,
The consolidated turnover of agri commodity public and private companies or bodies
derivatives contracts across exchanges was corporate.
`4,29,687 crore during 2020-21. On the other During 2020-21, in the non-agri segment, VCPs
hand, share of non-agri commodity derivatives and hedgers have hedged the highest at MCX
contracts rose to 95.3 per cent in 2020-21 from (Table 4.37). Though it is the highest among
93.7 per cent in 2019-20. exchanges, the share is miniscule at 3.9 per
The commodity index futures contracts were cent of total non-agri turnover. In the non-agri
introduced at MCX in iCOMDEX Bullion segment, trading is concentrated among others
index/Bulldex in August 2020 and iCOMDEX and proprietary traders at all exchanges.
Metal index/Metldex in October 2020. During In the agri segment also, turnover share of
the year, 5.31 lakh contracts were traded proprietary traders and others was the highest
in Bulldex with a traded value of `40,786 for all exchanges. During 2020-21, NCDEX had
crore and 1.12 lakh contracts were traded in witnessed participation to the extent of 6.8 per
Metaldex with turnover of `7,677 crore. The cent of its turnover from VCPs/hedgers and
Agridex futures contracts launched at NCDEX 0.01 per cent from FPOs/farmers.
in May 2020 recorded trading of 6,257 contracts 
As this data shows, hedging and risk
with turnover of `337 crore during the year. In management through the derivative
the inception year, commodity index futures platforms is at nascent stage and institutional
contracts garnered 0.5 percent in the aggregate participation remains much-desired in Indian
turnover. commodity derivative markets.

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 Chapter - 4 : Secondary Market

Table 4.37: Participant-wise Share in Turnover of Commodity Derivatives Market (Per cent)

Domestic Financial
Proprietary Foreign
FPOs/ Farmers VCPs/ Hedger institutional Others
traders Participants
Year investors
Non Non Non Non Non Non
Agri Agri Agri Agri Agri Agri
Agri Agri Agri Agri Agri Agri
MCX
2020-21 0.0 0.0 0.3 3.9 0.4 32.6 0.0 0.0 0.0 0.0 0.6 62.2
2019-20 0.0 0.0 0.3 4.1 0.4 34.4 0.0 0.0 0.0 0.0 0.5 60.3
NCDEX
2020-21 0.0 0.0 6.8 0.0 42.1 0.0 0.0 0.0 0.0 0.0 51.1 0.0
2019-20 0.0 0.0 3.8 0.0 46.5 0.0 0.0 0.0 0.0 0.0 49.6 0.0
BSE
2020-21 0.0 0.0 0.0 0.0 0.0 11.5 0.0 0.0 0.0 0.0 48.0 40.5
2019-20 0.0 0.0 0.0 0.0 0.0 5.6 0.0 0.0 0.0 0.0 48.0 46.4
NSE
2020-21 0.0 0.0 0.0 0.3 17.2 47.5 0.0 0.0 0.0 0.0 0.3 34.8
2019-20 0.0 0.0 0.0 0.0 0.0 4.6 0.0 0.0 0.0 0.0 0.0 95.4
ICEX
2020-21 0.0 0.0 0.0 0.1 11.9 54.6 0.0 0.0 0.0 0.0 7.1 26.3
2019-20 0.0 0.0 0.1 0.5 7.0 63.5 0.0 0.0 0.0 0.0 6.1 22.8
Source: All Exchanges

c. 
Liquidity /Depth of Commodity Derivatives services, rights, interests, events are notified for the
Markets purpose of commodity derivatives contracts. The
details of new products approved by SEBI during
In order to analyse the depth of the market,
the financial year 2020-21 are mentioned below:
turnover in the commodity derivatives
market have been juxtaposed with the GDP a. Commodity Futures Contracts
at market prices. Accordingly, the total value
Commodity futures contracts serve the two
of commodity derivatives traded during 2020-
important economic functions of unbiased price
21 accounts for 47.3 per cent of GDP, showing
discovery and price risk management (hedging)
the potential of further expansion. The
for the value chain participants of a commodity
value of trading of agricultural commodity
viz. farmers/producers, FPOs, processors,
derivatives as a proportion GDP emanating
millers, traders etc.The physical delivery of the
from agriculture and allied activities shows a
underlying commodities also contributes to
decline to 12.3 per cent in 2020-21 from 17.9 per
development of infrastructure in warehousing,
cent in previous year.
assaying and grading facilities etc.
B. Details of New Products approved by SEBI
During the year, approvals were granted to
Under section 2(bc) of the Securities Contracts nine commodity futures contracts as per details
(Regulation) Act, 1956, 91 goods including activities, tabulated below in Table 4.38.

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Securities and Exchange Board of India Annual Report : 2020-21

Table 4.38: 
Median Time Taken for Regulatory Table 4.39: 
Median Time Taken for Regulatory
Approval for Commodity Futures Approval for Futures on Commodity
Contracts Indices Contracts

No. of Median Time Taken for No. Median Time taken for
Applications Approval Applications Approval
approved (in working days) approved (in working Days)

9 13 (19.2) 2 53 (53)

Note 1: For calculation of Median Time Taken (working Note 1: For calculation of Median Time Taken (working
days), processing time has been taken from latest days), processing time has been taken from latest
date of receipt of complete information from the date of receipt of complete information from the
exchanges. exchanges.
2. T
 he figure in bracket represents average number of 2. The figure in bracket represents average number of
working days taken for processing of applications working days taken for processing of applications
from the latest date of receipt of complete from the latest date of receipt of complete
information from the exchanges information from the exchanges
b. Futures on Commodity Indices c. Options in Goods Contracts
SEBI had added another product by way of SEBI had prescribed a framework for product
futures on commodity indices and issued
design and risk management for options in
guidelines for design of commodity indices
goods contracts on January 16, 2020. Option
and product design for futures on commodity
in goods is a simple instrument particularly
indices on June 18, 2019. The instrument of
for use by farmers and FPOs for hedging their
index allows stakeholders to trade in an entire
produce against risk of price fluctuations
segment or basket through a single product.
at the time of harvest of crops. With the use
It is considered to be of immense benefit for
of this instrument, farmers/FPOs can lock-
small and medium enterprises and other small
in a price at the time of sowing or any time
users who are exposed to the volatility in
prices of the entire segment and also provides before harvesting in order to prevent losses

an avenue for participation by retail investors. due to price fall at the time of arrival season
Index-based products are also expected to of the commodity. In case the prices increase,
encourage the participation of institutions such farmers/FPOs can take advantage of higher
as mutual funds, AIFs etc., thereby attracting prices by selling their produce in the spot
broad based participation, enhancing liquidity, market and letting the option expire. During
facilitating hedging and bringing more depth the year, approvals were granted to twenty
to the commodity derivatives market. During (20) options in goods contracts as per details
the year, approvals were granted to two futures tabulated below in Table 4.40.
contracts on commodity indices as per details
tabulated below in Table 4.39.

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 Chapter - 4 : Secondary Market

Table 4.40: 
Median Time Taken Time for Table 4.41: 
Median Time Taken for Regulatory
Regulatory Approval for Options in Approval for Quanto Futures Contracts
Goods Contracts in IFSC

No. Median Time taken for No. Median Time taken for
Applications Approval Applications Approval
approved (in working Days) approved (in working Days)

20 10.5 (17.6) 2 32 (32)

Note: 1. For calculation of Median Time Taken (working Note: 1. For calculation of Median Time Taken (working
days), processing time has been taken from latest days), processing time has been taken from latest
date of receipt of complete information from the
date of receipt of complete information from the
exchanges.
exchanges. 2. The figure in bracket represents average number of
working days taken for processing of applications
2. The figure in bracket represents average number of
from the latest date of receipt of complete
working days taken for processing of applications information from the exchanges
from the latest date of receipt of complete
C. Other Measures
information from the exchanges

Delivery of Gold and Silver conforming to
d. 
Quanto Futures Contracts in International
BIS Standards in Commodity Derivatives
Financial Service Centre
Contracts
SEBI had permitted trading of commodity Bureau of Indian Standards (BIS) had notified
derivatives contracts on non- agricultural the Indian standards for refined gold and silver
commodities in International Financial for good delivery (IS:17278:2019) on December 30,
Service Centre (IFSC) on November 28, 2016. 2019. Pursuant to this, NSE, BSE and MCX had
During 2020-21, approval was granted to commenced empanelling domestic bullion refiners
Quanto futures contracts at IFSC. A Quanto to facilitate delivery of gold and silver conforming
is a type of derivative contract where the to BIS standards on these stock exchanges. Hitherto,
underlying of the contract is denominated gold and silver supplied by only London Bullion
in one currency and the contract is settled Market Association (LBMA) approved suppliers
in another currency at a fixed exchange rate were accepted for delivery in commodity derivatives
thereby eliminating the currency risk. Quanto in Indian exchanges. This measure is expected to
futures are attractive to hedgers and traders encourage domestic refiners of gold and silver and
who wish to have exposure to a foreign asset promote overall development of widely acceptable
but without the corresponding exchange domestic goods delivery standards for these precious
rate risk. Prior to operationalizing of IFSC metals.
Authority, the unified regulator in IFSC, SEBI D. Commodities Physically Delivered through
had granted approval to the following two the Platform
Quanto futures contracts as per the details Among agri commodities traded at NCDEX,
mentioned below in Table 4.41. 92.8 per cent of physical delivery during 2020-21 was

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Securities and Exchange Board of India Annual Report : 2020-21

concentrated in six commodities viz. soybean, cotton In the non-agri segment, maximum quantity
seed oil cake, RM seed, Chana, guar seed and castor was delivered through MCX platform in its base
seed (Table 4.42). At MCX platform, 98 per cent of the metal contracts. Among the base metals, 41.7 per
delivery in agri commodities was in cotton contract. cent of the total quantity delivered was in Zinc
contract.

Table 4.42: Physically Delivered Quantity (in Metric Ton)

2019-20 2020-21
Exchange
Agri Non-Agri Agri Non-Agri
MCX 2,00,022 78,234 59,218 60,372
BSE 8,287 7 280 0.16
NCDEX 6,31,309 0 4,18,010 0
NSE 0 533 0 6
ICEX 2,304 35,504 680 17,317
* For BSE, all delivery in 2020-21 in non-agri was in bullion options while 4.7 MT in NSE was in its Gold Mini contracts
Source: All Exchanges.

E.  Warehouse Capacity Utilization for Exchange end of March 31, 2021. While 53.6 per cent of the
Purposes capacity of registered warehouses was utilised
Data on warehouse capacity utilisation in by MCX across all commodities, NCDEX utilised
Table 4.43 shows that capacity utilisation had 44 per cent of the capacity of warehouses for agri
been the highest for agri commodities as at the commodities.

Table 4.43: Warehouse Capacity Utilisation at Exchanges (As on March 31, 2021)

Total No. of Registered No. of Warehouse Capacity of Capacity

Particulars
Warehouses Service Providers warehouses (MT) Utilised (MT)
MCX
Agri 43 4 1,06,853 66,554
Bullion 23 3 9,878 3,784
Metal 7 3 26,880 6,636
NCDEX
Agri 174 7 6,59,829 2,90,101
Metal 2 2 1,670  NA
BSE
Agri 14 5 20,787 6.3
Bullion 3 3 548 0.4
NSE
Bullion 1 1 520  NA
ICEX
Agri 5 2 93,095 393
Metal 1 2 4,000 1,033
Gems and Stones 1 1 5,000 97
Source: All Exchanges.

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 Chapter - 4 : Secondary Market

V. 
MARKET CONCENTRATION AND RISK Segment-wise share shows that agri segment
MANAGEMENT MEASURES trading is concentrated in NCDEX with turnover
share of 74.2 per cent (Figure 4.17).
A. Market Concentration
Figure 4.17: 
Exchange-wise Contribution of Agri.
Over the years, Indian commodity derivatives
Commodity Derivatives Turnover
market has expanded with many new products and
(2020-21)
segments. With permission given to institutional
investors like Category-3 AIFs, PMS, EFEs and BSE, 1.1%
MCX, 23.5%
mutual funds to trade in commodity derivatives, NSE, 1.1%

there has been an expansion in the eligible categories

ICEX, 0.1%
NCDEX,
of participants. Notwithstanding the above, the 74.2%

market is concentrated among few MIIs, product-

segments and participants.

a. 
Concentration of Trading among Market
Infrastructure Institutions

Presently, though all the exchanges have

commodity derivatives segment, lion’s share
Source: All exchanges
of commodity trading is appropriated by MCX
which is about 89.6 per cent of total turnover in b. 
Concentration among Segments/ Products

2020-21 (Figure 4.16). However, with a pickup Traded

of bullion options at BSE, share of MCX had Of the overall turnover, share of commodity
declined this year compared to 94.2 per cent futures was dominant at 90.6 per cent during
share in 2019-20. 2020-21. Options products which are more

Figure 4.16: 
Exchange-wise Share in Commodity of recent phenomenon accounted for the

Derivatives Turnover in 2020-21 remaining 9.4 per cent share in overall turnover.

In spite of a larger number of contracts available

NCDEX
3.5%
for trading in agri segment and particularly
ICEX those of India specific agri commodities,
MCX 0.02%
89.6% majority of trading in Indian exchanges is
BSE
6.6% concentrated in the non-agri segment. In 2020-
21, the share of agri segment in total traded
NSE
0.3% value was a miniscule 4.7 per cent as against
95.3 per cent in non-agri segment (Figure 4.18).
Over the last two years, trading is increasingly
being driven by non-agri products and share of
agri segment has been declining continuously
every year.

Source: All Exchanges

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Securities and Exchange Board of India Annual Report : 2020-21

Figure 4.18: P
 roduct Segment-wise Concentration During 2020-21, at MCX, the largest exchange,
in Aggregate Turnover the share of turnover in non-agri segment by
‘others’ was 62.2 per cent and that of proprietary
57.8%
60.0%
traders was 32.6 per cent. VCPs/ hedgers share
50.0% 42.7%
40.0%
in turnover was miniscule at 3.9 per cent. At
30.0% 20.4% BSE, in the non-agri, the share of ‘others’ was
17.1% 17.1%
20.0%
6.3% 4.7%
76.9 per cent and that of proprietary traders
10.0% 0.3% 0.01%
0.0%
was 23.1 per cent. The concentration was also
Agri Metals Bullion Energy Gems &
Stones
discernible in the agri segment, for instance
2019-20 2020-21
at NCDEX, the largest agri exchange, 51.1 per
Source: All exchanges cent of turnover was contributed by ‘others’
and 42.1 per cent was by proprietary traders.
Bullion derivatives accounted for more than
Participation of VCPs/ hedgers was slightly
half of the aggregate turnover at 57.8 per cent.
higher at 6.9 per cent vis-à-vis that in non-
Of the volume in bullion derivatives, 88.3 per
agri segment and that of FPOs/farmers was an
cent share was through MCX platform.
insignificant 0.01 per cent.
Across all the exchanges, 41 agri contracts
B. Risk Management Measures
(futures and options) are traded for 32 unique
commodities and/or their variants. However, a. 
Alternate Risk Management Framework
93.8 per cent share of agri segment turnover Applicable in case of Commodities reaching
is concentrated in top 10 commodities viz., Near Zero and Negative Prices
refined soy oil (20.6 per cent), CPO (19.7 per In the past, extreme volatility was observed in
cent), soybean (12.9 per cent), RM seed (9.6 per global commodity prices, and particularly in
cent), chana (9.4 per cent), guar seed (5.7 per the case of crude oil, wherein the prices had
cent), cottonseed oil cake (5.4 per cent), guar declined to zero and subsequently, turned even
gum (5.3 per cent), cotton (3.4 per cent) and negative. In such an extreme volatility situation,
castor seed (1.9 per cent). Of these, top five margins equivalent to even 100 per cent of the
commodities constituted 72.2 per cent share in futures price was not sufficient to cover such
agri turnover. steep price variations in the futures market.
c. Participant-wise Concentration In order to enable risk management framework

Broad categories of participants in the to handle such a scenario of ‘near zero’ and
commodity derivatives markets include negative prices, vide circular dated September
farmers/FPOs, VCPs/hedgers, proprietary 21, 2020 norms were issued regarding alternate
traders, Development Financial Institutions risk management framework (ARMF), which
(DFIs), Eligible Foreign Entities (EFEs) and shall apply in case of commodity prices
“others” representing clients. The institutional reaching near zero or negative value. The
investor participation has not picked up in circular includes, inter-alia, the principles
commodity markets and the trading is highly and the guidelines for the characteristics of
concentrated among’ proprietary traders and such framework along with activation and
others’ in both agri and non-agri segments deactivation triggers for the framework.
across all exchanges. Some of the salient features of ARMF include

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 Chapter - 4 : Secondary Market

theoretical price determination of options VSR. In light of the increased market volatility
using the Bachelier model, minimum margin in the recent past, the adequacy of current VSR
in absolute terms and computation of volatility values used by CCs in their margin framework
based on absolute difference in prices. was examined to ensure that a minimum floor

b. 
Review of Inclusion of Historical Scenarios value of VSR is specified. Vide circular dated

in Standardized Stress Testing in Commodity January 11, 2021, minimum VSR values for

Derivatives Segment underlying commodities were prescribed

based on their volatility viz. high, medium
In light of an unprecedented event of negative
and low as categorised in SEBI circular dated
final settlement price in the crude oil futures
January 27, 2020 on margin framework.
market, vide circular dated September 21,
2020, ARMF was prescribed. Pursuant to the d. Levy of Pre-Expiry Margins

issuance of the above circular, a need was In light of an unprecedented event of negative
felt to review the requirement of including final settlement price in the recent past,
all price movements during the last 15 years vide circular dated February 23, 2021, CCs
in the historical scenarios prescribed for were directed to levy pre-expiry margins.
stress testing. The matter was deliberated in These margins shall be levied on cash settled 
the Risk Management Review Committee contracts, wherein the underlying commodity
(RMRC) and in line with its recommendations, is deemed susceptible to possibility of near
vide circular dated December 21, 2020, the zero and/or negative prices as identified by
criteria for inclusion of historical scenarios exchange/CC. In case of these contracts, pre-
in standardized stress testing in commodity expiry margins shall be levied during the last
derivatives segment was rationalized. The five trading days prior to expiry date, wherein
price movements corresponding to a Z-score they shall increase by five per cent every day.
of 10 will replace extreme price movements The pre-expiry margins are already in place for
beyond that threshold in peak historical returns contracts settled by physical delivery.
of all the commodities, used in stress testing
e. Review of Delivery Default Norms
for determining minimum required corpus
(MRC) of SGF. This will enable the clearing SEBI vide circular dated September 21, 2016
corporation to rationalize the requirements of had prescribed, inter-alia, provisions for
MRC of SGF. the levy of penalty in the event of delivery
default. In this regard, it was necessary to
c. 
Review of Volatility Scan Range for Options
bring out standardization of delivery default
Contracts in Commodity Derivatives
norms, strengthening deterrent mechanism
Segment
and ensuring adequate compensation to the
Vide circular dated June 13, 2017 regarding defaulting party. In light of the same, vide
“Option on Futures”, inter-alia, exchanges circular dated March 23, 2021 delivery default
were advised to fix and determine volatility norms were revised, wherein the penalty
scan range (VSR) values. Further, vide circular on seller for delivery default of agricultural
dated January 16, 2020 on “Option on Goods”, commodities has been increased from three
CCs were advised inter-alia to fix prudent per cent to four per cent of the settlement

101
Securities and Exchange Board of India Annual Report : 2020-21

price plus replacement cost. The penalty on during 2020-21 compared to other emerging market
buyer in case of delivery default has now currencies. The currencies of BRICS1 nation (with
been introduced. In case of buyer default, the the exception of Brazil) appreciated during 2020-
CC shall review the loss incurred by the non- 21. Amongst BRICS currencies, the South African
defaulting party, i.e. seller, at its sole discretion, Rand appreciated the most by 17.5 per cent,
and accordingly, levy penalty upto the extent followed by Chinese Yuan aka Renminbi (7.7 per
of delivery margin, on the defaulting buyer. cent), Indian Rupee (2.8 per cent) and Russian
Rouble (2.7 per cent). The Brazilian Real on the
4.4. CURRENCY DERIVATIVES MARKETS
other hand, depreciated by 10.2 per cent. Amongst
A. 
Policy developments including Regulations
advanced market currencies, the British Pound and
and Circulars
Euro appreciated by 10.1 per cent and 5.8 per cent
Nil. respectively during 2020-21, while the Japanese
B. 
Global Currency Movements and Yen depreciated by 2.7 per cent. Overall, the dollar
Performance of Indian Rupee index depreciated by 5.8 per cent during the same
Indian Rupee remained relatively stable period. (Figure 4.19).

Figure 4.19: Movement of Currencies during 2020-21

4%
20% 2.7%
2%
15%
0%
10% 10.2%
-2%
5%
-2.7% -4%
0% -5.8%
-2.8% -6%
-5%
-7.7%
-10% -8%

-15% -10%
-10.1%
-20% -12%
-17.5%
-25% -14%
Mar-21

Mar-21
Feb-21

Feb-21
Jan-21

Jan-21
Sep-20
May-20

Sep-20

Dec-20

May-20

Dec-20
Oct-20

Oct-20
Nov-20

Nov-20
Apr-20

Jun-20

Aug-20

Aug-20
Jul-20

Apr-20

Jun-20
Jul-20

Real Rouble Rupee Dollar Index Euro

Renminbi Rand Pound Yen

Source: Refinitive

C. Market Activity and Trends Observed derivatives over the years. The Euro, Japanese Yen,
Through trading in currency derivatives, the British Pound and US Dollar are the major currencies
stakeholders can hedge against foreign exchange for which currency derivatives are paired with the
risk and benefit from the Rupee’s movements Rupee. Besides, cross currency pairs are now allowed
against major foreign currencies. There has been to be traded. Presently, in Indian markets, currency
significant increase in volumes of trading in currency derivatives are traded on BSE, NSE, and MSEI.

1
BRICS – Brazil, Russia, India, China and South Africa

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 Chapter - 4 : Secondary Market

The aggregate turnover in the currency of BSE declined by 23.2 per cent during this period.
derivatives segment at all the exchanges increased During 2020-21 NSE consolidated its market share
by 5.8 per cent from `163.8 lakh crore during further to 69.9 per cent (compared to 58.9 per
2019-20 to `173.3 lakh crore in 2020-21. Turnover of centduring 2019-20), in terms of total turnover. Share
NSE and MSEI grew by 25.4 per cent and 117.1 per of BSE reduced to 29.6 per cent in 2020-21 from 40.8
cent respectively during 2020-21 while the turnover per cent in the previous year (Table 4.44).

Table 4.44: Trends in the Currency Derivatives Segment

No. of Contracts Traded Turnover Open Interest at the

Year (Lakh) (` crore) End of Year (` crore)
2019-20 2020-21 2019-20 2020-21 2019-20 2020-21
BSE 9,445 6,905 66,83,274 51,23,763 46 526
MSEI 63 133 45,325 98,395 51,349 63,806
NSE 13,403 15,957 96,54,394 1,21,05,978 17,251 24,962
Total 22,911 22,994 1,63,82,993 1,73,28,136 68,646 89,294
Percentage Share
BSE 41.2 30.0 40.8 29.6 0.1 0.6
MSEI 0.3 0.6 0.3 0.6 74.8 71.5
NSE 58.5 69.4 58.9 69.9 25.1 28.0
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: National Exchanges

a. 
New Products in the Currency Derivatives in the currency derivatives segment during 2020-21
Segment are mentioned below (Table 4.45).
The details of new products approved by SEBI

Table 4.45: Time Taken for Regulatory Approval of New Products in Currency Derivatives

Time
Relevance of Product for Market Participants and
Segment Product Name Taken for
Development of Markets
Approval*

Currency Weekly futures and • With multiple developments unfolding in a short 10 working
Derivatives options on EURINR, span of time in the global market, geopolitical days
GBPINR, JPYINR, uncertainties and ongoing pandemic etc. unfolding
EURUSD, GBPUSD this year, a need was felt to introduce shorter tenor
and USDJPY contracts to provide greater flexibility and precision
to manage short term currency risk.

• The weekly derivatives on currency pairs apart from

reducing time related costs, will also help market
participants to hedge their currency exposure from
short-term market movements
*after receipt of complete information and documents

103
Securities and Exchange Board of India Annual Report : 2020-21

D. Risk Management Measures to 50.2 per cent in the previous year) whereas that

During 2020-21, the share of currency options in at BSE rose to 59.4 per cent from 57.3 per cent in the

total turnover at NSE and BSE consolidated further. previous year. At MSEI, only 0.1 per cent trading was
During 2020-21, percentage share of currency in currency options, whereas rest 99.9 per cent trading
options at NSE increased to 52.7 per cent (compared was in the currency futures segment (Table 4.46).

Table 4.46: Product-wise Market Share in Currency Derivatives Segment (Per cent)

NSE BSE MSEI

Category\Year
2019-20 2020-21 2019-20 2020-21 2019-20 2020-21
Currency Futures 49.8 47.3 42.7 40.6 88.2 99.9
Currency Options 50.2 52.7 57.3 59.4 11.8 0.1
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: National Exchanges

The trading activity in currency derivatives per cent, respectively (compared to 3.9 per cent and
segment was concentrated mainly in USD-INR 1.8 per cent, respectively, in the previous year).
currency pair constituting 88.9 per cent of total Product-wise shares with share in the currency
turnover at NSE, 99.7 per cent of total turnover at derivatives volume show that the USD-INR options
BSE and 97.5 per cent of total turnover at MSEI in emerged as a dominant product with 59.4 per cent
2020-21. During the year, the percentage share of GBP- in turnover at BSE and 52.6 per cent turnover at NSE
INR contracts and EUR-INR contracts in the currency during 2020-21. At MSEI, USD-INR futures had a major
derivatives segment increased to 6.6 per cent and 3.5 share of 97.4 per cent during 2020-21 (Table 4.47).

Table 4.47: Product-wise Market Share in Currency Derivatives Segment (Curremcy Pairs) (Per cent)

NSE BSE MSEI

Type Currency Pair
2019-20 2020-21 2019-20 2020-21 2019-20 2020-21
USD-INR 43.1 36.3 42.6 40.3 84.0 97.4
EURO-INR 1.8 3.5 0.0 0.1 1.8 0.5
GBP-INR 3.9 6.5 0.0 0.2 2.4 2.0
Futures JPY-INR 0.8 0.8 0.0 0.0 0.0 0.0
EURO-USD 0.1 0.0 0.0 0.0 0.0 0.0
GBP-USD 0.1 0.1 0.0 0.0 0.0 0.0
USD-JPY 0.0 0.0 0.0 0.0 0.0 0.0
USD-INR 50.2 52.6 57.3 59.4 11.8 0.1
EURO-INR 0.0 0.0 0.0 0.0 0.0 0.0
GBP-INR 0.0 0.1 0.0 0.0 0.0 0.0
Options JPY-INR 0.0 0.0 0.0 0.0 0.0 0.0
EURO-USD 0.0 0.0 0.0 0.0 0.0 0.0
GBP-USD 0.0 0.0 0.0 0.0 0.0 0.0
USD-JPY 0.0 0.0 0.0 0.0 0.0 0.0
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: National Exchanges.

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 Chapter - 4 : Secondary Market

At NSE, 55.4 per cent of the turnover in the category in 2020-21 followed by corporates (23.1
currency derivatives segment was contributed by per cent). On the other hand, corporates and banks
the proprietary traders category in 2020-21, followed remained the major participants in the currency
by corporates (7.2 per cent). Similarly, at BSE, 55.8 derivatives segment at MSEI in 2020-21 with market
per cent of the turnover in the currency derivatives share of 45.5 per cent and 44.6 per cent, respectively
segment was contributed by the proprietary traders (Table 4.48).

Table 4.48: Participant-wise Market Share in Currency Derivatives Segment (Per cent)

NSE BSE MSEI

Category\Year
2019-20 2020-21 2019-20 2020-21 2019-20 2020-21
Proprietary Trades 57.1 55.4 80.6 55.8 7.3 3.9
Domestic Institutions
0.0 0.0 0.0 0.0 0.0 0.0
(excluding MFs, Banks and Insurance)
FPIs 9.0 8.9 3.1 3.3 0.0 5.6
MFs 0.1 0.1 0.0 0.0 0.0 0.0
Insurance Companies 0.0 0.0 0.0 0.0 0.0 0.0
Banks 1.0 0.5 0.0 0.0 40.4 44.6
Corporate 9.1 7.2 10.6 23.1 47.5 45.5
Others 23.8 27.9 5.7 17.8 4.7 0.4
 Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: National Exchanges.

4.5 INTEREST RATE DERIVATIVES MARKETS During 2020-21, aggregate turnover in the
interest rate derivatives segment across all exchanges
I. 
POLICY DEVELOPMENTS INCLUDING
plummeted by 69.7 per cent. The gross turnover in
REGULATIONS, CIRCULARS
IRD segment of NSE decreased by 73 per cent to
Nil `97,391 crore in 2020-21 as compared to `3,60,811
crore in 2019-20. Similarly, the gross turnover in IRD
II. 
MARKET ACTIVITY AND TRENDS
segment of BSE fell by 57.8 per cent to `42,234 crore
OBSERVED
in 2020-21 from `1,00,045 crore in 2019-20. There
Interest-rate derivatives (IRD) are often used was no trading activity reported in the IRD segment
to hedge risk by institutional investors, banks, of MSEI during 2019-20 and 2020-21. In terms of
companies and individuals to protect themselves percentage share, NSE contributed 69.8 per cent
against changes in interest rates and they can also be whereas BSE contributes to 30.2 per cent of the total
used to increase or refine the holder’s risk profile. turnover of IRDs in India (Table 4.49).

105
Securities and Exchange Board of India Annual Report : 2020-21

Table 4.49: Trends in Interest Rate Derivatives at NSE and BSE

No. of Contracts Traded Open Interest at the

Turnover (` crore)
Year (Lakh) End of Year (` crore)
2019-20 2020-21 2019-20 2020-21 2019-20 2020-21
BSE 49 21 1,00,045 42,234 683 149
NSE 177 48 3,60,811 97,391 1,577 649
Total 226 69 4,60,857 1,39,624 2,260 798
Percentage Share
BSE 21.8 30.4 21.7 30.2 30.2 18.7
NSE 78.2 69.6 78.3 69.8 69.8 81.3
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: BSE and NSE

III. RISK MANAGEMENT MEASURES and almost 100 per cent of the total turnover in IRDs
at BSE and NSE respectively. The percentage share of
During 2020-21, among interest rate derivatives,
futures remained the dominant product at BSE and interest rate options at BSE and NSE stood at 0.9 per

NSE. Interest rate futures constituted 99.1 per cent cent and 0.0 per cent, respectively (Table 4.50).

Table 4.50: Product-wise Share in Interest Rate Derivatives at NSE and BSE (Per cent)

NSE BSE
Category\Year
2019-20 2020-21 2019-20 2020-21

Futures 100.0 100.0 97.5 99.1

Options 0.0 0.0 2.5 0.9

Total 100.0 100.0 100.0 100.0

Source: BSE and NSE

At NSE, 54.4 per cent of the turnover in the the turnover in the interest rate derivatives segment
interest rate derivatives segment was contributed by was contributed by the corporates category followed
the proprietary traders category in 2020-21, followed by proprietary traders category (27.3 per cent) in
by corporates (24.6 per cent). At BSE, 32.9 per cent of 2020-21 (Table 4.51).

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 Chapter - 4 : Secondary Market

Table 4.51: Participant-wise Share in Interest Rate Derivatives at NSE and BSE (Per cent)

NSE BSE
Category\Year
2019-20 2020-21 2019-20 2020-21

Proprietary Traders 70.3 54.4 33.3 27.3

Domestic Institutions (excluding MFs, Banks and Insurance) 0.2 0.7 0.0 0.0

FPIs 1.2 0.6 0.0 0.0

MFs 0.7 1.0 0.3 0.0

Insurance Companies 3.3 3.6 6.3 0.9

Banks 0.7 1.0 0.0 0.0

Corporate 18.3 24.6 27.2 32.9

Others 5.3 14.0 33.0 38.9

 Total 100.0 100.0 100.0 100.0

Source: BSE and NSE

4.6. MARKET INFRASTRUCTURE and Exchange Board of India (Depositories and

INSTITUTIONS Participants) Regulations, 2018 (D&P Regulations),
Stock exchanges, clearing corporations and various circulars issued thereunder.
and depositories are collectively referred to A. Stock Exchanges
as the Market Infrastructure Institutions. MIIs A stock exchange is a platform for facilitating
provide the underlying institutional framework price discovery and risk management of various
for the securities markets with functions such as instruments available for trading. Stock exchanges
trading and surveillance, clearing and settlement, play an important role in the efficient allocation of
dematerialisation and custody of securities. In resources in any economy as the prices discovered
addition to the institutional services provided to the provide a signal for efficient allocation of financial
participants in the primary and secondary markets, resources across corporations. Apart from
MIIs also act as frontline regulators. MIIs are providing platforms for trading, stock exchanges
systemically important institutions for the economy have also been entrusted with various regulatory
and their robust functioning is central for the smooth responsibilities for ensuring market integrity and for
and efficient operation of the markets. protecting investors’ interests. The stock exchanges’
I. 
MIIS - FUNCTIONING AND CEASED regulatory functions include issuer regulations,
OPERATIONS member regulations, trading regulations, investor
The functioning of stock exchanges and clearing protection, maintaining investor protection funds
corporations is governed by Securities Contracts (IPFs) and product design. They also undertake
(Regulation) (Stock Exchanges and Clearing a wide array of support functions like training
Corporations) Regulations, 2018 (SECC Regulations) and education, information/data services and
and that of the depositories by the Securities technology solutions.

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Securities and Exchange Board of India Annual Report : 2020-21

Stock exchanges are granted recognition had permanent recognition namely BSE, NSE,
for their operations in the securities market by CSE. MCX,NCDEX and ICEX. SEBI had renewed
SEBI under Section 4 of the Securities Contracts recognition of MSEI on a yearly basis, which is
(Regulation) Act (SCRA), 1956. As on March 31, currently valid upto September 15, 2021. BSE was
2021 there were six stock exchanges in India which established in 1875 as the first stock exchange in Asia.
(Table 4.52 and 4.53).

Table 4.52: Stock Exchanges with Permanent Recognition

Sr. No. Exchanges Recognition

1 BSE Ltd (BSE) Permanent

2 Calcutta Stock Exchange Ltd * Permanent

3 National Stock Exchange of India Ltd Permanent

4 Multi Commodity Exchange of India Limited Permanent

5 National Commodity & Derivatives Exchange Limited Permanent

6 Indian Commodity Exchange Limited Permanent

Note: *- At present, Calcutta Stock Exchange is under the process of compulsory exit.

Table 4.53: Recognition Granted to Stock Exchanges during 2020-21

Sr. Date of
Exchanges Period Recognition
No. Notification
1 Metropolitan Stock Exchange September 11, 2020 September 16, 2020 to Renewal
of India Ltd September 15, 2021

SEBI formulated the exit policy for de- been initiated against the stock exchange. However,
recognized/non-operational stock exchanges in May the matter is subjudice before Hon’ble Kolkata High
2012. Subsequent to this, SEBI received applications Court.
from de-recognized / non-operational stock Pursuant to the exit policy for de-recognized/
exchanges seeking voluntary exit as stock exchanges. non-operational stock exchanges notified by SEBI in
At present, Calcutta Stock Exchange (CSE) is under 2012, 20 stock exchanges had exited so far. The last
the process of compulsory exit. CSE had not apply exchange to exit was Magadh Stock Exchanges in
for voluntary exit and compulsory exit process had 2019-20 (Table 4.54).

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Table 4.54: Stock Exchanges Already Exited (as on March 31, 2021)

Sr. No. Name of Stock Exchange Date of Exit Order

1 Hyderabad Stock Exchange Ltd January 25, 2013
2 Coimbatore Stock Exchange Ltd April 03, 2013
3 Saurashtra Kutch Stock Exchange Ltd April 05, 2013
4 Mangalore Stock Exchange Ltd March 03, 2014
5 Inter-Connected Stock Exchange of India Ltd December 08, 2014
6 Cochin Stock Exchange Ltd December 23, 2014
7 Bangalore Stock Exchange Ltd December 26, 2014
8 Ludhiana Stock Exchange Ltd December 30, 2014
9 Gauhati Stock Exchange Ltd January 27, 2015
10 Bhubaneswar Stock Exchange Ltd February 09, 2015
11 Jaipur Stock Exchange Ltd March 23, 2015
12 OTC Exchange of India March 31, 2015
13 Pune Stock Exchange April 13, 2015
14 Madras Stock Exchange May 14, 2015
15 Uttar Pradesh Stock Exchange June 09, 2015
16 Madhya Pradesh Stock Exchange June 09, 2015
17 Vadodara Stock Exchange Ltd November 09, 2015
18 Delhi Stock Exchange Ltd January 23, 2017
19 Ahmedabad Stock Exchange Ltd April 02, 2018
20 Magadh Stock Exchange May 08, 2019

B. Clearing Corporations • Recognition to NSE Clearing Limited, for

Clearing corporations carry out the functions a period of three years commencing on the
of clearing, settlement, collateral management and October 03, 2020 and ending on October 02,
risk management. The three clearing corporations 2023.
currently having approval from SEBI (in the non-
• Recognition to Indian Clearing Corporation
commodity markets) are NSE Clearing Limited
Limited, for a period of three years commencing
(formerly NSCCL), Indian Clearing Corporation
on October 03, 2020 and ending on October 02,
of India Limited and Metropolitan Clearing
2023.
Corporation of India Limited.
SEBI, in exercise of the powers conferred under • Recognition to Metropolitan Clearing
Section 4 read with sub-section (4) of Section 8A of the Corporation of India Ltd., for a period of one
Securities Contracts (Regulation) Act, 1956, granted year commencing on October 03, 2020 and
recognition/renewal of recognition to following ending on October 02, 2021.
clearing corporations during the year 2020-21:

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Securities and Exchange Board of India Annual Report : 2020-21

The grant of recognition/renewal of recognition permitted to hold up to five per cent shareholding.
to aforementioned clearing corporations has also The regulations also stipulate eligibility criteria for
been notified in the Gazette of India. acquiring or holding shares of an MII, and require
such acquirer to seek approval from SEBI, either
C. Depositories
prior to acquisition of shares or subsequent to such
Under the dematerialisation process, the acquisition, depending on the percentage of shares
depository enters in its records, the name of the acquired.
owner of the securities as the beneficial owner;
Keeping in mind the role of public interest
while the issuer, on receipt of the physical certificate
directors (PIDs) and managing directors (MDs) in the
from the security holder, cancels the certificate of
governance of an MII, various norms relating to tenure
security and substitutes in its records the name of
and directorships of PIDs and MDs at MIIs had been
the depository as a registered owner. All securities
prescribed under various regulations. The regulations
held by a depository are in fungible form. The
and circulars issued thereunder, also prescribed
dematerialisation process harnessed technology to
the composition of governing board and various
increase efficiency, minimize risk and reduce costs.
regulatory committees at MIIs, with an aim to balance
NSDL and CDSL are the two central securities between the number of PIDs, who serve the interest
depositories in India. The function of the depositories of public at large and the number of shareholder
is to hold securities (like shares, debentures, bonds, directors. Further, considering the importance of the
government securities, mutual fund units etc.) role played by key management personnel (KMP), the
of investors in electronic form. The depositories regulations define KMP in an MII and also stipulate
provide many of their services further through DPs norms relating to disclosure of compensation of such
as their agents. KMPs. Also, in order to enhance transparency in
II. 
OWNERSHIP AND GOVERNANCE OF utilization of resources, MIIs are required to disclose
MIIs the resources committed towards regulatory functions
and towards ensuring regulatory compliance, backed
The Securities Contracts (Regulation)
by an activity based accounting.
(Stock Exchanges and Clearing Corporations)
Regulations, 2012 (SECC Regulations) and the SEBI A. Stock Exchanges
(Depositories and Participants) Regulations, 2018 As of March 31, 2021, the foreign shareholders
(D and P Regulations) and various circulars issued collectively hold about 47 per cent stake in NSE
thereunder, prescribe the norms for ownership (compared to 48.9 per cent as on March 31, 2020). The
and governance at stock exchanges, clearing foreign shareholding in BSE and MSEI was relatively
corporations and depositories. These ownership and lower at 18.5 per cent and 8.1 per cent, respectively
governance norms prescribed by SEBI have evolved as of March 31, 2021 (compared to 24.1 per cent and
over time, taking into consideration that the MIIs are 9.9 per cent respectively as of March 31, 2020).
systematically important public utilities vested with
Followed by the foreign direct investment
regulatory responsibilities under various statutes.
(FDI), next highest shareholding in NSE was of
As prescribed under the SECC Regulations and insurance companies. The insurance companies hold
D and P Regulations, eligible domestic and foreign about 19.3 per cent of the total shareholding in NSE
entities are permitted to hold up to 15 per cent as of March 31, 2021 (compared to 21.1 per cent at the
shareholding in an MII, whereas all other persons are end of March 31, 2020) (Table 4.55).

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Table 4.55: Ownership Pattern of BSE, NSE and MSEI (Per cent)

BSE NSE MSEI

Category
31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21
Foreign Shareholding (A) 24.1 18.5 48.9 47 9.9 8.1
- FDI 7.8 1.9 36.8 38.2 0 0
- FPI 12 10.9 12.1 8.9 0 0
- Others 4.4 5.7 0 0 9.9 8.1
Domestic Shareholding (B) 75.9 81.5 51.1 53 90.1 91.9
- Banks 4.2 1 5.9 4.9 13.4 13.4
- Insurance Companies 6.1 6.6 21.1 19.3 - -
- Domestic Financial Institutions
(Other than Banks and Insurance) 2.4 1.7 5.7 5.4 1.5 1.5
(including MFs, NBFCs, AIFs)
- Individuals 42.4 50.4 4.7 7.5 51.6 54.2
- Corporates 18.3 19 12.9 14 19 18.3
- Others 2.6 2.8 0.8 1.9 4.6 4.6
Total (Foreign + Domestic) 100.0 100.0 100.0 100.0 100.0 100.0
Source: BSE, NSE and MSEI

At the end of March 2021, the shareholding of at 20.7, 43.2 and 30.6, respectively. The detailed
top 10 shareholders at BSE, NSE and MSEI stands shareholding is as given in (Figure 4.20).

Figure 4.20: Top 10 Shareholders of BSE, NSE and MSEI

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Securities and Exchange Board of India Annual Report : 2020-21

B. Clearing Corporations C. Depositories

The three stock exchanges had majority At NSDL, the ‘Banks’ was the largest
ownership in the three clearing corporations i.e. NCL category of shareholders, holding 56.4 per cent of
and ICCL are wholly owned subsidiaries of NSE and the total shareholding in NSDL as on March 31,
BSE respectively while MSEI has majority stake in 2021. As of March 31, 2021, the ‘individuals’ and
MCCIL. Post the introduction of interoperability, ‘corporates’ categories collectively hold 53.1 per
the clearing corporations are also catering to various cent stake in CSDL, of which ‘individuals’ hold
segments of non-associated exchanges through an 28.5 per cent and ‘corporates’ hold 24.6 per cent of
interoperability arrangement in compliance with the total outstanding shares as on March 31, 2021
SEBI circular on interoperability among the CCs. (Table 4.56).

Table 4.56: Ownership Pattern of CDSL and NSDL (Per cent)

CDSL NSDL
 Category
31-Mar-20 31-Mar-21 31-Mar-20 31-Mar-21
Foreign Shareholding 9.0 15.2 9.9 9.9
- FDI - - - -
- FPI 1.8 8.0 - -
- Others 7.2 7.2 9.9 9.9

Domestic Shareholding 91.0 84.8 90.2 90.2

- Banks 15.4 11.7 56.4 56.4
- Insurance Companies 1.9 7.9 3.0 3.0
- Domestic Financial Institutions
(Other than banks and corporates) 17.4 7.2 6.8 6.8
(including MFs, NBFCs, AIFs)
- Individuals 27.7 28.5 - -
- Corporates 24.8 24.6 24.0 24.0
- Others 3.8 4.9 - -
Total (Foreign + Domestic) 100.0 100.0 100.0 100.0
Source: CDSL and NSDL

At the end of March 2021, the shareholding 51 per cent, and 89.2 per cent, respectively. The
of top 10 shareholders at CDSL and NSDL stands at detailed shareholding is as given in (Figure 4.21).

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 Chapter - 4 : Secondary Market

Figure 4.21: Top 10 Shareholders of CDSL and NSDL

III. 
SUMMARY COMPARISON OF MARKET management, price discovery and maintenance of
DEVELOPMENTS AND INVESTOR market integrity.
PROTECTION MEASURES TAKEN BY
The trading segments: cash equity, equity
MIIS
derivatives, currency derivatives and commodity
The development of the capital markets plays segments witnessed growth in volumes. A surge
a significant role in facilitating investment and in participation in secondary market trading was
economic growth. The COVID-19 outbreak is an observed in India on similar lines as was reported
unprecedented global situation in terms of its human by global exchanges. Retail oriented products such
and economic consequences. Even in these difficult as exchange traded funds (ETFs), infrastructure
times, the capital market ecosystem in India has been investment trusts (InvITs), real estate investment
able to function without any significant disruptions trusts (REITs) etc. had also seen significant growth in
as a result of several facilitations provided by the volumes and participation. The growth in secondary
Government, regulators and MIIs. market has also rekindled the primary market which
witnessed decent activity in terms of number of new
SEBI, along with MIIs, had implemented
IPOs and amount mobilized. Demat accounts grew
various measures to reduce the compliance
significantly with nearly three times new demat
burden on various market participants in view of
accounts being opened during the financial year
the prevailing situation. Further, in view of the
compared to that of the previous year.
uncertainty observed owing to concerns relating
to COVID-19 pandemic, SEBI introduced various On the fixed income side, in order to enhance
regulatory measures with the objective of ensuring the transparency and disclosure pertaining to
orderly trading and settlement, effective risk debt schemes and investments by mutual funds

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Securities and Exchange Board of India Annual Report : 2020-21

in corporate bonds/commercial papers, SEBI Investor awareness programmes were

encouraged participation of mutual funds through conducted by MIIs and their respective Investor
exchange operated RFQ platform for debt securities. Protection Funds (IPFs) advising investors not to
get misled by advertisements or influenced by
SEBI had mandated that margin obligations
unsolicited stock tips regarding assured/exorbitant
have to be given by way of pledge/re-pledge in
returns. This included the use of social media
the depository system. Depositories are to provide
campaigns and webinars on investor education
a separate pledge type viz. ‘margin pledge’, for
during the times of the pandemic.
pledging client’s securities as margin to the TM/CM.
The TM/CM is required to open a separate demat Steps were taken by the MIIs to streamline
account for accepting such margin pledge, which the process of redressal of client complaints,
shall be tagged as ‘Client Securities Margin Pledge including creation of online/web interfaces for filing
Account’ (CMPA). Accordingly, TM/CM can accept of complaints, simplification of claim forms for
collateral from clients in the form of securities only ease of filing claims, FAQs to guide the investors,
by way of margin pledge created in the depository formulation of policy and standard operating
system. For the purpose of providing collateral procedures with timelines for evaluation of claims,
in the form of securities as margin, a client can review of awards and declaration of member as

pledge the securities through margin pledge with defaulter. Virtual hearings for investor grievance
redressal mechanism, arbitration and appellate
TM; TM further can re-pledge the same with CM
arbitration matters were facilitated by the MIIs to
and CM in turn can further re-pledge the same to
expedite client complaint resolution.
the clearing corporation. This mitigates the risk of
misappropriation or misuse of clients’ securities In line with SEBI’s directions, depositories
available with TMs/ CMs. The misappropriation or had implemented the facility with respect to
misuse would include use of one clients’ securities to mandatorily obtaining client’s consent through one-
meet the exposure, margin or settlement obligations time Password (OTP) for all off-market transfer of
of another client or of the TM/CM. securities. Further, depositories are also recording
all types of encumbrances, which are specified under
During the financial year 2020-21, MIIs took
Regulation 28 (3) of SEBI (Substantial Acquisition of
several investor awareness, protection and education
Shares and Takeovers) Regulations, 2011.
measures. The exchanges send trade information to
the investors providing the details of the transaction IV. 
DEVELOPMENT AND REGULATION OF
executed by them via SMS and email. This includes BUSINESS IN MIIs
information regarding trades taken place under SEBI released a framework to enable
buyback window. This facilitates timely verification verification of upfront collection of margins from
of the funds and securities balances by the clients. clients in cash and derivatives segments, with effect
Further, it enabled the investors to claim relevant from December 01, 2020. The applicable upfront
exemptions in accordance with the income tax margins were to be collected from clients in advance
guidelines. Under enhanced supervision guidelines, of the trade and the clearing corporations were
trading members are required to upload funds required to send minimum four snapshots of client
and securities balances of their client on a weekly wise margin requirements to TM or CM for them to
basis. This was aimed at ensuring that there is no know the intra-day margin requirement per client in
misutilisation of client funds and securities. each segment.

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To ease investor concerns arising due to made mandatory giving more safety to the clients.
technical glitches, guidelines for Business Continuity To have better visibility of the reasons for off-market
Plan (BCP) and Disaster Recovery (DR) of MIIs were transfers, it was made mandatory to provide reason
issued in March 2021. codes for off-market transfers and the reason codes
were made uniform across the depositories.
Based on trading member feedbacks received
by exchanges, recommendations were made to SEBI During the last financial year, the depositories
to streamline the process of testing and approval took several steps towards ensuring integrity of
of software used by the trading members. The key the depository system such as regular inspection
objectives for the recommendations were based on: (including joint inspection), internal audit and

i. 
Reduce the time for deploying software concurrent audit of depository participants.

solutions for trading in live sessions; and V. POLICY DEVELOPMENTS CONCERNING

ii. Provide flexibility to participate as per their MIIS
convenience instead of monthly mocks for A. 
Amendment to SECC Regulations, 2018
their existing approved algos. to permit setting up of a Limited Purpose
SEBI, after consultation with various Clearing Corporation and to merge SEBI
stakeholders, removed the mandatory mock (Regulatory Fee on Stock Exchanges)
participation and allowed software testing in the Regulations, 2006 with SECC Regulations,
exchange provided simulated environment through 2018
its circular dated November 24, 2020. This was aimed
SEBI notified the Securities Contracts
to help in reducing the member’s operational and
(Regulation) (Stock Exchanges and Clearing
logistical risks and also the compliance challenges
Corporations) (Amendment) Regulations, 2020,
while providing them with a higher flexibility to test
(SECC Amendment Regulations, 2020) on October
their new / existing applications and release the same
08, 2020, to permit setting up of a Limited Purpose
in their production environment at their convenience.
Clearing Corporation (LPCC) for clearing and
The change was effective from December 21, 2020.
settlement of repo transactions in debt securities. A
Several measures were taken towards new chapter was introduced to the SECC Regulations,
development and regulation of depository containing provisions to allow mutual funds to hold
business during the year. Under SEBI’s directions, up to 15 per cent shareholding, contribution by
depositories introduced a system of margin pledge issuers to core SGF, transfer of profits of LPCC to
thereby eliminating the need for a client to carry out core SGF for a period of five years, representation of
title transfer of securities for availing margin benefit, top three issuers of PSU corporate bond issuers on
which gives full visibility to the client of the use of the Board.
his securities by the TM and the CM for securities as
Further, vide amendments dated March 23,
a collateral.
2021 to the SECC Regulations, SEBI merged the SEBI
In order to improve the safety and integrity (Regulatory Fee on Stock Exchanges) Regulations,
of securities market, for all types of off-market 2006 with the SECC Regulations, 2018, in order
transfers, an authentication by the client directly to improve ease of doing business and provide a
with the depository through an OTP mechanism was consolidated view to users of Regulations.

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Securities and Exchange Board of India Annual Report : 2020-21

B. 
Transfer of Excess Contribution made by D. 
Code of Conduct and Institutional mechanism
Stock Exchanges from Core SGF of one for prevention of Fraud or Market Abuse
Clearing Corporation to the Core SGF of
Pursuant to the report of the Committee on
another
Fair Market Conduct (Committee), set up inter-alia
SEBI had been receiving representations to recommend appropriate institutional mechanism
from SEs, requesting to allow transfer of excess to ensure accountability of the management/
contribution made by SEs from core SGF of one designated persons in case of negligence/ failure,
clearing corporation to the core SGF of another necessary changes have been carried out in SEBI
clearing corporation, in interoperable scenario. In (Prohibition of Insider Trading) Regulations, 2015
this regard, vide circular dated January 08, 2021 the (PIT Regulations). Based on the same, it was decided
SEs were permitted to transfer excess contribution that the code of conduct and institutional mechanism
made by them from core SGF of one CC to core SGF for prevention of fraud or market abuse shall be
of another CC. applicable to stock exchanges, clearing corporations
C. 
Outsourcing of Activities, Business and depositories, on the lines of Regulation 9(1) to
Continuity Plan and Disaster Recovery, 9(4) of PIT Regulations. Accordingly, vide circular
Cyber Security and Core SGF of Limited dated March 3, 2021, MIIs were advised to formulate
Purpose Clearing Corporation a code of conduct to regulate, monitor and report
trading by their designated persons and immediate
Towards expeditious setting up of LPCC
relative of designated persons towards achieving
without having to spend much time and capital
compliance with the PIT Regulations, by adopting
to create a new set of core and critical information
the minimum standards set out in Schedule C to
technology (IT) support infrastructure and conserve
the PIT Regulations. The managing director/chief
capital for credit risk management, vide circular
executive officer of the MII will be obligated to frame
dated November 6, 2020, LPCC were permitted to
the referred code of conduct, and the MII is required
enter into outsourcing agreements with existing
to identify and designate a compliance officer to
clearing corporations for the purpose of using
administer the code of conduct. In this regard,
their core and critical IT support infrastructure /
MIIs were advised to put in place an institutional
activities for running the core activities (transaction
mechanism for prevention of fraud or market abuse.
process, clearing and settlement) of LPCC and
related operations. In this regard, broad framework E. Recording of All Types of Encumbrances in
containing the selection process of stock exchanges Depository System
and CCs and responsibilities of LPCC in respect of
SEBI (Substantial Acquisition of Shares and
outsourcing arrangement had also been prescribed.
Takeover) Regulations, 2011 requires promoters of
Additionally, LPCC had also been permitted to enter
a company to disclose details of their encumbered
into outsourcing arrangement with existing MIIs
shares. However apart from pledge, hypothecation
for business continuity plan and disaster recovery
and non-disposal undertakings (NDUs), there was
(BCP & DR) and cyber security requirements.
no framework to capture the details of other types of
Further, the manner of contribution by issuers, CM
encumbrances in the depository system.
and LPCC, instead of contribution of exchanges, in
the core SGF along with requisite changes in default In this regard, vide circular dated July 24,

waterfall applicable for LPCC had been prescribed. 2020, depositories had been directed to put in place

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a system for capturing and recording all types a. 

In the event of disruption of any one or more
of encumbrances, specified under Regulation 28 of the ‘critical systems’, the MII shall, within
(3) of SEBI (Substantial Acquisition of Shares and 30 minutes of the incident, declare that
Takeovers) Regulations, 2011, as amended from time incident as ‘disaster’ and take measures to
to time. Towards this end, depositories need to follow restore operations including from DRS within
processes and other norms similar to that stipulated 45 minutes of the declaration of ‘disaster’.
for the purpose of capturing and recording NDUs in Accordingly, the recovery time objective (RTO)
the depository system. This is apart from pledge and which is the maximum time taken to restore
hypothecation, whose processes and specific norms operations of ‘critical systems’ from DRS after
are separately provided in SEBI (Depositories & declaration of disaster is required to be 45
Participants) Regulations, 2018 and circulars issued minutes and needs to be implemented within
thereon. 90 days from the date of the circular.

F. Framework for Regulatory Sandbox b. MIIs to also ensure that the recovery point
objective (RPO) – the maximum tolerable
SEBI had stipulated the framework for
period for which data might be lost due to a
‘Regulatory Sandbox’ on June 05, 2020. Under
major incident needs to be 15 minutes
this framework, entities regulated by SEBI shall
be granted certain facilities and flexibilities to c. Unannounced live trading from DRS of MIIs
experiment with FinTech solutions in a live isrequired to be done at a short notice of 45
environment and on limited set of real customers for minutes after 90 days from the date of this
a limited time frame. These features were required circular.
to be fortified with necessary safeguards for investor
d. 
All MIIs shall constitute an Incident and
protection and risk mitigation.
Response team (IRT)/ Crisis Management
All entities registered with SEBI under section Team (CMT). IRT/ CMT shall be responsible for
12 of the SEBI Act 1992, shall be eligible for testing the actual declaration of disaster, invoking the
in the regulatory sandbox. The entity may either on BCP and shifting of operations from Primary
its own or engage the services of a FinTech firm. In Data Centre (PDC) to DRS whenever required.
either scenario, the registered market participant
H. 
Measures taken to Enhance the Effectiveness
shall be treated as the principal applicant, and shall
of Investor Protection Fund of Stock
be solely responsible for testing of the solution.
Exchanges
G. Guidelines for Business Continuity Plan and In order to enhance the effectiveness of the
Disaster Recovery of Market Infrastructure Investor Protection Fund (IPF) and to improve the
Institutions investor experience while making claims against
With advancement in technology and defaulting trading members, exchanges were
improved automation of processes, the framework advised to operationalize a detailed standard
for BCP (business continuity plan) and DRS (disaster operating procedure (SOP).
recovery site) for stock exchanges, depositories and The SOP inter alia covers procedures and
clearing corporations was revised vide circular dated timelines for obtaining information from investors,
March 22, 2021. Major points of the circular are - processing investor claims, review of claims and

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Securities and Exchange Board of India Annual Report : 2020-21

timeline for declaration of a TM as a defaulter. The and to allow TM/CM to collect 20 per cent upfront
SOP strengthens existing processes and includes margin in lieu of VaR and Extreme Loss Margin
electronic claim submission, pre-filled forms with (ELM) from the client, without penalizing them for
information as available with the exchange, claim short-collection or non-collection of margin, vide
processing policy, review by independent auditors, circular dated July 31, 2020, it was decided that-
etc. If TM / CM collects minimum 20 per cent
The SOP, which has already been upfront margin in lieu of VaR and ELM from the client,
operationalized is expected to significantly reduce then penalty for short-collection / non-collection of
the timelines for making payments to the investors margin shall not be applicable. However, clearing
in case of defaults by trading member. corporation shall continue to collect the upfront

4.7. INTERMEDIARIES ASSOCIATED margin from the TM / CM based on VaR and ELM.

I. POLICY DEVELOPMENTS The penalty provision for short-collection /

non-collection of upfront margin in cash segment
A. Standard Operating Procedure in the cases of
were implemented with effect from September 01,
Trading Member / Clearing Member Leading
2020.
to Default
C. 
Collection and Reporting of Margins by
A standard operating procedure was
Trading Member / Clearing Member in Cash
prescribed vide circular dated July 01, 2020 to protect
Segment – Clarification on ‘Other Margins’
the interest of non-defaulting clients of a TM and /
or non-defaulting clients / TM(s) of the CM, in cases To relax the conditions with regard to levy of
where SE / CC is of the view that TM / CM is likely penalty for non-collection of “other margins” (other
to default in repayment of funds or securities to its than VaR and ELM) on or before T+2 days from
clients. This harmonized the action amongst all stock clients by TM / CM it was clarified vide circular
exchanges, clearing corporations and depositories in dated September 15, 2020 -
a time bound manner.
a. If pay-in (both funds and securities) is made
B. 
Collection and Reporting of Margins by by T+2 working days, the other margins would
Trading Member / Clearing Member in Cash deemed to have been collected and penalty for
Segment short / non collection of other margins shall not
Vide circular dated November 19, 2019 arise.
guidelines were prescribed for upfront collection and b. If early pay-in of securities has been made to
reporting of margins by TM / CM in cash segment.
the CC, then all margins would deemed to
It was decided that TM/ CM in cash segment
have been collected and penalty for short / non-
will be required to mandatorily collect upfront
collection of margin including other margins
margins from their clients.  Further, TM/CM  would
shall not arise.
be exempted from collecting upfront margins from
the institutional investors and in cases where early c. If client fails to make pay-in by T+2 working
pay-in of securities is made by the clients for sale days and TM / CM do not collect other
transaction. margins from the client by T+2 working days,
the same shall also result in levy of penalty as
In view of the representations received from
applicable.
investors, TMs / CMs, stock broker associations

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D. Execution of Power of Attorneyby the Client E. Recovery of Assets of Defaulter Member and
in favour of the Stock Broker / Stock Broker Recovery of Funds from Debit Balance of
and Depository Participant Clients of Defaulter Member

To protect the interest of investors by 

To enable the SE / CC to monetise the assets
discouraging the use of Power of Attorney (PoA) in (movable and immovable) of the defaulter

the securities market and to mitigate any chances of member including that of debit balance clients

fraud by the brokers, vide circular dated August 27, and utilise the proceeds for settlement of
claims of clients of the defaulter member, it
2020, it was, inter-alia, specified that-
was prescribed that post declaration of trading
a. PoA is optional and should not be insisted upon member as defaulter, SEs and CCs shall, in
by the stock broker / stock broker depository terms of their bye laws, obtain an order from a
participant for opening of the client account. court of law to liquidate the assets (movable and

b. PoA executed in favour of stock broker / stock immovable) of defaulting TM / CM including

/depository participant depository participant that of debit balance clients. The SE / CC shall
initiate such actions within six months of
by the client shall be utilized-
declaration of TM / CM as defaulter for recovery
• For transfer of securities held in the of the assets not in possession of the SE / CC.
beneficial owner accounts of the
F. 
Relaxation in Timelines for Compliance with
client towards stock exchange related
various Regulatory Requirements by Trading
deliveries / settlement obligations arising
Members / Clearing Members / Depository
out of trades executed by clients on the
Participants in view of COVID-19 Pandemic
stock exchange through the same stock
In view of the rising COVID-19 cases,
broker.
relaxations were provided from time to time in
• For pledging / re-pledging of securities in timelines for compliance with various regulatory
favour of trading member (TM) / clearing requirements by trading members / clearing
member (CM) for the purpose of meeting members/ depository participants in respect of the
margin requirements of the clients in following compliances:
connection with the trades executed by
• Processing of the demat request form by Issuer
the clients on the stock exchange.
/ RTA.
It was also decided that all off-market transfer of • Processing of the demat request form by the
securities shall be permitted by the depositories Depository Participants.
only by execution of Delivery Instruction Slip
• KYC application form and supporting
(DIS) or by way of electronic DIS, signed by the
documents of the clients to be uploaded on
client himself. The depositories shall also put
system of KRA within 10 working days.
in place a system of obtaining client’s consent
through One Time Password (OTP) for such • Client Funding Reporting.

off-market transfer of securities from client’s • Reporting for Artificial Intelligence (AI) and
demat account. Machine Learning (ML) applications.

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Securities and Exchange Board of India Annual Report : 2020-21

• Compliance certificate for Margin Trading for G. 

Know Your Client Process and Use of
CM Segment. Technology for the same
• Risk based supervision. SEBI enabled the usage of eSign, DigiLocker,
• Internal Audit Report for half year ending online / App based know your client (KYC), in-person
(HYE) March 31, 2020. verification through video, online submission of
• System Audit Report (Algo). officially valid document (OVD) / other documents
under eSign.The same has been discussed in details
• System Audit Report.
in Chapter 3 of this report.
• Half yearly Net worth certificate in Margin
Trading for CM Segment. H. 
Entities permitted to undertake e-KYC

• Half yearly Net worth certificate for all Aadhaar Authentication service of UIDAI in
Securities Market
members.
• Penalty for non-collection / short collection of Entities in the securities market, as notified by
upfront margins in cash segment. the Central Government and as permitted by SEBI
are allowed to undertake Aadhaar Authentication
• Maintaining call recordings of orders/
under section 11A of the PMLA. The same has been
instructions received from clients.
discussed in detail in Chapter 3 of this report.
• Submission towards weekly monitoring of
client funds under the provisions of Enhanced I. Prior Approval for Change in control
Supervision. SEBI issued clarification with respect to
• Submission of data on monthly basis towards transfer of shareholding among immediate relatives
clients’ and fund balance under the provisions and transmission of shareholding of Intermediaries.
of Enhanced Supervision. The same has been discussed in details in Chapter 3
• Daily margin trading reporting. of this report.

• Update in Income Tax Permanent Account J. 

Amendments to SEBI (Investment Advisers)
Number of Key Management Personnel / Regulations, 2013 and Guidelines for
Directors. Investment Advisers
• Issue of Annual Global Statement to clients. SEBI notified amendments to SEBI (Investment
• Submission of BO Grievances Report to Advisers) Regulations, 2013 on July 03, 2020. These
Depositories. amendments became applicable from September 30,
• Submission of half yearly Internal Audit 2020 and are intended to strengthen the regulatory
Report (IAR) by DPs for half year ended 31st framework for Investment Advisers (IA). Some of
March 2020. the key regulatory changes include:

• Redressal of investor grievances. a. Eligibility Criteria for Investment Advisers

• Transmission of securities. • Net worth requirement increased from
• Closure of demat account. Rupees one lakh to Rupees five lakh for
• Systems audit on annual basis. individuals and from `25 lakhs to `50

• Cyber Security & Cyber Resilience Audit. lakhs for non-individuals.

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 Chapter - 4 : Secondary Market

• Enhanced educational qualifications and administer and supervise IAs registered with SEBI.
experience specified for registration of The circular sought proposal from stock exchanges
IAs. satisfying conditions stated therein.

• Individuals registered as IAs whose In this regard, amendment to IA Regulations

number of clients exceed 150 in total, to 2013 was notified on January 11, 2021 read with
apply for registration with SEBI as non- corrigendum dated January 20, 2021, which requires
individual IA. IAs to seek membership of a body recognized by
SEBI for administration and supervision of IAs.
b. 
Segregation of Advisory and Distribution
The amendment also modified the structure of
activities
fees payable by IAs, while ensuring that the total
• Non-individual IA to have client level cost borne by IAs towards fees (to SEBI and the
segregation at group level for advisory recognized body) remains same as that payable
and distribution activities to avoid by IAs (to SEBI) under the IA Regulations 2013 as
conflict of interest and to provide applicable till March 31, 2021.
advisory services through a separately
L. Procedural Guidelines for Proxy Advisers
identifiable department or division.
Vide circular dated August 03, 2020
• An individual IA to have an option to
procedural guidelines were issued for proxy
register as an IA or provide distribution
advisers with respect to formulation and disclosure
services as a distributor.
of voting recommendation policies, disclosure of
c. 
Mandatory agreement to be entered between methodologies and processes followed for making
IA and client for ensuring greater transparency recommendations, time lines for communication
with reference to advisory activities. with clients and companies, disclosures of conflict of
d. 
The fee charged by IA from a client for interest, etc.
providing investment advice has to be in the In furtherance to the above, vide circular dated
manner as specified by SEBI. December 31, 2020, proxy advisers were mandated
Based on the amended SEBI (Investment to inform their clients regarding any impending
Advisers) Regulations, 2013, ‘Guidelines for material revision in their reports with 24 hours of
Investment Advisers’ were issued vide circular receipt of information thereof and communication of
dated September 23, 2020. These guidelines provide such material revision to clients within 72 hours of
modalities in respect of amendments to SEBI receipt of information.
(Investment Advisers) Regulations, 2013. The IAs M. 
Post Graduate Program in Securities Market
were required to ensure compliance with the said of not less than One Year Offered by NISM as
Guidelines by April 01, 2021. Eligible Qualification for Portfolio Managers,
K. 
Administration and Supervision of Investment Advisers and Research Analysts.
Investment Advisers Amendments to SEBI (Investment Advisers)
Vide circular dated August 06, 2020 it was Regulations, 2013 and SEBI (Research Analysts)
stated, inter alia, that it has been decided to recognize Regulations, 2014 were notified on March 16, 2021.
a wholly-owned subsidiary of the stock exchange to The aforesaid amendments recognize Post Graduate

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Securities and Exchange Board of India Annual Report : 2020-21

Program in Securities Market of not less than one brokers of 35, 46 and 28, respectively, during 2020-
year offered by NISM as eligible qualification for 21. The net reduction in the stock brokers in the
Investment Advisers and Research Analysts. equity derivatives segment of BSE, NSE and MSEI
stood at 23, 45 and 27, respectively. Similarly,
II. REGISTRATION DETAILS
the net reduction in the stock brokers in the
A. Stock Brokers commodity derivatives segment of MCX, NCDEX
During 2020-21, the number of registered and ICEX stood at 56, 18 and 1, respectively, while
stock brokers declined on all the segments (except the stock brokers in the commodity derivatives
commodity derivatives segment) across the segmentof BSE and NSE, saw increase in number
exchanges. The cash segment of BSE, NSE and of registered brokers by 14 and 16, respectively
MSEI saw net reduction in the number of registered (Table 4.57).

Table 4.57: Registered Stock Brokers

Registered Registered Net

Additions Cancellation/
Stock Brokers Stock Brokers Additions
Exchange Details during Surrender of
as on as on during the
2020-21 Memberships
March 31, 2020 March 31, 2021 Year

BSE 1,343 17 52 1308 -35

Cash Segment NSE 1,289 18 64 1243 -46

MSEI 346 2 30 318 -28

BSE 941 19 42 918 -23

Equity
NSE 1,204 22 67 1159 -45
Derivatives
MSEI 334 1 28 307 -27

BSE 579 15 21 573 -6

Currency
NSE 793 11 36 768 -25
Derivatives
MSEI 558 2 36 524 -34

BSE 154 2 7 149 -5

Debt NSE 259 6 11 254 -5

MSEI 14 1 1 14 0

MCX 692 20 76 636 -56

NCDEX 375 4 22 357 -18

Commodities
ICEX 135 2 3 134 -1
Derivatives
BSE 275 19 5 289 14

NSE 268 19 3 284 16

Source: ALL Exchanges

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 Chapter - 4 : Secondary Market

During 2020-21, the majority of stock brokers in equity derivatives, currency derivatives and
were registered as the corporate entities. In the cash commodity derivatives segment ranged between 79
segment, about 85 to 92 per cent of the total stock to 95 across exchanges. In debt segments, about 96
brokers across exchanges were corporate brokers. to 100 per cent of the total brokers were corporates
The percentage of corporate entities (by number) (Table 4.58).

Table 4.58: Classification of Stock Brokers

Name of Total No. Number Percentage Share

Segment Stock of stock Propri- Partner- Corpo- Others Propri- Partner- Corpo- Others
Exchange brokers etorship LLP LLP
ship rate (if any) etorship ship rate (if any)

BSE 1,308 150 31 1,107 20 - 11.5 2.4 84.6 1.5 -

Cash Seg-
NSE 1,243 54 59 1,112 18 - 4.3 4.8 89.5 1.4 -
ment
MSEI 318 16 8 293 1 - 5.0 2.5 92.1 0.3 -

BSE 918 45 16 844 13 - 4.7 1.7 91.9 1.4 -

Equity
NSE 1,159 46 52 1,038 23 - 4.0 4.5 89.6 2.0 -
Derivatives
MSEI 307 15 8 283 1 - 4.9 2.6 92.2 0.3 -

BSE 573 10 10 541 12 - 1.8 1.8 94.4 2.1 -

Currency
NSE 768 15 23 714 16 - 2.0 3.0 93.0 2.1 -
Derivatives
MSEI 524 28 18 476 2 - 5.3 3.4 90.8 0.4 -

BSE 149 2 - 147 - - 1.3 - 98.7 - -

Debt NSE 254 4 5 245 - - 1.6 2.0 96.5 - -

MSEI 14 - - 14 - - 0.0 0.0 100.0 - -

MCX 636 34 36 557 9 - 5.4 5.7 87.6 1.4 -

NCDEX 357 14 22 320 1 - 3.9 6.2 89.6 0.3 -

Commodi-
ties Deriva- ICEX 134 15 12 106 1 - 11.2 9.0 79.1 0.7 -
tives
NSE 284 5 9 262 8 - 1.8 3.2 92.3 2.8 -

BSE 289 2 6 274 7 - 0.7 2.1 94.8 2.4 -

Note: * Others include banks

Source: ALL Exchanges

B. Clearing Members number of registered clearing members at MCXCCL,

During 2020-21, the total number of registered ICCL, and MCCIL fell by 14, 3 and 5 respectively.

clearing members for cash segment at ICCL, NCL On the other hand, the clearing members for equity

and MCCIL fell by 21, 58 and 24, respectively. In derivatives segment at ICCL and NCL increased by 3
the commodities derivatives segment too, the total and 2, respectively (Table 4.59).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 4.59: Registered Clearing Members

Registered Registered
Net
Clearing Additions Cancellation/ Clearing
Additions
Exchange Details Members as during Surrender of Members as
during
on March 31, 2020-21 Memberships on March 31,
the Year
2020 2021

ICCL 1,373 5 26 1,352 -21

Cash
NCL 1,280 11 69 1,222 -58
Segment
MCCIL 344 - 24 320 -24

ICCL 139 11 8 142 3

Equity
NCL 508 26 24 510 2
Derivatives
MCCIL 60 - 9 51 -9

ICCL 97 3 9 91 -6
Currency
NCL 197 11 4 204 7
Derivatives
MCCIL 65 2 10 57 -8

ICCL 41 1 - 42 1

Debt NCL 110 8 4 114 4

MCCIL 5 - - 5 0

MCXCCL 207 20 34 193 -14

NCCL 4 0 0 4 0
Commodities
NCL 42 7 2 47 5
Derivatives
ICCL 40 - 3 37 -3

MCCIL 27 - 5 22 -5
Source: Clearing Corporations

During 2020-21, the majority of clearing about 95 to 100 per cent of the total clearing members
members were registered as corporates. In the were corporate entities. In the cash segment across
debt, equity derivatives, currency derivatives and all the exchanges, about 85 to 92 per cent of the total
commodity derivatives segment of ICCL and NCL, clearing members were corporates (Table 4.60).

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 Chapter - 4 : Secondary Market

Table 4.60: Classification of Clearing Members

Total Number Percentage Share

Name of
No. of
Segment Stock
stock Propri- Partner- Cor- LLP Others Propri- Part- Corpo-
LLP
Others
Exchange
brokers etorship ship porate (if any) etorship nership rate (if any)

ICCL 1,352 154 30 1,146 22 - 11.4 2.2 84.8 1.6 -

Cash
NCL 1,222 52 61 1,092 17 - 4.3 5.0 89.4 1.4 -
Segment
MCCIL 320 16 10 294 - - 5.0 3.1 91.9 - -
ICCL 142 1 - 141 - - 0.7 - 99.3 - -
Equity
NCL 510 7 8 485 10 - 1.4 1.6 95.1 2.0 -
Derivatives
MCCIL 51 - 51 - - - - 100.0 - -
ICCL 91 1 - 87 3 - 1.1 - 95.6 3.3 -
Currency
NCL 204 1 1 197 5 - 0.5 0.5 96.6 2.5 -
Derivatives
MCCIL 57 2 - 55 - - 3.5 - 96.5 - -
ICCL 42 - - 42 - - - - 100.0 - -
Debt NCL 114 - 1 113 - - - 0.9 99.1 - -
MCCIL 5 - - 5 - - - - 100.0 - -
MCXCCL 193 8 8 174 3 - 4.1 4.1 90.2 1.6 -
NCCL 4 4 - - 100.0 - -
Commodities
NCL 47 1 - 45 1 - 2.1 - 95.7 2.1 -
Derivatives
ICCL 37 1 - 36 - - 2.7 - 97.3 - -
MCCIL 22 - 1 21 - - - 4.5 95.5 - -
Source: Clearing Corporations

C. Depository Participants that at CDSL fell by seven. As of March 31, 2021,

During 2020-21, the number of registered there were 592 Depository Participants registered at
depository participants at NSDL fell by four, while NSDL and 276 at CDSL (Table 4.61).

Table 4.61: Registered Depository Participants

Registered Cancellation/ Registered

Depository Surrender of Depository Net Additions
Additions
Depository Participants Memberships Participants during the
during 2020-21
as on during the as on year
March 31, 2020 Year 2020-21 March 31, 2021

NSDL 280 7 11 276 -4

CDSL 599 23 30 592 -7

Source: CDSL and NSDL

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Securities and Exchange Board of India Annual Report : 2020-21

D. Other Registered Intermediaries registered intermediaries as on March 31, 2021 are

The details of new registrations in 2020-21 and given in Table 4.62.

Table 4.62: Registered Intermediaries

Registered New Cancellation/ Registered

Intermediaries Registrations Surrender / Intermediaries
Type of Intermediary
as on March during the during the as on March
31, 2020 Year 2020-21 Year 2020-21 31, 2021

KYC (Know Your Client)

5 0 0 5
Registration Agency (KRA)
Custodians 19 1 1 19
Approved Intermediaries
2 0 0 2
(Stock Lending Schemes)
Proxy Advisors 4 0 0 4
Investment Advisers 1,292 121 48 1,334
Research Analysts 682 61 12 730

E. 
Process of Registration of Various for stock brokers and depository participants was
Intermediaries 21 working days and 14 working days respectively
The median time for processing the applications (Table 4.63).

Table 4.63: Median Time Taken for Approval of Registrations for Intermediaries

Median Time
Type of Applications Applications Application Pending as on for processing
Intermediary Received Granted Rejected March 31, 2021 Applications (in
Working Days)

Stock Brokers 39 33 0 6 21
Depository Participants 27 23 1 4 14

III. SUSPENSION/CANCELLATIONS OF REGISTRATION

There were two suspensions and six cancellations of stock brokers during 2020-21.

Table 4.64: Details of Suspension/Cancellation of Registration of Intermediaries Associated with Securities

Markets

2019-20 2020-21
Type of Intermediary Suspension Cancellation Suspension Cancellation
KYC Registration Agency 0 0 0 0
Stock Brokers 0 0 2 6
Depository Participants 0 1 0 0

126
 Chapter - 5 : Fund Management Activities

CHAPTER FIVE:
Fund Management Activities

P
ooled investment vehicles are intermediation funds (AIFs), real estate investment trusts (REITs) and
mechanisms that are of utmost importance infrastructure investment trusts (InvITs). The pace of
to India’s financial market and economic growth of all these mechanisms have been impressive.
development as they channelize savings into SEBI has put in place an enabling regulatory
productive investment. Indian securities market framework for all fund management activities and
has been witnessing major transformation in fund has been always in the forefront for their further
management activities over the years. Apart from development and broadening as well as to protect the
the conventional institutions like mutual funds (MFs) interest of investors. Figure 5.1 provides a snapshot of
and portfolio managers, at present there are many the share in funds managed by the different pooled
innovative mechanisms like alternative investment investment vehicles as on March 31, 2021.

Figure 5.1: Snapshot of Fund Management Activities (Percentage Share of Funds Managed)

2.0 1.1
3.4
58.5
Mutual funds
35.0

Portfolio Management
Schemes

AIFs

InvITs

REITs

Note: “Investments made” has been taken for AIFs. AUM of advisory services of PMS is excluded

127
Securities and Exchange Board of India Annual Report : 2020-21

5.1 MUTUAL FUNDS In 2020-21, mutual fund industry had to

confront challenges created from liquidity pressures
Mutual funds are indispensable institutions
on few high-risk debt schemes induced by pandemic
for financial development and inclusion as they
induced volatility in markets. However, the storm
aggregate savings from a large number of investors, was weathered smoothly which amply demonstrates
including retail investors and deploy these resources the robustness of the regulatory framework as well
in financial markets, based on different risk-return as the maturity of the industry. SEBI implemented
preferences. There has been a phenomenal expansion several policy measures during 2020-21 to nurture
of mutual fund segment in India as evident in the the growth of the segment in an orderly manner as
growth of sheer size of assets under management well as to instill confidence, transparency and trust
(AUM) within a span of five financial years - from for investors.

`12.3 lakh core at end of 2015-16 to `31.4 lakh crore I. POLICY DEVELOPMENTS
at the end of 2020-21. Hence, promoting the growth A. Reforms in Debt Mutual Funds
of the mutual fund segment while protecting the Details of reforms in debt mutual funds and
interest of its investors has been and will remain as corporate bond markets post closure of certain
one of the important focus areas of SEBI. mutual fund schemes is given in Box Item 5.1.

Box Item 5.1: Major Reforms in Debt Mutual Funds and Corporate Bond Market Post
Closure of Certain Mutual Fund Schemes

Backstop facility for Corporate Debt Securities

Based on experience gained in regulating the bond market over the years and feedback received on the
subject from time to time, particularly in light of the disruption observed in corporate bond market due to
the impact of COVID-19 pandemic, SEBI decided to take a stock of the present status of bond market in the
country, analyse the factors impeding its development and suggest a workable way forward. An internal
task force of SEBI was formed for the purpose which prepared a comprehensive report on the subject which
was shared with the Ministry of Finance (MoF).

The proposal on Backstop facility for corporate bonds was one of the recommendations of the internal Task
Force of SEBI. Subsequently, the issue was also deliberated in Mutual Funds Advisory Committee (MFAC)
and thereafter a working group (WG) of representatives from the mutual fund industry was constituted to
provide its recommendation inter alia on formation of the backstop facility for corporate bonds.

Based on recommendations of the WG, a proposal was drafted which suggested detailed modalities for
creation of the backstop facility for corporate bonds, to be set up with contribution from specified debt MF
schemes and asset management companies with support from the Government of India. The draft proposal
was subsequently shared with the Government and the proposal underwent multiple iterations based
on recommendations from other regulatory agencies, the MoF, World Bank etc. Each iteration included a
thorough analysis of comparable schemes internationally or schemes of government support for various
sectors of the Indian economy.

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 Chapter - 5 : Fund Management Activities

In recognition of the key role of the corporate bond market in the economy, an announcement in the Union
Budget 2021-22 was made with regard to creation of the backstop facility that would purchase investment
grade debt securities both in stressed and normal times and help in the development of the bond market.

The proposed backstop facility will function as an entity on standby and is envisaged to facilitate
liquidity in the corporate bond market and to respond quickly to stress situations, similar to the mechanisms
available in developed markets globally in order to achieve the following:
a. To bring liquidity and stability to the corporate debt market.
b. To address risk aversion during times of stress specially for securities rated below AAA.
c. To build confidence of market participants in the secondary market.
d. To create liquidity options for investors at large.

Currently, SEBI along with other stakeholders, including the Ministry of Finance, is in the process of
finalizing the modalities to implement the budget announcement.

Product Labeling in Mutual Fund Schemes – Risk-o-Meter

SEBI vide circular dated October 05, 2020 issued detailed guidelines for evaluation of risk levels of a
scheme. Pursuant to calculation of risk value of the scheme portfolio based on the methodology specified,
risk level of a scheme shall be depicted by risk-o-meter, which will be evaluated on monthly basis starting
January 2021. SEBI had also specified disclosure related requirements for the risk-o-meter calculated by
the mutual funds. This will enhance the disclosure to the investors which will enable the investors to take
informed decision.

Norms regarding Holding of Liquid Assets in Open-Ended Debt Schemes and Stress Testing of
Open-Ended Debt Schemes

1. To augment the liquidity risk management framework of open-ended debt schemes, mutual funds are
required to maintain at least 10 per cent of their net assets in liquid assets (i.e. in cash, G-sec, T-bills and
repo on Government Securities) in all open-ended debt schemes (except overnight fund, liquid fund,
Gilt Fund and Gilt fund with 10 year constant duration).

2. Mutual funds are also mandated to carry out stress testing for all open-ended debt schemes (except
overnight funds) on monthly basis.

3. An expert committee has been constituted under the aegis of AMFI to provide its recommendations on
assets to be considered as liquid assets for mutual funds and to identify a framework for uniform stress
testing across all open-ended debt schemes (except overnight schemes).

Transaction in Corporate Bonds/Commercial Papers through RFQ platform

In order to boost the liquidity on the exchanges for secondary market bond transactions, mutual funds
have been directed to undertake at least 10 per cent of their secondary markets trades in corporate bonds
through the Request for Quote (RFQ) platform of stock exchanges from October 01, 2020. All transactions
in Corporate Bonds and Commercial Papers wherein mutual fund is on both sides of the trade shall be
executed through RFQ platform of stock exchanges in one-to-one mode.

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Securities and Exchange Board of India Annual Report : 2020-21

Limited Purpose Clearing Corporation

1. In order to develop and deepen the corporate bond market several measures have been taken overtime
by the Government and SEBI. While the fund raising through corporate bonds has progressively risen
overtime, the secondary market trading continues to remain concentrated in top rated categories. Robust
secondary market trading in corporate bonds is a challenge in lower rated papers, which gets further
accentuated during stress times.

2. Towards improving liquidity in the corporate bond market, it was felt that an active repo market is
an essential pre-condition, which would aid active traders, especially market makers, to provide finer
two-way quotes (bid-offer spreads), by enabling them to finance their inventory of bond holdings
through an active repo market. The linkage between repo market and trading in underlying security is
most visible in the G-Sec market.

3. In addition to helping market makers, an active repo market has the following potential benefits:

a. Improving liquidity in the underlying debt securities.

b. Holders of debt have the ability to monetize debt securities without selling the underlying.

c. Using the platform to meet temporary funds and securities mismatch.

d. In the short to medium term, issuers also get benefitted as the prices of bonds may improve due to
improved liquidity and, therefore, in turn, yields may go down thereby reducing the cost to the
Issuers.

4. It was felt that a well-functioning corporate bond repo market may necessitate creating a specialized
Clearing Corporation exclusively focused on development of repo market for corporate bonds and a
specific guarantee fund to provide guarantee for repo transactions.

Towards facilitating setting up of the Limited Purpose Clearing Corporation requisite changes were under
taken in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations,
2018 vide notification dated October 08, 2020 with respect to (a) Ownership Structure, (b) Contribution to
SGF, (c) Composition of the Board, (d) Outsourcing of core activities. Further, Circulars dated November
06, 2020 and December 21, 2020 were issued with respect to business continuity plan, disaster recovery and
cyber security and core settlement guarantee fund (SGF) respectively.

B. Participation of Mutual Funds in Commodity the immediate next expiry day of the same contract
Derivatives Market in India series of the said commodity
Mutual fund schemes participating in exchange Vide circular dated January 15, 2021, it was
traded commodity derivatives (ETCDs) may hold prescribed that mutual funds shall not write options,
the underlying goods in case of physical settlement or purchase instruments with embedded written
of contracts. In that case, vide circular dated June 05, options in goods or on commodity futures. Further,
2020, the holding period of physical goods received it is decided that the following exposures shall not be
in case of physical settlement of exchange traded considered in the cumulative gross exposure:
commodity derivatives contract was modified from i. Short position in ETCDs not exceeding the
the existing 30 days to 180 days for gold and silver. holding of the underlying goods received in
For other goods the holding period was modified to physical settlement of ETCD contracts.

130
 Chapter - 5 : Fund Management Activities

ii. Short position in ETCDs not exceeding the and models, where the discretion of the fund
long position in ETCDs on the same goods. manager is not required for placement of order,

C. Trade Execution and Allocation is not mandated to be placed through OMS

subject to the adherence of the conditions that
a. Vide circulars dated September 17, 2020 and
(i) the AMC shall document and demonstrate
December 31, 2020, it was mandated that asset
that no judgement and discretion of the fund
management companies (AMCs) shall put
manager is required for placement of such
in place a written down policy which inter-
orders and shall ensure that orders in breach
alia details the specific activities, role and
of applicable regulatory limits and allocation
responsibilities of various teams engaged in
limits as specified in Scheme Information
fund management, dealing, compliance, risk
Documents (SIDs), should not be placed and
management, back office etc. with regard to executed (ii) The fund manager shall provide
order placement, execution of order, trade the scheme wise details as required for order
allocation amongst various schemes and other placement such as value of transaction(s),
related matters. nature of transaction(s), etc. to the dealer. (iii)
b. For orders pertaining to equity and equity related The scheme wise audit trail of placement of
instruments, AMCs shall use an automated orders (including the information provided by
Order Management System (OMS), wherein the fund manager), order execution and trade
the orders for equity and equity related allocation shall be maintained along with time
instruments of each scheme shall be placed by stamping of each stage of the process.
the fund manager(s) of the respective schemes. d. 
At all points of time, the responsibility
However, a fund manager may authorize an associated with order placement shall continue
employee of the AMC for order placement on to vest with the fund manager.
his behalf, subject to adherence to conditions
e. All orders of fund manager(s) shall be received
that the order instructions to such employee
by dedicated dealer(s) responsible for order
by the fund manager shall be through
placement and execution. However, in case of
electronic mode i.e. either through e-mail or
orders for arbitrage transactions, stock lending
other electronic utility, wherein scheme-wise
and borrowing transactions, passive schemes
audit trail of such orders starting from the
(such as index funds and ETFs) and schemes
instruction of the fund manager is maintained
investing primarily based on pre-defined rules
along with time stamping of each stage of the
and models, the requirement of a dedicated
process and the employee placing the order
dealer shall not be mandatory.
shall be bound by the same requirements of
f. For all investments, the dealing desk should
maintaining confidentiality and the code of
comply with measures such as all conversations
conduct as applicable to the fund manager in
of the dealer shall be only through the dedicated
respect of order placement.
recorded telephone lines, restriction on mobile
c. The orders in case of arbitrage transactions, phone and other communication devices other
stock lending and borrowing transactions, than the recorded telephone lines, restricted
passive schemes (such as index funds and access to internet facilities on computers and
exchange traded funds (ETFs) and schemes other devices inside the dealing room and no
investing primarily based on pre-defined rules sharing of information by dealer except for

131
Securities and Exchange Board of India Annual Report : 2020-21

trade execution under the approved internal with the existing applicable Acts and other
policy. SEBI Regulations and also to address certain
g. Orders by dealer are required to be placed operational difficulties, SEBI, in consultation
either for each scheme individually or pooled with various stakeholders, undertook a
on the basis of orders from multiple schemes detailed exercise on review of SEBI (Mutual
as per the trade allocation policy of the AMC. Funds) Regulations, 1996 and various circulars
issued thereunder (called as Regulatory
h. In case of pooled orders, post-trade allocations
Revamp exercise). Accordingly, the major
shall be on pro-rata basis as per the size of
amendments notified on February 05, 2021 are
the order placed based on weighted average
as under:
price. The policy is required to clearly include
scenarios / situations in which deviation from i. Eligibility Criteria for Sponsoring a Mutual
the allotment of units on pro-rata basis would Fund
be permissible, with prior written approval of
Sponsors which are not fulfilling the
chief investment officer, risk officer and the
profitability criteria at the time of making
compliance officer with detailed rationale for
application, may also be considered eligible to
such deviation.
sponsor a mutual fund subject to fulfilling all
i. In cases of requirement of placing certain other eligibility criteria and having a net worth
margins /collaterals, policy shall include of not less than `100 crore for the purpose of
details on how such margins / collaterals shall contribution towards the net worth of the
be segregated / placed from amongst various AMC. In such case, the net worth of the AMC
schemes without affecting the interest of the shall not be less than `100 crore and has to be
investors. maintained till the time AMC makes profit for
j. 
Audit trail of activities related to order five consecutive years.
placement, trade execution and allocation
ii. Net Worth of AMC
shall be available in the system. Further, there
should be time stamping with respect to order • While making application, the net worth
placed by fund manager (or the order placed shall be more than the proposed capital
by the employee of the AMC authorized by the contribution of the sponsor in the AMC
fund manager), order placed by dealer, order (in case of setting up of a new mutual
execution and trade allocation in the OMS. The fund). Further, in case of acquisition of
audit trail and time stamping of all other orders shares of an existing AMC of a mutual
(including orders through RFQ platform) not fund leading to change in control, the net
placed through OMS shall also be adequately worth of the sponsor shall be more than
maintained. the aggregate par value or market value
D. 
Review of SEBI (Mutual Funds) Regulations, of the shares so acquired, whichever is
1996 and Circulars Issued thereunder higher.

a. 
Amendments to SEBI (Mutual Funds) • A latest net worth certificate from the
Regulations, 1996 statutory auditor shall be provided along
In order to examine certain policy proposals, with the application.
to remove redundant provisions, to align

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 Chapter - 5 : Fund Management Activities

• All AMCs are required to maintain the b. Regulatory Revamp Exercise

minimum net worth on a continuous Pursuant to notification of amendments to
basis. MF Regulations on February 05, 2021, vide
• To make computation of net worth of circular dated March 04, 2021 fresh guidelines
AMCs more robust, loans and advances were issued and/or the existing guidelines
given by AMC to either sponsor, were modified on various areas such as
associates or group company of sponsor cumulative gross exposure limits, investment
and associates or group company of asset pattern, procedure for change in control of
management company shall be excluded AMC, dispensing with requirements of filing
while computing the net worth of the of hard copy of the monthly cumulative

asset management company. report (MCR), AMC’s annual reports for

unitholders, annual information report by
iii. Segregation and Ring- Fencing of Assets and
AMC, investment/ trading in securities by
Liabilities of Mutual Fund Schemes
employees of AMC(s) and trustees of mutual
All assets and liabilities of each scheme shall funds and allowing employees of AMCs
be segregated and ring-fenced from other and trustees to avail discretionary portfolio
schemes of the mutual fund in addition to management services subject to compliance
the existing requirement of segregating bank with all applicable SEBI Regulations and
accounts and securities accounts. circulars. It also includes various guidelines
pertaining to advertisements of mutual fund
iv. Other Amendments
schemes, disclosure of performance of mutual
Other amendments to MF Regulations fund schemes, undertaking from trustees for
include dispensing the requirement to issue new scheme offer document, definition of
physical unit certificates, reducing maximum key personnel, frequency for updation of SID
permissible exit load, reducing the timeline for and key information memorandum (KIM),
payment of dividend, permitting other modes disclosures of votes cast by mutual funds,
for payment of dividend and providing clarity dividend distribution procedure for mutual
with respect to payment of interest and penalty funds, seeking comments from SEBI for
in case of delay in dividend payment, exclusion change in fundamental attribute, exit period
of common independent directors from the for unitholders for change in fundamental
ambit of the term “associate”, mandatory attributes, removal of provisions of Rajiv
approval from SEBI in case of fundamental Gandhi Equity Savings Scheme (RGESS),
attribute changes in mutual fund schemes, inclusion of newer modes of payments and
giving option to unitholders for their consent dispatch, prescribing the timelines for quarterly
/ approval through postal ballot wherever filing of the transaction reports by trustees,
required, guidelines with respect to minimum timelines for issuance of consolidated account
duration of exit period to be provided to statement (CAS), treatment of non-convertible
unitholders, defining the term Equity related preference shares (NCPSs), applicability of
instruments, advertisements in vernacular exit load, additional benchmark for different
language(s) shall contain the standard warning categories of schemes, clarification with regard
in the vernacular language etc. to record date of dividend etc.

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Securities and Exchange Board of India Annual Report : 2020-21

E. 
Uniformity in Applicability of Net Asset H. Asset Allocation of Multi Cap Funds
Value Vide circular dated September 11, 2020, it was
To bring uniformity in applicability of net asset mandated that multi cap schemes of mutual funds
value (NAV) across various schemes, vide circular had to invest a minimum of 25 per cent each in large,
dated September 17, 2020, it was mandated that ‘in mid and small cap stocks, with the balance 25 per
respect of purchase of units of mutual fund schemes cent in any large, mid or small cap stocks giving
(except liquid and overnight schemes), closing NAV flexibility to the fund manager. This was aimed at
of the day shall be applicable on which the funds are diversifying the underlying investments of multi cap
available for utilization irrespective of the size and funds across the large, mid and small cap companies
time of receipt of such application. The same had and be true to label.
been made effective from February 01, 2021. I. Review of Dividend Option(s) / Plan(s) in
F. Listing of Mutual Fund Schemes that are in case of Mutual Fund Schemes
the Process of Winding Up In order to clearly communicate to the investor
Units of mutual fund schemes that are in the that, under dividend option of a mutual fund scheme,
process of winding up were allowed to be listed certain portion of capital (equalization reserve) can
on the stock exchanges vide circular dated May 20, be distributed as dividend, the dividend option

2020. In a scenario when winding up process of an was renamed as income distribution cum capital

open-ended scheme may take considerable time withdrawal option vide circular dated October
05, 2020. Further, AMCs were required to ensure
to be completed, this direction provides a possible
that whenever distributable surplus is distributed,
channel for exit to the unitholders through the stock
a clear segregation between income distribution
exchange mechanism.
(appreciation on NAV) and capital distribution
G. 
Transaction in Corporate Bonds/Commercial
(equalization reserve) shall be disclosed in the
Papers through RFQ Platform and Enhancing
consolidated account statement (CAS) provided to
Transparency Pertaining to Debt Schemes investors. The same has been made effective from
In order to boost the liquidity on the exchanges April 01, 2021.
for secondary market bond transactions, vide circular J. 
Enhancement of Overseas Investment Limits
dated July 22, 2020, mutual funds were directed to for Mutual Funds
undertake at least 10 per cent of their secondary
In order to better utilize the overall industry
markets trades in corporate bonds through the
limits and based on representations received from
Request for Quote (RFQ) platform of stock exchanges
market participants, vide circular dated November
from October 01, 2020. All transactions in corporate
05, 2020, investment limits per mutual fund were
bonds and commercial papers wherein mutual fund
enhanced as follows:
is on both sides of the trade were required to be
• Overseas investments subject to a maximum
executed through RFQ platform of stock exchanges in
of USD 600 million per mutual fund (earlier
one-to-one mode. Mutual funds were also mandated
USD 300 million per mutual fund), within the
to disclose their portfolio every 15 days. This was
overall industry limit of USD seven billion.
aimed to enhance the transparency pertaining to
debt schemes and investments by mutual funds in • Investments in overseas ETFs subject to a
corporate bonds/commercial papers. maximum of USD 200 million per mutual fund

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 Chapter - 5 : Fund Management Activities

(earlier USD 50 million per mutual fund), within to appoint a dedicated officer with adequate
the overall industry limit of USD one billion. professional qualification and experience who will

Allocation methodology and reporting format be considered as an employee of the trustees. The

was also introduced. This enhancement was aimed scope of work for the said officer shall be specified
by trustees. Further, trustees shall also be requiring
towards better utilization of overall industry limits.
to have standing arrangements with independent
K. Introduction of ‘Flexi Cap Fund’
firms for special purpose audit and/or to seek legal
In order to give more flexibility to mutual advice in case of any requirement as identified and
funds and taking into account recommendations of whenever considered necessary.
Mutual Fund Advisory Committee (MFAC), vide
O. 
Review of Guidelines related to Inter Scheme
circular dated November 05, 2020, a new category
Transfers of Securities
named ‘Flexi Cap Fund’ was introduced under
In order to ensure that inter scheme transfers
equity schemes. A scheme under this category shall
(IST) of securities are done at the prevailing market
be required to have a minimum of 65 per cent of its
price for quoted instruments on spot basis and the
total assets invested in equity and equity related
securities so transferred are in conformity with the
instruments. Type of scheme (uniform description
investment objective of the scheme to which such
of scheme) was set out as ‘an open-ended dynamic
transfer has been made, vide circular dated October
equity scheme investing across large cap, mid cap,
08 ,2020, the following additional safeguards were
small cap stocks’.
prescribed -
L. Revision of Monthly Cumulative Report
i. In case of close-ended schemes, IST purchases
Pursuant to introduction of new scheme would be allowed within three business days
category and to bring transparency in reporting of of allotment pursuant to new fund offer (NFO)
segregated portfolios, vide circular dated January and thereafter, no ISTs shall be permitted to/
29, 2021, monthly cumulative report format was from close-ended schemes.
modified.
ii. In case of open-ended schemes, ISTs shall be
M. 
Review of Format and Time Period for allowed for limited purpose, such as meeting
Disclosure of Transactions in Debt and liquidity requirement for unanticipated
Money Market Securities redemption pressure, rebalancing duration/
To enhance transparency and prompt issuer/ sector/ group related breach of
disclosures, vide circular dated September 01, 2020, regulatory limits.
format for reporting of all transactions in debt and iii. No IST of a security shall be allowed, if there
money market securities was revised. The time lag is negative news or rumors in the mainstream
of disclosure of daily transactions was also reduced media or an alert is generated about the security,
from 30 days to 15 days. based on internal credit risk assessment.
N. Resources for Trustees of Mutual Funds P. 
Introduction of Code of Conduct for Fund
In order to provide administrative assistance Managers and Dealers
to trustees in monitoring various activities of the Since the fund managers including chief
AMCs, vide circular dated August 10, 2020 and investment officer (CIO) and dealers deal in enormous
September 23, 2020, the trustees were empowered amount of investors’ money at the execution level, it

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Securities and Exchange Board of India Annual Report : 2020-21

is imperative to cast some onus on them in the form trigger of a pre-specified event for loss absorption
of a code of conduct. Accordingly, the fifth schedule such as Additional Tier I (AT-I) bonds and Tier 2
of SEBI (Mutual Funds) Regulations was amended (AT-II) bonds issued under Basel III framework, vide
to add code of conduct for fund managers including circular dated March 10, 2021 prudential investment
CIO and dealers, so as to make them accountable in limits for such instruments were prescribed as under -
case of any breach of the said code of conduct. i. No mutual fund under all its schemes shall
Q. Guidelines for Votes Cast by Mutual Funds own more than 10 per cent of such instruments
issued by a single issuer.
As active role of mutual funds helps in better
corporate governance of listed companies, various ii. 
A mutual fund scheme shall not invest

guidelines had been prescribed for casting of votes more than 10 per cent of its NAV of the debt
portfolio of the scheme in such instruments
by mutual funds. In order to further strengthen
and not invest more than five per cent of its
the said guidelines, vide circular dated March 05,
NAV of the debt portfolio of the scheme in
2021, voting was made compulsory in respect of the
such instruments issued by a single issuer.
important resolutions mentioned at para number
4(iii) of circular dated March 15, 2010 and also with The existing investments of mutual fund
respect to resolution on related party transactions schemes in such instruments in excess of the limits
of the investee companies (excluding own group specified above as on the date of the circular were to
companies). Exception to compulsory voting had be grandfathered.

been allowed where there is no economic interest of In respect of the valuation of perpetual bonds, it
the mutual fund on the date of voting. was clarified vide circular dated March 10, 2021 that
the maturity of all perpetual bonds shall be treated
R. 
Review of Norms regarding Investment in
as 100 years from the date of issuance of the bond for
Debt /Instruments with Special Features and
the purpose of valuation. Further, vide circular dated
the Valuation of Perpetual Bonds
March 22, 2021, a glide path for implementation of
In order to reduce exposure of debt schemes in the above policy was decided wherein the deemed
certain riskier debt instruments with special features residual maturity for the purpose of valuation of
like subordination to equity (absorbs losses before existing as well as new bonds issued under Basel III
equity capital) and /or convertible to equity upon framework shall be as under:

Table 5.1: Deemed Residual Maturity of Basel III AT-1 Bonds and Tier 2 Bonds

Deemed Residual
Deemed Residual Maturity of
Time Period Maturity of Basel III
Basel III Tier 2 Bonds (Years)
AT-1 Bonds (Years)

Till March 31, 2022 10 10 years or contractual maturity whichever is earlier

April 01, 2022 – September 30, 2022 20 contractual maturity

October 01, 2022 – March 31, 2023 30 contractual maturity

April 01, 2023 onwards 100 * contractual maturity

*100 years from the date of issuance of the bond.

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 Chapter - 5 : Fund Management Activities

It was also decided that the Macaulay Duration investor associations, government representatives
for bonds issued under Basel III framework shall be and other stakeholders. The committee provides a
calculated based on the deemed residual maturity as platform for interaction and deliberations on issues
mentioned in the above table. Further, if the issuer related to the MF industry. It acts as a platform for
does not exercise call option for any International SEBI to place its various regulatory development
Securities Identification Number (ISIN), then the activities and at the same time the industry places
valuation and calculation of Macaulay Duration its agenda before SEBI for further consideration.
shall be done considering maturity of 100 years from Various working groups constituted by MFAC
the date of issuance for AT-1 Bonds and contractual were also convened during the year to deliberate
maturity for Tier 2 bonds, for all ISINs of the issuer. in detail on certain issues under examination at
MFAC. During 2020-21, the committee under the
S. Advisory Committee on Mutual Funds
Chairpersonship of Ms. Usha Thorat, met six times
SEBI has Mutual Funds Advisory Committee and gave its recommendations on various policy
(MFAC), which comprises of industry representatives, issues encompassing the mutual fund industry.

Box Item 5.2: Relaxations in Compliance due to COVID-19 - Requirements Pertaining to Mutual Funds

In light of market events pursuant to COVID-19, following steps were taken:

1. Submission of cyber security audit reports, filing scheme annual reports for the year 2019-20,
implementation of the stewardship code for mutual funds, updation of scheme information document
and key information memorandums, etc.
2. Temporary relaxations were granted with respect to compliance requirements of the following:
i. 
The cut off timings for applicability of NAV was reduced in line with the reduction in the trading
hours of money markets and certain debt instruments by RBI. However, the same was restored
later with original timings.
ii. 
Permitted corporate bond funds, credit risk funds and banking and PSU funds to invest additional
15 per cent of assets under management in G-secs or T-bills only, upto January 31, 2021.
3. Review of provision regarding segregation of portfolio due to the COVID-19 pandemic - In view of the
RBI circular to extend the resolution facility under ‘Prudential Framework for Resolution of Stressed
Assets’ and SEBI circular specifying credit rating agencies (CRAs) to not consider restructuring by
lenders/ investors due to COVID-19 related stress as a default event, SEBI circular dated December
28, 2018 was modified and it was decided that the date of proposal for restructuring of debt received
by AMCs shall be treated as the trigger date for the purpose of creation of segregated portfolio. Such
proposal of restructuring of debt received by AMCs shall be immediately reported to the valuation
agencies (VA), credit rating agencies, debenture trustees and Association of Mutual Funds in India
(AMFI). AMFI, on receipt of such information, shall immediately disseminate it to its members.
4. Review of provisions regarding valuation of debt and money market instruments due to the COVID-19
pandemic -
i. 
In view of the nationwide lock-down and moratorium/ deferment on payment permitted by RBI,
a differentiation in treatment of default, on a case to case basis, needs to be made as to whether
such default occurred solely due to the lockdown or loan moratorium.

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Securities and Exchange Board of India Annual Report : 2020-21

ii. 
Accordingly, based on assessment, if the valuation agencies are of the view that the delay in pay-
ment of interest/principal or extension of maturity of a security by the issuer has arisen solely
due to COVID-19 pandemic lockdown and/or in light of the moratorium permitted by RBI creat-
ing temporary operational challenges in servicing debt, then VAs may not consider the same as
a default for the purpose of valuation of money market or debt securities held by mutual funds.

iii. 
In line with the same, discretion is provided to valuation agencies for recognition of default in
case proposal of restructuring of debt is solely due to COVID-19 related stress. Any proposal of
restructuring received by debenture trustees shall be communicated to investors immediately.
Further, any proposal received by mutual funds from lenders/issuer/debenture trustees shall
be reported immediately to the valuation agencies (along with the other material information
required for the purpose of valuation), credit rating agencies and AMFI. AMFI, on receipt of such
information, shall immediately disseminate it to its members.

iv. 
Further, if the VA, based on its assessment of the proposal, is of the view that the proposed re-
structuring is solely due to fallout of COVID-19 pandemic then the VAs may not consider the
restructuring / non receipt of the dues as a default for the purpose of valuation of money market
or debt securities held by mutual funds. Further, valuation agencies shall ensure that change in
terms of investment, financial stress of the issuer and the capability of issuer to repay the dues/
borrowings on the extended dates are reflected in the valuation of the securities.

If there is any difference in the valuation of securities provided by two valuation agencies, the conservative
valuation shall be accepted.

II. MARKET ACTIVITY AND TRENDS Out of 46 mutual funds, two mutual funds
were inactive in both 2019-20 and 2020-21.
A. Mutual Funds Registered with SEBI
B. Schemes Launched during 2020-21
The total number of mutual funds at the end
of 2020-21 remained same at 46 as in 2019-20 (Table Overall, 84 new mutual fund schemes were
5.2). While the number of public sector mutual funds launched in 2020-21 (Table 5.3). Of this, the number
decreased to six in 2020-21 from eight in previous of open-ended schemes decreased to 79 compared
year, the number of private sector mutual funds to 82 in 2019-20. In case of close-ended schemes, the
increased to 40 from 38 in the same period. number of schemes launched during 2020-21 stood

Table 5.2: Mutual Funds Registered with SEBI at five as compared to 56 in 2019-20. Reflecting the
liquidity strains and low returns, only 12 open-
Sector 2019-20 2020-21
ended income/debt-oriented schemes were launched
Public Sector 8 6 in 2020-21 as compared to 27 in 2019-20. Highest
number of open-ended schemes launched were from
Private Sector 38 40
the category of 'other' schemes i.e. ETFs, index funds
Total 46 46 and fund of funds investing overseas followed by
Note: Data is as on March 31 of respective financial year. growth/equity oriented schemes.

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Table 5.3: Mutual Fund Schemes Launched

No. of Schemes Launched

S. No. Scheme Category
2019-20 2020-21
A Open-ended Schemes
I Income/Debt Oriented Schemes 27 12
II Growth/Equity Oriented Schemes 26 21
III Hybrid Schemes 6 6
IV Solution Oriented Schemes 3 5
V Other Schemes 20 35
Total A 82 79
B Close -ended Schemes
I Income/Debt Oriented Schemes 56 5
II Growth/Equity Oriented Schemes 0 0
III Other Schemes 0 0
Total B 56 5
C Interval Schemes
I Income/Debt Oriented Schemes 0 0
II Growth/Equity Oriented Schemes 0 0
III Other Schemes 0 0
Total C 0 0
Grand Total 138 84
Fund of Funds Scheme (Domestic) 5 8

As on March 31, 2021, there were 1,735 mutual significantly lower gross fund mobilization as well as
fund schemes, 9.4 per cent lower than 1,916 schemes, redemption as compared to previous year (Figure 5.2).
as at end of previous year. On the other hand, the Gross resource mobilization was less than half of the
total number of mutual fund folios increased by nine previous year at `86 lakh crore in 2020-21 compared
per cent to 9.8 crore as at the end of 2020-21, from to `188 lakh crore in previous year. However, due to
nine crore at the end of 2019-20. substantially lower redemptions, the net inflows in
C. Resource Mobilisation by Mutual Funds 2020-21 increased by 146 per cent to `2,14,743 crore as
compared to `87,301 crore in 2019-20.
During 2020-21, mutual fund segment witnessed

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Securities and Exchange Board of India Annual Report : 2020-21

Figure 5.2: Mobilisation of Resources by Mutual Funds (` crore)

Average Assets for 32,17,195

th e period 24,70,882

Assets at the end 31,42,764

of period 22,26,203
2,14,743
Net Inflow
87,301
84,24,424
Redemption 1,87,26,157

86,39,167
Gross Mobilisation 1,88,13,458

2020-21 2019-20

In terms of sector-wise share in gross resource to private sector mutual funds increased around six
mobilisation, share of private sector mutual funds times to `1,42,378 crore compared to `24,059 crore
increased to 81.2 per cent in 2020-21 from 79.7 per in 2019-20, while for public sector mutual funds, net
cent in previous year (Table 5.4). The net fund inflow fund inflow increased by 14.4 per cent to `72,365
crore in 2020-21.

Table 5.4: Sector-wise Resource Mobilisation by Mutual Funds (` in crore)

Private Sector Mutual Funds Public Sector Mutual Funds

Grand
Year
Total
Open Close Interval Total Open Close Interval Total

Mobilisation of Funds

2019-20 1,49,89,209 773 8 1,49,89,990 38,19,736 3,730 1 38,23,467 1,88,13,458

2020-21 70,15,514 0 5 70,15,519 16,22,472 1,176 0 16,23,648 86,39,167

Redemption/Repurchase

2019-20 1,49,33,969 30,313 1,649 1,49,65,931 37,49,970 10,190 66 37,60,226 1,87,26,157

2020-21 68,36,429 36,430 282 68,73,141 15,39,061 12,222 0 15,51,283 84,24,424

Net Inflow/Outflow of Funds

2019-20 55,240 -29,540 -1,641 24,059 69,767 -6,460 -65 63,241 87,301

2020-21 1,79,085 -36,430 -278 1,42,378 83,411 -11,045 0 72,365 2,14,743

Note: For 2020-21, UTI Mutual Fund is considered under Private Sector MFs.

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At the end of 2020-21, mutual fund’s AUM Open-ended growth/equity oriented schemes
registered a growth of 41.2 per cent over previous witnessed net outflows of `25,966 crore during 2020-
year and stood at `31.4 lakh crore. Open-ended 21. In fact, during consecutive eight months of the
schemes accounted for 95.3 per cent share in total financial year i.e from July 2020- February 2021,
AUM, while 4.6 per cent was contributed by closed- there were net fund outflows from equity schemes,
ended schemes. The huge expansion in AUM was led due to higher redemptions possibly to take benefit

by rise in asset base of open-ended equity oriented from the buoyant trend in equity markets. Among

schemes by Rupees four lakh crore and debt oriented the equity oriented schemes in open-ended category,

schemes by Rupees three lakh crore in 2020-21 over sectoral/thematic funds received the highest positive

the previous year. inflows followed by focused funds and dividend

yield funds.
Scheme-wise, among the open-ended category,
Though there were net outflows of `2,936 crore
income /debt oriented schemes witnessed net inflow
from hybrid schemes, arbitrage funds under the
of `2,30,591 crore during the year, driven by fund
category received high fund inflows of `26,908 crore
inflows into corporate bond funds, low/ultra/short
possibly driven by increased investor interest to take
duration funds, banking/public sector units’ funds
advantage of volatility in markets.
and floater funds (Table 5.5). Positive inflows
were also recorded in gilt funds, long/medium All the scheme categories under ‘Other’
duration fund and dynamic bond funds. Highest net schemes recorded fund inflows in 2020-21. Of

outflows in this category was seen from credit risk this, ETFs recorded highest inflow of `39,820 crore

funds during 2020-21 followed by liquid funds and in 2020-21 followed by fund of funds investing

overnight funds. overseas, gold ETFs and index funds.

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Table 5.5: Scheme-wise Resource Mobilisation and Assets under Management by Mutual Funds

Repur- Net In-

Funds mo- chase/ flows (+ve)/ Net Assets
No. of Folios
No. of bilized for Redemp- Outflows Under
as on March
schemes the period tion for the (-ve) for the Manage-
Sr. 31, 2021
Scheme Category (` crore) period period ment as on
No.
(` crore) (` crore) March 31,
2021
(As on (Since April 01, 2020 to (` crore)
March 31, 2021) March 31, 2021)

A Open-ended Schemes
I Income/Debt Oriented Schemes 318 82,46,129 81,45,260 79,14,669 2,30,591 13,28,226
II Growth/Equity Oriented 344 6,57,44,364 2,17,716 2,43,682 -25,966 9,79,367
Schemes
III Hybrid Schemes 139 94,21,805 1,33,817 1,36,753 -2,936 3,42,957
IV Solution Oriented Schemes 35 55,10,065 3,699 2,122 1,577 24,377
V Other Schemes 182 72,66,463 1,37,495 78,265 59,230 3,21,626
Total A 1,018 9,61,88,826 86,37,986 83,75,490 2,62,496 29,96,553
B Close-ended Schemes
I Income/Debt Oriented Schemes 620 5,93,763 1,176 35,291 -34,114 1,24,336
II Growth/Equity Oriented 76 10,79,533 0 13,361 -13,361 21,754
Schemes
III Other Schemes 0 0 0 0 0 0
Total B 696 16,73,296 1,176 48,652 -47,475 1,46,089
C Interval Schemes
I Income/Debt Oriented Schemes 21 3,407 5 282 -278 122
II Growth/Equity Oriented 0 0 0 0 0 0
Schemes
III Other Schemes 0 0 0 0 0 0
Total C 21 3407 5 282 -278 122
Grand Total 1,735 9,78,65,529 86,39,167 84,24,424 2,14,743 31,42,764
Fund of Funds Schemes 54 11,63,437 17,904 6,487 11,417 27,325
(Domestic)
Notes: 1. Number of schemes includes series / serial plans
2. Segregated portfolios created in a scheme are not to be treated as a separate scheme.
3. Number of folios does not include folios of segregated portfolios
4. AUM of segregated portfolios is included
5. Inter scheme investments are excluded from the above data
6. Fund of Funds Schemes (Domestic) invest in domestic mutual fund schemes and so the AUM of such schemes
should not be combined with Grand Total, i.e., AUM of open-ended, close ended and interval schemes

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D. Deployment of Funds As on March 31, 2021, 80.7 per cent total assets
under equity schemes was deployed in five
a. Scheme-wise Sectoral Deployment
major sectors. Finance services accounted
As on March 31, 2021, 82.2 per cent total for highest investment share, at 30.7 per
assets under debt schemes was deployed in cent, followed by Consumer Goods (19.1 per
four major sectors. Finance sector accounted cent), Information Technology (11.6 per cent),
for the highest share in funds deployed from Manufacturing (9.8 per cent) and Commodities
debt schemes at 42.1 percent. The share of (9.5 per cent) (Figure 5.4).
“Government and Others” includes bank
Figure 5.4: 
Sector-wise Deployment of Funds
deposits, Government securities, SDLs, repo,
(Equity) (Per cent of Investment)
tri party repo dealing system (TREPs), treasury
(As on March 31, 2021)
bills stood at 28.6 per cent, while the share of
energy sector was 8.4 per cent (Figure 5.3). Pharma And others, 4.6
Healthcare, 7.1

Figure 
5.3: 
Sector-wise Deployment of Funds Financial
Energy, 7.5 Services, 30.7
(Debt) (Per cent of Investment)
(As on March 31, 2021)
Commodities, 9.5

Others,18.0

Manufacturing, 9.8

Financial Services,
Energy, 8.4 42.1 Consumer Goods,
Information 19.1
Technology, 11.6
MANUFACTURING,
2.9

b. Asset Class-wise Deployment of Fund

Government and
Mutual funds’ total deployment in equity
Others, 28.6
instruments in 2020-21 was sizably higher
at 46.8 per cent of the total as compared to
Note: “Government and Others” includes Bank Deposits,
40.2 per cent in previous year. On the other
Government Securities, SDLS, Repo, Treps, Treasury
hand, share of debt assets declined to 49.5 per
Bills
cent in 2020-21 from 58.8 per cent in 2019-20
(Table 5.6).

Table 5.6: Asset Class-wise Deployment of Funds (Amount in ` crore)

Value of Deployed amount in the Asset class

Year Ended
Equity Debt Others Total

2019-20 8,98,472 13,14,333 21,163 22,33,967

2020-21 14,66,334 15,49,392 1,16,393 31,32,119

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Securities and Exchange Board of India Annual Report : 2020-21

E. Mutual Fund Scheme-wise Annual Returns generating returns greater than 10 per cent
increased significantly to 767 from 114 schemes
The scheme-wise annual returns of the mutual
in 2019-20 (Table 5.7). On the other hand,
funds indicate remarkable performance of
schemes recording returns less than -10 per
majority of schemes in 2020-21 in consonance
cent declined to nine in 2020-21 as compared
with market uptrend. In 2020-21, schemes
to 556 schemes in 2019-20.
Table 5.7: M
 utual Fund Scheme-wise Annual Returns

Annual Return Number of schemes

(per cent) 2019-20 2020-21

<= -10 556 9

from -10 to <= -5 71 1

from -5 to <=0 81 22

from 0 to <=5 137 187

from 5 to <=10 750 744

> 10 114 767

Note: Annual Returns for Direct Plan Growth Option of Schemes is considered

F. Trends in Transactions on Stock Exchanges in 2019-20 (Table 5.8). During 2020-21, in equity
In 2020-21, aggregate net investments by segment, mutual funds reported net sales of `1.2
mutual funds in secondary markets declined by lakh crore, while in debt segment, net purchase of
78.9 per cent to `1.07 lakh crore from `5.1 lakh crore `2.3 lakh crore were reported.

Table 5.8: Trends in Transactions on Stock Exchanges by Mutual Funds (` crore)

Equity Debt Total

Year Net Net Net

Gross Gross Gross Gross Gross Gross
Purchase/ Purchase/ Purchase/
Purchase Sales Purchase Sales Purchase Sales
Sales Sales Sales

2019-20 8,06,744 7,15,142 91,603 22,63,317 18,44,703 4,18,614 30,70,061 25,59,845 5,10,216

2020-21 7,65,760 8,86,492 -1,20,732 16,50,572 14,22,271 2,28,301 24,16,332 23,08,763 1,07,568

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 Chapter - 5 : Fund Management Activities

G. Unit Holding Pattern of all Mutual Funds 2021, individual investors accounted for 96.9 per cent
of the aggregate investors’ folios and contributed
During 2020-21, incremental folios of 81.2 lakh
were added to the mutual fund segment taking the 51.1 per cent to net assets (Table 5.9). Corporates and

aggregate number of investor folios to 9.8 crore. The institutions which formed only 1.1 per cent of the total

incremental growth in folios was 72.9 lakh in 2019- number of investors’ accounts contributed a sizeable

20. The healthy penetration of the segment is driven 45.4 per cent of the total net assets. Non-resident
by increasing investor awareness programmes, Indians (NRIs) and foreign portfolio investors
dedicated efforts of stakeholders in spreading constituted a miniscule of investors’ accounts (1.9
reach of the segment in B30 cities, financialization per cent) and contributed 3.6 per cent to net assets.
of savings, ease of transactions, proliferation of In terms of sector-wise unit holding pattern,
technology and digitization. at the end of March 31,2021, private sector mutual
Individual investors have emerged as the funds held 85.7 per cent of total folios and 82.6 per
dominant investor category in mutual fund segment cent of net assets, making them the dominant players
in terms of net asset since 2019-20. At the end of March in industry.

Table 5.9: Unit Holding Pattern of Mutual Funds (As on March 31, 2021)

Percentage
Percentage to AUM
Category Year No. of Folios to Total Net
Total Folios (in crore)
Assets

2019-20 8,69,58,514 96.9 11,14,150 50.1

Individuals
2020-21 9,48,75,160 96.9 16,05,535 51.1

2019-20 17,17,822 1.9 70,695 3.2

NRIs/OCBs
2020-21 18,67,922 1.9 1,05,159 3.4

2019-20 210 0 4,614 0.2

FPIs
2020-21 3,014 0 5,813 0.2

Corporates/ 2019-20 10,69,505 1.2 10,36,744 46.6

Institutions/Others 2020-21 11,19,433 1.1 14,26,256 45.4

Total (2020-21) 9,78,65,529 100.0 31,42,764 100.0

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Securities and Exchange Board of India Annual Report : 2020-21

III. RISK MANAGEMENT MEASURES number of instances of restructuring fell to 63 in

2020-21 from 90 in the previous year (Table 5.10).
A. 
Number of Defaults and Restructurings in
During 2020-21, the percentage of default and
Debt Securities
restructured amount to total debt schemes’ AUM
The instances of defaults had declined to 51 declined to 0.8 per cent as compared to 1.6 per cent
during 2020-21 from 125 during 2019-20, while the in the previous year.

Table 5.10: Number of Defaults and Restructurings in Debt Securities held by Mutual Fund Schemes

Default and Total (Cumulative) Per cent of

Outstanding
Restructured Amount Recovered Default and
No. of Default and
No. of Amount as after Default of the Restructured
instances Restructured
Year instances of on Date of Security or after Amount to Total
of Amount as on
Restructuring Default/ Restructuring as on Debt Schemes
Defaults March 31
Restructuring March 31 AUM as on
(in ` crore)
(in ` crore) (in ` crore) March 31

2019-20 125 90 18,124 3,404 15,030 1.6

2020-21 51 63 8,325 2,309 9,488 0.8

B. Quantum of Unclaimed Amount

The unclaimed redemption amount of mutual (Table 5.11). While, the unclaimed dividend amount
funds increased by 36.8 per cent to `671.9 crore at the increased by 2.4 per cent to `918.8 crore in 2020-21
end of 2020-21 from `491 crore at the end of 2019-20 from `897.6 crore in the previous year.

Table 5.11: Quantum of Unclaimed Amount with Mutual Funds (Amount in ` crore)

Year Unclaimed Redemption Unclaimed Dividend

2019-20 491.01 897.59

2020-21 671.88 918.79

Note: As on March 31 of respective year-end

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 Chapter - 5 : Fund Management Activities

5.2 ALTERNATIVE INVESTMENT FUNDS v. prescribing a code of conduct for AIF, trustee
and directors of the trustee/designated
Alternative investment funds (AIFs) are privately
partners/directors of the AIF, manager,
pooled investment vehicles for channelizing funds of
members of Investment Committee and key
niche and institutional investors to various assets. The
role of alternative capital is of immense importance management personnel of AIF and manager.

in supporting India’s economic growth aspirations B. 

Qualification and Experience Criteria for
and also reducing the strain on government finances. Members of Key Investment Team
Private equity and venture capital funds channeled
To provide flexibility to managers of AIFs in
under the domain of AIFs are an important source
constituting their key investment teams, amendment
of capital for Indian entrepreneurs to meet their
to SEBI (Alternative Investment Funds) Regulations,
need for growth, restructuring, turn around or
2012 (AIF Regulations) notified on October 19,
start-up plans. The pace of growth of AIFs has been
2020, defined ‘relevant professional qualification’
significant over the years and SEBI is continuously in
and provided that the qualification and experience
the forefront in developing an investor friendly and
criteria of the investment team may be fulfilled
enabling AIF ecosystem in India.
individually or collectively by personnel of key
I. POLICY DEVELOPMENTS investment team of the manager.
A. 
Amendments in SEBI (Alternative Investment C. Investment Committee
Fund) Regulations, 2012
To provide flexibility to managers of AIFs
In the meeting held on March 25, 2021, SEBI for taking investment decisions for the AIFs, the
Board approved amendment to SEBI (Alternative aforesaid amendment also provided for constitution
Investment Funds) Regulations, 2012 with respect to of an investment committee by the manager for
the following proposals – approving investment decisions. With a view
i. providing a definition of ‘startup’ as specified to ensure that all persons who are involved in
by Government of India for the purpose of approving the investment decisions of AIFs are
investment by angel funds; accountable for such decisions, the said amendment
ii. 
removing the list of restricted activities or also defined the roles and responsibilities of the
sectors from the definition of venture capital members of Investment Committee which approves
undertaking to provide flexibility to venture investment decisions.
capital funds (VCFs) registered under Category Further, vide amendment to AIF Regulations,
- I alternative investment funds (AIFs) in 2012, notified on January 08, 2021, relaxation had
making investments; been provided to AIFs from the responsibilities of
iii. allowing AIFs, including fund of AIFs, to members of such investment committees, wherein
simultaneously invest in units of other AIFs each investor has committed to invest not less than
and directly in securities of investee companies `70 crore (or an equivalent amount in currency other
subject to certain conditions. than Indian rupee) and has furnished a waiver to the

iv. providing clarity on scope of responsibilities AIF in respect of compliance with the said clauses, in

of managers and members of Investment the manner specified in SEBI circular dated January

Committees; and 08, 2021.

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Securities and Exchange Board of India Annual Report : 2020-21

D. 
Collection of Stamp Duty on Issue, Transfer Vide circular dated June 12, 2020, certain
and Sale of Units of AIFs clarifications were issued with respect to SEBI

Vide circular dated June 30, 2020, guidelines circular dated February 05, 2020 on disclosure

were provided on collection of stamp duty on issue, standards for AIFs.

transfer and sale of units of AIFs and AIFs were F. 
Measures taken to Ease the Compliance
mandated to appoint registrar and transfer agents Burden due to COVID-19 Pandemic
(RTAs) for the necessary services. Also, RTAs had
In light of market events due to COVID-19
been designated as ‘collecting agent’ for the purpose
pandemic, due date for regulatory filings for AIFs
of collecting stamp duty on creation and transfer
of AIF units, in pursuance to Gazette notification and VCFs were extended vide circular dated March

S.O.116(E)dated January 08, 2020. 30, 2020, which was further extended vide circular
dated June 04, 2020.
E. 
Standardization and Audit of Private
Placement Memorandum II. 
MARKET ACTIVITY AND TRENDS
OBSERVED
To ensure that a minimum standard of
disclosure is made available in the private placement A. Category-wise Registration of AIFs
memorandum (PPM) in a simple and comparable
The total number of registered AIFs at the
format and to ensure compliance of the AIF with the
end of March 31, 2021 increased to 732 compared to
same, circular dated February 05, 2020 was issued
642 at the end of March 31, 2020 (Table 5.12). The
on disclosure standards for AIFs standardization of
number of registered AIFs in Category I, Category
PPM, audit of terms of PPM for AIFs and performance
II, and Category III increased by eight per cent, 17
benchmarking for AIFs. PPM is a primary document
per cent and 12 per cent, respectively, at the end of
in which all the necessary information about the AIF
2020-21 as compared to previous year.
is disclosed to prospective investors.

Table 5.12: Number of Registered Alternative Investment Funds (Category-wise)

No. of AIFs Registered as on

Category of AIFs
March 31, 2020 March 31, 2021

Category I - Total 164 178

Infrastructure Fund 16 16

Social Venture Fund 14 14

Venture Capital Fund 119 133

SME Fund 15 15

Category II 348 409

Category III 129 145

Grand Total 641 732

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 Chapter - 5 : Fund Management Activities

B. Category-wise Investment in AIFs increased by 23.3 per cent and 30.7 per cent,
respectively in 2020-21. The cumulative investment
At the end of 2020-21, the amount of
commitment raised by all categories of AIFs made by Category-I, Category-II and Category-III

increased by 22 per cent to `4,51,216 crore from AIFs increased by 25.4 per cent, 38.6 per cent and

`3,69,988 crore at the end of 2019-20 (Table 5.13). 11.4 per cent, respectively, at the end of 2020-21
The amount of fund raised and investment made compared to end of 2019-20.

Table 5.13: Category-wise Investment by AIFs (Amount in ` crore)

As on March 31, 2020 As on March 31, 2021

Commitments Funds Investments Commitments Funds Investments

Raised Raised Made Raised Raised Made

Category I Total 38,745 18,473 14,840 44,560 24,370 18,612

Infrastructure Fund 11,119 7,787 6,741 12,202 8,819 7,624

Social Venture Fund 1,980 1,027 1,002 3,691 2,463 1,106

Venture Capital Fund 25,124 9,558 7,051 28,071 13,015 9,817

SME Fund 522 100 46 595 72 65

Category II 2,82,013 1,24,524 1,01,088 3,56,627 1,61,973 1,40,114

Category III 49,230 43,527 37,475 50,030 43,672 41,758

Grand Total 3,69,988 1,86,524 1,53,403 4,51,216 2,30,015 2,00,484

C. Instrument-wise Deployment of Funds interest followed by 30.3 per cent (`60,809.70 crore)

As on March 31, 2021, AIFs invested 39.2 per in debt/securitized debt instruments, 19.3 per cent

cent (`78,492.89 crore) of the total funds in unlisted (`38,697.22 crore) in listed equity (excluding listed/

equity shares/equity linked instruments/LLP to be listed on SME exchange) (Table 5.14).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 5.14: Instrument-wise Deployment of Funds by AIFs (Amount in ` crore)

Funds Invested Percentage Funds Invested Percentage

Type of Instruments as on Share of Funds as on March Share of Funds
March 31, 2020 Invested 31, 2021 Invested

Unlisted Equity Shares/ Equity 61,126 39.85 78,493 39.15

Linked Instruments/LLP Interest

Listed Equity (excluding Listed/to 32,336 21.08 38,697 19.3

be Listed on SME Exchange)

Debt/ Securitised Debt Instruments 39,366 25.66 60,810 30.33

Units of other AIFs 2,157 1.41 3,581 1.79

Liquid Funds 4,874 3.18 6,990 3.49

Listed/ to be Listed Securities on 68 0.04 51 0.03

SME Exchange

Others 13,476 8.78 11,862 5.92

Total 1,53,403 100.00 2,00,484 100.00

D. Sector-wise Deployment of Funds by AIFs services sector (9.4 per cent), NBFCs (seven per

At end of March 31, 2021, AIFs had deployed cent), pharmaceuticals/ biotechnology/ healthcare

major portion of funds in real estate (24.6 per cent), (6.7 per cent), and IT/ ITeS (6.1 per cent), (Figure
followed by industrial products (20 per cent), 5.5). The top six sectors accounted for around 67 per
banking and financial services (13.3 per cent), cent of total deployment of funds by AIFs as at the
end of March 2021.

Figure 5.5: Sector-wise Deployment of Funds by AIFs (Per cent)

Industrial
products, 20.0
Real Estate, 24.6
FMCG/Food and
beverages, 4.1
Banking and
Financial
Retail, 4.2 Services, 13.3

Energy/ Power
Plants/ power
generation and
transmission/No Services Sector,
n-conventional IT/ ITeS, 6.1 9.4
-
energy, 4.6 Pharmaceuticals/
Biotechnology/ NBFCs, 7.0
Healthcare, 6.7

Note: Banking and Financial Services are excluding NBFCs

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 Chapter - 5 : Fund Management Activities

III. RISK MANAGEMENT MEASURES C. NISM Certification Requirements

The risk management measures applicable Amendment to SEBI (Portfolio Managers)
to AIFs includes concentration norms and leverage Regulations, 2020 was notified on March 16, 2021.
provisions. As per present regulatory framework, The aforesaid amendment, inter-alia, provided for
Category I and II AIFs are permitted to invest not continuous NISM certification requirement for the
more than 25 per cent of their investable funds in a
relevant employees of a portfolio manager.
single investee company, and Category III AIFs is
permitted to invest not more than 10 per cent of their D. 
Requirement of Prior Approval for Change in
investable funds in a single investee company. Control

Further, Category I and II AIFs cannot borrow SEBI Board had approved amendment to
funds directly or indirectly or engage in any leverage the SEBI (Portfolio Managers) Regulations, 2020,
except for meeting temporary funding requirements mandating portfolio managers to obtain prior
for not more than thirty days, on not more than four approval of SEBI for change in control.
occasions in a year and not more than ten percent of
E. COVID-19 Related Measures
the investable funds. Category III AIFs may, however,
engage in leverage or borrow up to a maximum limit In light of market events due to COVID-19
of two times the net asset value of AIF pandemic, vide circular dated March 30, 2020,
timelines for the following were extended by two
5.3 PORTFOLIO MANAGERS
months:
I. POLICY DEVELOPMENTS
a. Monthly reporting to SEBI by portfolio
A. 
Operating Guidelines for Portfolio Managers
in International Financial Services Centre managers for the periods ending March 31,
2020 and April 30, 2020.
To facilitate the presence of portfolio managers
in International Financial Services Centre (IFSC), b. Applicability of circular dated February 13,

operating guidelines were issued vide circular dated 2020 on ‘Guidelines for Portfolio Managers’,

September 09, 2020, specifying the registration which was to be applicable from May 01, 2020.

requirements and operational compliances for After taking into consideration requests
portfolio managers setting up/ operating in IFSC. received from portfolio managers and the prevailing
In terms of International Financial Services Centre business and market conditions, vide circular
Authority Act, 2019, with effect from October 01, dated June 29, 2020, timeline for compliance with
2020, the powers exercisable by SEBI under SEBI the requirements of the aforesaid circular dated
Act, 1992, Securities Contracts (Regulation) Act, 1956 February 13, 2020 was further extended by three
and the Depositories Act, 1996 shall not extend to an months. Accordingly, the provisions of said circular
IFSC set up under sub-section (1) of section 18 of the dated February 13, 2020 became applicable with
Special Economic Zones Act, 2005. effect from October 01, 2020.

B. Monthly Reporting of Portfolio Managers II. MARKET ACTIVITY AND TRENDS

Vide circular dated January 08, 2021, certain During 2020-21, the total number of registered
modifications were specified in the monthly reporting portfolio managers increased by 2.8 per cent to 361
format for portfolio managers in order to broaden the from 351 in 2019-20. However, the total number of
information obtained under the said reports. clients with portfolio managers declined by 23.6

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Securities and Exchange Board of India Annual Report : 2020-21

per cent to 1,27,323 in 2020-21 from 1,66,548 in the 51.4 per cent, while under discretionary and non-
previous year. Number of clients registered under discretionary category, number of clients fell by 23.4
advisory category witnessed significant decline of per cent and 14.4 per cent, respectively.

Table 5.15: Registered Portfolio Managers

Registered Cancellation/ Sur- Registered Interme-

Type of New Registration
Intermediaries as render / during diaries as on March
Intermediary during 2020-21
on March 31, 2020 2020-21 31, 2021

Portfolio Managers 351 20 10 361

At the end of March 31, 2021, 59 per cent of all the services (Figure 5.6). The combination of
the registered portfolio managers provided only discretionary and advisory services was provided
discretionary services while 17 per cent provided by 15 per cent of the portfolio managers.
Figure 5.6: Share of Services provided by Portfolio Managers

Only Advisory
Only Discretionary
Services
Services
1%
59% Only Non-Discretionary
Services
7%

Discretionary and
Advisory Services
15%

Discretionary and
Non-Discretionary
Services
1%
All
17%

The total AUM of the portfolio management increased by 74.2 per cent, while in non- discretionary
industry increased by 13.9 per cent to `20,67,205 crore category, it increased by 13.8 per cent at end of 2020-
at end of 2020-21 as compared to 2019-20 (Table 5.16). 21. On the other hand, AUM of advisory category
AUM under discretionary (Non EPFO/PFs) category recorded a fall of 3.6 per cent during 2020-21.

Table 5.16: Assets Managed by Portfolio Managers

No. of Clients AUM (` crore)

Discre-
Year Discre-
Non- tionary Non-
Ended Discre- tionary
Discre- Advisory Total (Non Discre- Advisory Total
tionary (EPFO/
tionary EPFO/ tionary
PFs)
PFs)
2019-20 1,53,232 9,393 3,923 1,66,548 13,93,447 1,14,271 1,15,202 1,91,451 18,14,371

2020-21 1,17,380 8,037 1,906 1,27,323 15,52,385 1,99,071 1,31,148 1,84,601 20,67,205

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During 2020-21, gross inflow of `1,47,907 portfolio management category (Table 5.17). Net
crore was recorded under discretionary portfolio inflow during 2020-21, for discretionary and non-
management category while gross inflow of `47,175 discretionary category stood at `94,484 crore and
crore was witnessed under non- discretionary `30,807 crore, respectively.

Table 5.17: Total Fund Inflows/Outflows under Portfolio Management Services (Amount in ` crore)

Discretionary Portfolio Management Non-Discretionary Portfolio Management

Inflow Outflow Net Inflow/ Outflow Inflow Outflow Net Inflow/ Outflow

1,47,907 53,423 94,484 47,175 16,368 30,807

III. RISK MANAGEMENT MEASURES

Risk management measures applicable to 5.4 COLLECTIVE INVESTMENT SCHEMES

Portfolio Managers include disclosure requirements
As on March 31, 2021, there was only one
and investment related restrictions. Portfolio managers
registered collective investment management
are required to disclose, inter-alia, portfolio risks
company (CIMC), M/s GIFT Collective Investment
including risk specific to each investment approach
Management Company Ltd., which was registered
offered by them in their disclosure document.
during 2008-09. However, no collective investment
In addition, portfolio managers are required to
scheme has been launched by this CIMC till now.
furnish periodic reports to the clients, containing
5.5 
REAL ESTATE INVESTMENT TRUSTS
various details such as those of risk foreseen by
AND INFRASTRUCTURE INVESTMENT
the portfolio manager and the risk relating to the
TRUSTS
securities recommended by the portfolio manager for
investment or disinvestment, etc. Infrastructure and real estate are two sectors
that have tremendous spillover and multiplier
As per present regulatory framework,
effects on the rest of the economy. Given the huge
discretionary portfolio managers are not permitted
infrastructural finance need of the country and that
to invest funds of their clients in unlisted securities,
of the closely related real estate sector, their capital
and portfolio managers offering non-discretionary
intensive nature, long gestation period and limited
or advisory services to clients may invest or
options of finance, innovative pooled vehicles such
provide advice for investment up to 25 per cent
as REITs and InvITs are a way forward. SEBI has
of the assets under management of such clients in
been continuously engaged in strengthening the
unlisted securities. Further, portfolio managers are
regulatory framework for these two products to
not allowed to leverage the portfolio of their clients
facilitate and propel financing, developing and
for investment in derivatives and are also prohibited
managing of country’s infrastructural and real
from indulging in speculative transactions while
estate needs.
dealing with clients’ funds.

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Securities and Exchange Board of India Annual Report : 2020-21

I. POLICY DEVELOPMENTS holding in perpetuity by sponsor of a REIT was

A. 
Amendments in InvITs Regulations and removed, thereby, aligning the time period of

REITs Regulations three years for mandatory unit holding by

sponsors of REITs and InvITs.
Vide notification dated June 16, 2020, the
following amendments were made in the InvIT Vide circular dated July 17, 2020, the manner

Regulations and REIT Regulations: and mechanism for providing exit option to
dissenting unit holders of a REIT and InvIT, in
a. Entry of New Sponsor Post Listing
cases of induction of new sponsor or any unit
Provisions regarding change of sponsor were holder acquiring more than 25 per cent of total
provided in REIT Regulations and InvIT units in a REIT or InvIT, was provided.
Regulations. Such change or induction is
B. 
Guidelines for Rights Issue of Units by
subject to approval from 75 per cent of the
Unlisted InvITs
unit holders by value excluding the value of
units held by parties related to the transaction. Vide circular dated November 04, 2020,

In case the requisite approval is not received guidelines were issued for rights issue of units

but the entity is desirous to become a sponsor, by unlisted InvITs, thereby providing additional

then the said entity had to give exit option to framework for fund raising by unlisted InvITs.

the dissenting unit holders at a price not lower C. 

Amendment to Guidelines for Preferential
than the offer price determined in terms of Issue and Institutional Placement
Takeover Regulations. Vide circular dated September 28, 2020,
b. Exit of Sponsor guidelines for preferential issue and institutional


Provisions were provided for sponsor placement by REITs and InvITs were amended to

declassification, for both REITs and InvITs, provide for the following:

in line with those provided for promoter a. The cooling-off period between two
declassification for equity listed companies. institutional placements had been reduced to

c. Inclusion of Mutual Funds and Insurance two weeks from six months earlier.

Companies as ‘Strategic Investors’ b. An optional alternative pricing formula had


Mutual funds and insurance companies been provided for preferential issue of units by

were earlier not included in the category of REITs and InvITs.

‘strategic investors’. In order to enable mutual Further, vide circular dated November 17,
funds and insurance companies to participate 2020, guidelines for preferential issue of units by
in any offer by REITs and InvITs as strategic InvITs were amended to provide that no allotment
investor, the definition of strategic investor as of units is made to any person who has sold any
per REIT Regulations and InvIT Regulations units of the InvIT during the six months preceding
had been amended to include mutual funds the relevant date.
and insurance companies.
II. MARKET ACTIVITY AND TRENDS
d. 
Rationalisation of Sponsor’s Unit Holding
A. Registered REITs and InvITs
Requirements
At the end of 2020-21, there were four REITs
The requirement of maintaining minimum unit

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 Chapter - 5 : Fund Management Activities

and 15 InvITs registered with SEBI as compared to There has been manifold rise in funds raised
three REITs and 10 InvITs registered at the end of and net asset values of InvITs in 2020-21. While
2019-20 (Table 5.18). funds raised by InvITs surged up by 251.6 per cent
The amount of funds raised by REITs during to `40,432 crore in 2020-21, net asset value of InvITs
2020-21 stood at `14,300 crore. Compared to end of as on March 31,2021 appreciated by 132.5 per cent to
2019-20, the net asset value of REITs nearly doubled `1,05,529 crore as compared to `45,396 crore as at the
by 102.1 per cent to `58,430 crore as on March 31, 2021. end of 2019-20.

Table 5.18: Number of Registered REITs and InvITs

REITs InvITs
Particulars
2020-21 2019-20 2020-21 2019-20

Number of Registered Trusts at the end of the period 4 3 15 10

Of which Number of Entities listed on Stock Exchanges 3 1 6 5

Funds Raised during the year* (Amount in ` crore) 14,300 NIL 40,432 11,496

Net Asset Value as on March 31 of year end**

58,430 28,910 1,05,529 45,396
(Amount in ` crore)
Note: * amount consists of funds raised through initial offer, preferential issue, institutional placement and rights issue.
Also includes funds raised by unlisted InvITs
** includes net asset values for unlisted InvITs
Net asset values for REITs/InvITs are as on latest available dates.

III. RISK MANAGEMENT MEASURES • Privately placed InvITs which can invest in
Various provisions regarding risk management under construction projects have a minimum
as provided in the REIT Regulations and InvIT investment threshold of Rupees one crore.
Regulations are as follows: Further, units of a privately placed InvIT can
be offered only to institutional investors and
• The units issued by REITs and InvITs are
body corporates and other small investors are
required to be issued in dematerialized form
not permitted to participate.
and in case of public issue the application can
be made only through application supported • For further issuance of units through
by blocked amount (ASBA). institutional placement or preferential
allotment, REITs and InvITs are required to
• REITs and InvITs are required to maintain
follow the process which is similar to equity
at least 25 per cent public unit holding. In
addition to the unit holding requirements, issuances, keeping in mind the impact on

REITs and InvITs are required to have the market price of listed units due to such

specified minimum number of unit holders to issuances.

avoid any concentration of unit holding. • Regular disclosures regarding related party
• Units of REITs and InvITs are required to be transactions, unit holders’ meeting unit
listed (except unlisted InvITs) and the issuers holding pattern etc. are mandated for REITs
are required to adhere to the listing agreements. and InvITs.

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Securities and Exchange Board of India Annual Report : 2020-21

5.6 INTERMEDIARIES ASSOCIATED III. 

DISTRIBUTORS ASSOCIATED WITH
PORTFOLIO MANAGERS
I. MUTUAL FUND DISTRIBUTORS
As per the extant regulatory framework for
All entities engaged in selling and marketing
portfolio management services (PMS), portfolio
of mutual funds units (distributors, agents, brokers,
managers are required to:
sub-brokers or called by any other name, whether
individuals or of any other organisation structure), a. Utilize services of only such distributors who
should obtain relevant certification from NISM and have a valid AMFI Registration Number or
registration from AMFI. At the time of empanelling have cleared NISM-Series-V-A exam.
distributors and during the period i.e. review
b. Pay fees or commission to distributors only
process, mutual funds/AMCs shall undertake a due
on trail-basis. Pay fees or commission to
diligence process to satisfy ‘fit and proper’ criteria.
distributors only from the fees received by
Such due diligence of the distributors is solely the
portfolio managers.
responsibility of the mutual funds/ AMCs. However,
c. Ensure that prospective clients are informed
assistance of any agency in this regard has been
about the fees or commission to be earned
allowed.
by the distributors for on-boarding them
Further, responsibility for ensuring compliance
to specific investment approaches. Further,
with the mandated Code of Conduct has also been
details of commission paid to distributor(s) for
placed on the mutual funds.
a particular client are required to be disclosed
II. 
RESTRICTION ON USAGE OF CERTAIN by portfolio managers in the periodic client
NOMENCLATURE reports.

To ensure transparency and clarity, d. Ensure that distributors abide by the specified
SEBI (Investment Advisers) Regulations, Code of Conduct. Portfolio managers shall also
2013, were amended so that no person, while have mechanism to independently verify the
dealing in distribution of securities, uses the compliance of its distributors with the Code
nomenclature  “Independent Financial Adviser or of Conduct. Further, they are also required
IFA or Wealth Adviser or any other similar name” to ensure that an annual self-certification is
unless registered with SEBI as Investment Adviser. received from distributors with regard to
compliance with Code of Conduct.

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 Chapter - 6 : Foreign Portfolio Investors and Foreign Venture Capital Investors

CHAPTER SIX:
Foreign Portfolio Investors and Foreign
Venture Capital Investors

F
oreign investment is often viewed as an Instruments) Rules, 2019 that with effect from April
important source of funding for the capital 01, 2020, the aggregate limit for foreign investment
requirements of corporates in the emerging by FPIs will be the sectoral cap applicable to the
economies. Such investments serve to boost investee company unless decreased by the Indian
investment and economic activity in the domestic company to a lower threshold limit of 24 per cent or
economy. Foreign portfolio investment increases 49 per cent or 74 per cent as deemed fit, before March
the liquidity of domestic capital markets and can 31, 2020. It further provided that the Indian company
improve the market efficiency as well. which decreased its aggregate limit to 24 per cent or
49 per cent or 74 per cent, may subsequently increase
In broader terms, the foreign portfolio
such aggregate limit to 49 per cent or 74 per cent or
investment refers to the purchase of securities and
the sectoral cap or statutory ceiling respectively.
other financial assets by investors from another
Once the aggregate limit has been increased to a
country, without holding direct ownership of a
higher threshold, the Indian company cannot reduce
company’s assets. Foreign portfolio investor (FPI)
the same to a lower threshold.
holdings include stocks, bonds, mutual funds, and
exchange-traded funds. Foreign portfolio investment The liberalisation of investment cap has led to
is part of a country’s capital account reflecting in its an increase in the availability of investible stock for FPI
balance of payments (BoP). investment which has augmented the weightage of
Indian securities in global indices and attracted greater
6.1. POLICY DEVELOPMENTS
foreign portfolio investment inflows. As a result, 2020-
I. LIBERALIZED INVESTMENT CAP 21 witnessed unprecedented investment by FPIs into
Based on the recommendation of the working India’s equity markets. Foreign portfolio investors
group formed by SEBI, Department of Economic made a net investment of more than USD 37 billion in
Affairs, Ministry of Finance (DEA-MoF) notified this financial year in the Indian equity markets which
under Foreign Exchange Management (Non-debt is the highest in any financial year till date.

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Securities and Exchange Board of India Annual Report : 2020-21

II. RELAXATIONS DURING COVID-19 are unlisted/ illiquid/ suspended/ delisted. Further,
in order to streamline the process of surrender of FPI
Due to COVID-19, SEBI had granted temporary
registration, guidelines were issued to designated
relaxation in processing of documents pertaining to
depository participants (DDPs).
FPIs by allowing designated depository participants
(DDPs)/ custodians to process the request(s) for 6.2.  
MARKET ACTIVITY AND TRENDS
registration/ continuance/ know your clients (KYC) OBSERVED
applications / KYC review and any other material I. FUND INFLOW/OUTFLOW
change on the basis of scanned version of signed
During 2020-21, the net foreign portfolio
documents (instead of originals) and copies of
inflows to India spiked and recorded its best year
documents which are not certified, received from -
ever in terms of equity investment and second-best
a. e-mail IDs of their global custodians/existing year in terms of overall investment in the history of
clients where these details are already captured Indian capital market. After a heavy sell-offs in the
in records; or month of March 2020 triggered by the COVID-19
pandemic, FPIs returned to Indian capital market
b. e-mail IDs of new clients received from domains
as the situation stabilized and the growth prospects
which are duly encrypted with transport –
resurfaced. The year 2020-21 saw net inflows of
layer security (TLS) or similar encryption or
foreign portfolio investments to the tune of `267.1
the documents are password protected.
thousand crore (or USD 36.2 billion) into the Indian
III. 
EASING THE EXIT PROCESS FOR capital market, compared to a net outflow of `27.5
FOREIGN PORTFOLIO INVESTORS thousand crore (or USD three billion) in 2019-20. In
In order to facilitate those FPIs who wish to exit the history of investments by FPIs, the highest net
Indian securities market, such FPIs were permitted inflow of `277.5 thousand crore was recorded in
to write-off shares of all the companies which they 2014-15 whereas, in 2008-09, at the time of global
are unable to sell. Earlier, such FPIs were permitted financial crisis, the highest net outflow of `45.8
to write-off shares of only those companies which thousand crore was recorded. (Figure 6.1).

Figure 6.1: Trends in Net Investment by Foreign Portfolio Investors

(` thousand crore)

300 277.5 267.1

250
Thousands Crore

200
150
100
50
0
-50
- 45.8
-100
20 03

20 -10

20 -13
20 -09
20 -01

20 -08

20 11

20 19
20 -20
20 -18

1
20 -02

20 2
20 -06

20 -16
20 04

20 14
20 05

20 -15
20 07

20 17

-2
-1
-
-

-
-

-
-

-
10
02

09

12
08

18

19
00

07

17

20
01

11
05

15
03

13
04

14
06

16
20

Note: Debt includes Debt through Voluntary Retention Route (Debt-VRR)

Source: NSDL

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 Chapter - 6 : Foreign Portfolio Investors and Foreign Venture Capital Investors

Box Item 6.1: Highest ever Foreign Portfolio Investors Inflows in the Equity Markets
The financial year 2020-21 witnessed unprecedented FPI investment inflows, recording its best year
ever in terms of equity investment and second-best year in terms of overall investment in the history of
Indian capital market. FPIs made a net investment of more than `2.74 lakh crore in the Indian equity markets
in 2020-21. Prior to 2020-21, the highest ever net investment made by FPIs in equity segment was in 2012-13
which amounted to greater than `1.4 lakh crore.
Throughout the financial year 2020-21, only barring the months of April and September, FPIs' net
investment in equity was positive i.e. the inflows exceeded the outflows in each of these months. The month
of December saw the highest ever FPI inflows in any month till date amounting to `62,016 crore
The various measures taken to facilitate participation of FPIs including liberalized investment cap,
introduction of common application form, simplification of documentation and removal of broad based
criteria, among others, may have contributed towards this increase.
Figure 6.1:Investments by Foreign Portfolio Investors
FPI Investments (` crore)

300000
250000
200000
150000
100000
50000
0
-50000
-100000
20 -06
20 -00

20 -08

20 -10

20 -18

20 -20
20 -09
20 -03
20 -04

20 -13
20 -14
20 -02

20 -07

20 -12

20 -17
20 -01

20 -11

1
20 -05

20 16

20 19
20 -15

-2
-

-
05

10
99

07

09

17

19
08
02

03

12

13
01

06

11

16
00

20
04

15

18
14
19

Equity Total

II. INSTRUMENT-WISE INVESTMENTS instrument as compared to `7.7 thousand crore in

2019-20 (Table 6.1)
Instrument-wise analysis of investments by
FPIs suggests that the high FPI inflow in 2020-21 was Table 6.1: 
Net Investment by Foreign Portfolio
mainly on account of large inflow into equity. During Investors (Amount in ` crore)
2020-21, FPIs made net equity investments of `274 Debt-
Year Equity Debt Hybrid Total
thousand crore, compared to inflows of `6.2 thousand VRR
crore in 2019-20. However, FPIs continued to remain 2019-20 6,153 -48,710 7,331 7,698 -27,528
net sellers in the debt segment during 2020-21. Foreign 2020-21 2,74,032 -50,443 33,265 10,247 2,67,101
portfolio investors sold net amount of `50.4 thousand Source: NSDL
crore worth of Indian debt in 2020-21, compared to On monthly basis, the month of December 2020
net selling of `48.7 thousand crore in 2019-20. On the saw the highest inflows into equity markets (`62
flipside, the investment in debt through voluntary thousand crore), followed by November 2020 (`60.4
retention route (VRR) increased significantly from thousand crore) and August 2020 (`47.1 thousand
`7.3 thousand crore in 2019-20 to `33.3 thousand crore). During 2020-21, FPIs were net sellers in
crore in 2020-21. Meanwhile, FPI invested net equity only during two months viz. April 2020 and
amount of `10.2 thousand crore in hybrid debt September 2020 (Figure 6.2).

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Securities and Exchange Board of India Annual Report : 2020-21

Figure 6.2: Instrument-wise Net Investment by Foreign Portfolio Investors during 2020-21

80

60

Thousands Crore
40
60.4 62.0
20 47.1
14.6 21.8 7.6 19.5 19.5 25.8
0 10.5
-6.9 -7.8
-20

-40

ne

ch
ay

ly

ry
r

er

r
st
ril

be

be

be

ar
Ju

ua
gu

ob
Ap

ar
Ju
M

nu
em

em

em

M
br
Au

ct

Ja
O

Fe
pt

ov

ec
Se

D
Equity Debt Hybrid

Note: Debt includes Debt through Voluntary Retention Route (Debt-VRR)

Source: NSDL

III. 
ASSETS UNDER CUSTODY OF during 2020-21. On the contrary, their AUC in the
CUSTODIANS debt instruments declined by 24.6 per cent.

As on March 31, 2021, the market value of FPIs’ The percentage share of equity assets in the
assets under custody (AUC) of custodians increased total assets of FPIs increased further during 2020-
by 79.2 per cent to `44.6 lakh crore compared to 21. As on March 31, 2021, the equity assets of FPIs
`24.9 lakh crore at the end of March 2020. FPI’s AUC constituted 91 per cent of total assets of FPIs in India
in equity and hybrid instruments recorded robust as compared to 85 per cent as on March 31, 2020
growth of 91.7 per cent and 95.6 per cent respectively, (Table 6.2).

Table 6.2: Assets of Foreign Portfolio Investors in India (Amount in ` lakh crore)

Assets of FPIs in India Per cent Percentage Share

Product Change in
March 31, 2020 March 31, 2021 AUC Y-o-Y March 31, 2020 March 31, 2021

Equity 21.2 40.6 91.7 85.0 91.0

Debt 3.6 2.7 -24.6 14.4 6.1

Debt-VRR 0.0 1.1 Na 0.0 2.4

Hybrid 0.1 0.3 95.6 0.5 0.6

Total 24.9 44.6 79.2 100.0 100.0

Source: NSDL

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 Chapter - 6 : Foreign Portfolio Investors and Foreign Venture Capital Investors

IV. 
SECTOR-WISE AND COUNTRY-WISE products sector and food, beverages and tobacco
DISTRIBUTION OF FOREIGN PORTFOLIO sector declined by 1.3 and 1.2 percentage points
INVESTORS AUC respectively.

During 2020-21, FPIs increased their As on March 31, 2021, FPIs’ highest holding
percentage holding (equity assets) in capital goods remains in the banking sector (19.7 per cent),
sector by 1.3 percentage points followed by software followed by financial services sector (13.7 per cent),
services (0.8 percentage points), and metal and software and services sector (13.7 per cent) and oil
mining (0.8 percentage points). On the other hand, and gas sector (9.7 per cent) (Table 6.3)
their percentage holding in household and personal

Table 6.3: Percentage Share of Top 15 Sectors in Foreign Portfolio Investors Total Equity Assets (Per cent)

Percentage Share in Change in

Sr. No. Sectors Total Equity Assets Percentage
March 31, 2020 March 31, 2021 Points

1 Banks 19.4 19.7 0.3

2 Financial Services 14.1 13.7 -0.3

3 Software and Services 12.9 13.7 0.8

4 Oil and Gas 9.8 9.7 -0.1

5 Automobiles and Auto Components 4.2 4.7 0.5

6 Capital Goods 2.7 3.9 1.3

7 Pharmaceuticals and Biotechnology 4.2 3.7 -0.5

8 Household and Personal Products 5.0 3.7 -1.3

9 Food, Beverages and Tobacco 4.0 2.8 -1.2

10 Utilities 2.9 2.6 -0.3

11 Insurance 2.7 2.5 -0.2

12 Consumer Durables 2.2 2.3 0.1

13 Construction Materials 1.8 2.2 0.3

14 Telecom Services 3.1 2.1 -1.0

15 Metals and Mining 1.1 1.8 0.8

16 Others 9.9 10.9 1.0

Total 100.0 100.0 0.0

Source: NSDL

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Securities and Exchange Board of India Annual Report : 2020-21

On the basis of country of incorporation, as on terms of AUC, FPIs from USA had the maximum
March 31, 2021, total AUC of FPIs belonging to 60 AUC (`15,31,504 crore) followed by Mauritius
different jurisdictions was `44,62,903 crore. Further, (`5,29,094 crore), Luxembourg (`3,79,940 crore) and
the number of FPIs registered was the highest Singapore (`3,67,428 crore). The AUC of FPIs from
from United States of America (USA), followed by Ireland and United Kingdom increased by 106.2 per
Luxembourg, Canada, Ireland and Mauritius. In cent and 94 per cent respectively during 2020-21.

Table 6.4: Country-wise Number of Foreign Portfolio Investors and their Assets under Custody
(Amount in ` crore)

Number of FPIs AUC of FPIs

Percentage Percentage
Country March 31, March 31, Change year March 31, March 31, Change year
2020 2021 on year 2020 2021 on year
(per cent) (per cent)

USA 3,309 3,361 1.6 8,27,258 15,31,504 85.1

Mauritius 608 636 4.6 2,83,487 5,29,094 86.6

Luxembourg 1,143 1,208 5.7 2,30,497 3,79,940 64.8

Singapore 434 489 12.7 2,27,831 3,67,428 61.3

United Kingdom 499 550 10.2 1,20,915 2,34,538 94.0

Ireland 617 639 3.6 93,544 1,92,933 106.2

Canada 662 690 4.2 92,769 1,49,742 61.4

Japan 421 422 0.2 82,827 1,15,809 39.8

Norway 25 22 -12.0 65,144 1,09,395 67.9

Netherlands 123 124 0.8 65,116 1,02,294 57.1

Other 1,982 2,037 2.8 4,00,834 7,50,226 87.2

Total 9,823 10,178 3.6 24,90,222 44,62,903 79.2

{The table includes details of even those FPIs whose registration has expired. No. of FPIs excluding those whose registration
has expired as on March 31, 2020 and March 31, 2021 were 9679 and 9997 respectively and their AUC was INR 24, 88,729
Crore and INR 44, 61,479 crore)
Source: NSDL

During 2020-21, the percentage holding (in Singapore and Japan declined by 0.8 percentage points,
equity assets) of FPIs from USA increased by 1.1 0.9 percentage points and 0.7 percentage points,
percentage points, followed by Mauritius and Ireland respectively. As on March 31, 2021, 34.3 per cent of the
(0.5 percentage points each), and United Kingdom total equity assets of the FPIs in India were from USA,
(UK) (0.4 percentage points). On the other hand, followed by Mauritius (11.9 per cent), Luxemburg (8.5
the percentage holding of FPIs from Luxemburg, per cent) and Singapore (8.2 per cent) (Table 6.5).

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 Chapter - 6 : Foreign Portfolio Investors and Foreign Venture Capital Investors

Table 6.5: Percentage Share of Top 10 Countries in Foreign Portfolio Investors Total Equity Assets (Per cent)

Percentage Share in Total Assets

Sr. Change in the
Sectors
No. March 31, 2020 March 31, 2021 Percentage

1 United States of America 33.2 34.3 1.1

2 Mauritius 11.4 11.9 0.5

3 Luxembourg 9.3 8.5 -0.8

4 Singapore 9.1 8.2 -0.9

5 United Kingdom 4.9 5.3 0.4

6 Ireland 3.8 4.3 0.5

7 Canada 3.7 3.4 -0.3

8 Japan 3.3 2.6 -0.7

9 Norway 2.6 2.5 -0.1

10 Netherlands 2.6 2.3 -0.3

11 Others 16.1 16.8 0.7

Total 100.0 100.0

Source: NSDL

V. 
FPI LIMITS IN CORPORATE BONDS AND in 2019-20. However, the overall debt utilisation
THEIR UTILIZATION limit as percentage of total investment limits in the

In 2020-21, overall upper limit for the corporate bonds category decreased to 24.5 per cent
investment by the FPIs in corporate bonds was on March 31, 2021 from 54.5 percent as on March 31,
increased to `5,41,488 crore from `3,17,000 crore 2020 (Table 6.6).

Table 6.6: Foreign Investment Limits in Corporate Bonds (` crore)

Unutilized
Auctioned
Upper Limit* Investment Total Investment Per cent
Limits available Limit Available
Year of Limits
with FPIs for Investment
Utilized
A B C (B+C)

2019-20 3,17,000 1,72,722 - 1,72,722 54.5 1,44,278

2020-21 5,41,488 1,32,865 - 1,32,865 24.5 4,08,623

Note: *The Upper Limit mentioned is as per limit prescribed by RBI for every Financial Year.
Source: NSDL

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Securities and Exchange Board of India Annual Report : 2020-21

VI. 
OFFSHORE DERIVATIVES INSTRUMENTS the market risk is managed by FPIs at their end by
ISSUED BY FPIS hedging it in the market or by entering into offsetting
contracts with others or any other technique.
Offshore derivatives instruments (ODIs) or
participatory notes (PNs) is an instrument issued by The value of investment in ODIs on equity and
a registered FPI to an overseas investor who wishes debt (including derivatives) increased by 85.6 per cent
to invest in Indian stock markets without registering `89,100 crore as on March 31, 2021, as compared to
themselves with SEBI. Investment in participatory `48,006 crore as on March 31, 2020. The value of
notes provide the foreign investor with an exposure ODIs as a percentage of total FPI assets increased to
to Indian securities and derivatives market. The two per cent as on March 31, 2021, as compared to
ODIs are issued by FPIs to the overseas investors and 1.9 per cent as on March 31, 2020 (Table 6.7).

Table 6.7: V
 alue of Offshore Derivative Instruments / Participatory Notes Holding by Foreign Portfolio
Investors (` crore)

Notional value of ODIs as a

Notional value of
ODIs (excluding AUC of FPIs percentage of
At the end of ODIs*
Derivatives) AUC of FPIs
Respective Year
(A) as a percentage
(A) (B) (C)
to (C)
2019-20 48,006 47,852 24,90,223 1.92
2020-21 89,100 89,100 44,62,903 2.00
Note:-* in Equity, Debt, Hybrid Securities and Derivatives
Source: NSDL

VII. FOREIGN VENTURE CAPITAL INVESTOR instruments (instruments optionally or mandatorily

convertible into equity share) or debt instruments.
Foreign Venture Capital Investor (FVCI) is
The FVCI can invest directly in the venture capital
an entity incorporated or established outside India,
undertaking or invest through VCFs (Category I
which proposes to make investments in VCFs or AIFs).
venture capital undertakings in India. The FVCI As on March 31, 2021, there are 265 registered
can invest in equity instruments, equity-linked FVCIs in India, up from 251 as on March 31, 2020.

Table 6.8: Registered Foreign Venture Capital Investors

Cancellation/
Type of Registered as on New Registrations Registered as on
Surrender during
Intermediary March 31, 2020 during 2020-21 March 31, 2021
2020-21

Foreign Venture
251 20 6 265
Capital Investors

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 Chapter - 6 : Foreign Portfolio Investors and Foreign Venture Capital Investors

Cumulative net investment of FVCIs fell by services sector (3.6 per cent) as on March 31,
11.3 per cent during 2020-21. Highest investment 2021. The others category contributes 83.4 per cent
of FVCIs was in Information Technology Sector of the total FVCI assets as on March 31, 2021
(7.5 per cent of total investment) followed by (Table 6.9).

Table 6.9: Cumulative Net Investments by Foreign Venture Capital Investors (` crore)

Sectors 2019-20 2020-21

Information Technology 3,667 3,497

Telecommunication 4,800 1,409

Pharmaceuticals 48 177

Biotechnology 32 0

Media/Entertainment 623 630

Services Sector 1,675 1,683

Industrial Products 379 392

Others 41,527 39,014

Total 52,751 46,802

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Securities and Exchange Board of India Annual Report : 2020-21

CHAPTER SEVEN :
Credit Rating Agencies

7.1 POLICY DEVELOPMENTS or under the aforementioned RBI framework, CRAs

may not consider the same as a default event and/or
I. 
RELAXATION FROM DEFAULT
recognize default and make appropriate disclosures
RECOGNITION DUE TO RESTRUCTURING
in this regard in the press release.
OF DEBT
The above relaxation was extended till
In view of the developments arising due December 31, 2020.
to the COVID-19 pandemic and in light of the
B. Extension in Timelines for Press Release and
resolution framework provided by Reserve Bank of
Disclosures on Website
India (RBI) vide notification dated August 06, 2020,
credit rating agencies (CRAs) were provided the Since ability of credit rating agencies was
following relaxations from default recognition due impaired due to the lockdown to collect information
to restructuring of debt by lenders/investor solely from issuers and third parties, therefore, relaxation
due to COVID-19 related stress or under resolution from timelines for rating action/ issue of press release
framework dated August 06, 2020 provided by the by credit rating agencies was granted (stipulated vide
RBI as default on a case-to-case basis, subject to SEBI circular dated June 30, 2017). However, credit
appropriate disclosures in the press release- rating agencies were directed to endeavour to finish
the exercise on a best effort basis and put such cases
A. Recognition of Default
up for ratification by the Rating Sub-Committee of
Credit rating agencies recognize default based the Board of CRA.
on the guidelines stipulated vide circulars dated
Credit rating agencies were granted an
May 03, 2010 and November 01, 2016. Vide circular
extension of 30 days for making annual and semi-
dated March 30, 2020 relaxation was provided for
annual disclosures on their website for the period
from recognition of default owing to moratorium
ending March 2020.
permitted by RBI and lockdown due to COVID-19
pandemic. Vide circular dated August 31, 2020 it C. 
Review of Post-Default Curing Period for
was prescribed that based on their assessment, if the Credit Rating Agencies
CRAs are of the view that the restructuring by the It was represented to SEBI that while there
lenders/investors is solely due to COVID-19 stress have been scenarios where the CRAs downgraded

166
 Chapter - 7 : Credit Rating Agencies

the rating due to default/non-payment of interest/ previous year, a change of 57.8 per cent), followed by
principal by the issuer on a debt/ borrowing, the CARE with 150 fresh ratings (comparing with 142 in
upgradation of rating even if justified could not 2019-20) and ICRA with 124 fresh ratings (comparing
be carried out due to extant norms on post-default with 128 in 2019-20). Ratings reviews were carried
curing period. Therefore, SEBI undertook a review out by all the seven agencies and in 2020-21 highest
of post-default curing period for CRAs. reviews were recorded by CRISIL with 3,278 reviews
Vide circular dated May 21, 2020 it was comparing with 2613 reviews in 2019-20. Second
prescribed inter alia that after a default is cured and highest reviews in 2020-21 were by CARE with 940
the payments regularized, a CRA shall generally reviews as compared to 907 reviews in 2019-20 and
upgrade the rating from default to non-investment Brickwork with 560 comparing with 953 in 2019-
grade after a period of 90 days based on the 20. Highest rating downgrades (more than three
satisfactory performance by the company during notches) during 2020-21 were by CARE with 34 rating
this period. CRAs may deviate from the said period downgrades comparing with 50 in 2019-20 followed
of 90 days on a case-to-case basis, subject to the by Acuite (27 downgrades compared to five in 2019-
CRAs framing a detailed policy in this regard that 20) and Brickwork (18 downgrades comparing with 85
shall also be disclosed on their websites. Further, the in 2019-20).
CRA were required to frame a policy in respect of In 2020-21, activities of CRISIL increased by
upgrade of default rating to investment grade rating
26.7 per cent over the previous year followed by
and place it on its website.
India Ratings and Research with 24 per cent increase
over the previous year and CARE with 2.2 per cent
7.2 MARKET ACTIVITY AND TRENDS
increase over 2019-20. Other rating agencies such
 During 2020-21, registration of one credit rating as Acuite and Infomerics show significant increase
agency was renewed. At the end of March 2021,
in market activity over the previous year with a
there were seven credit rating agencies registered
low base. On the other hand, Brickwork registered
with SEBI.
a drop of 41 per cent in its activities followed by
During 2020-21, CRISIL had given the highest ICRA with a decline of 9.4 per cent in its activities
number of fresh ratings (213 comparing with 135 in over 2019-20.

Table 7.1: Activities of Credit Rating Agencies

Ratings
Fresh
Ratings Downgraded
Credit Rating Agencies Year Ratings Total
Reviewed@ more than 3
Granted
Notches*
2019-20 14 118 5 137
Acuite Ratings and Research Ltd
2020-21 51 256 27 334

2019-20 79 953 85 1,117

Brickwork Ratings India Private Limited
2020-21 77 560 18 655

2019-20 142 907 50 1,099

CARE Ratings Limited
2020-21 150 940 34 1,124

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Securities and Exchange Board of India Annual Report : 2020-21

Ratings
Fresh
Ratings Downgraded
Credit Rating Agencies Year Ratings Total
Reviewed@ more than 3
Granted
Notches*
2019-20 135 2,613 9 2,757
CRISIL Ratings Limited
2020-21 213 3,278 3 3,494
2019-20 128 241 14 383
ICRA Limited
2020-21 124 219 4 347
2019-20 101 400 11 512
India Ratings and Research Pvt Ltd
2020-21 136 498 1 635
2019-20 4 2 0 6
Infomerics Valuation and Rating Pvt Ltd
2020-21 16 15 0 31
Note: *In the present analysis, for the purpose of uniformity across CRAs, only ratings that have been downgraded more
than 3 notches at one instance or ratings that have been downgraded more than 3 notches within 3 months have
been considered.
@
including upgrades, downgrades, surveillance,INC etc.
Source: Credit Rating Agencies

7.3 RISK MANAGEMENT MEASURES framing a detailed policy in this regard, which
shall also be available on CRA’s website. The policy
There had been concerns related to the pro-
framed needs to include scenarios like technical
cyclicality of credit rating downgrades, viz. a cliff
defaults, change in management, acquisition by
effect arising from the need for market participants
another firm, sizeable inflow of long- term funds
to react to a credit downgrade, particularly during
instances of ratings transition from investment grade or benefits arising out of a regulatory action, etc.

to non-investment grade. The impact of these risks which fundamentally alter the credit risk profile of

may have further amplified in the wake of COVID-19. the defaulting firm. The cases of deviations from
stipulated timelines, if any, are also required to be
In this regard, risk management measures
placed before the Ratings Sub- Committee of the
were taken by SEBI in respect of mitigation of
board of the CRA, on a half yearly basis, along with
risk posed by pro-cyclicality of credit ratings.
the rationale for such deviation.
Considering the market dynamics and role of credit
rating in bond issuances, to prevent undue delays To further reduce risks arising due to pro-
in rating upgrades subsequent to regularisation cyclical nature of credit ratings, CRAs were permitted
of a debt account and curing of a default, for to not to recognize default, if a CRA, based on its
instance in events of technical defaults that may assessment, is of the view that the restructuring
be further exacerbated in the wake of COVID-19, by the lenders/investors is solely due to COVID-19
vide circular dated May 21, 2020, CRAs were related stress or under RBI’s resolution framework
permitted to deviate from the given timelines for for COVID-19 related stress as notified on August
upgrade of default rating to sub-investment grade, 06, 2020 subject to CRAs making appropriate
on a case-to-case basis and for upgrade of default disclosures in this regard in the press release. This
rating to investment grade. This is subject to CRAs relaxation was extended till December 31, 2020.

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CHAPTER EIGHT :
Protection of the Investor Interests

8.1. INVESTOR EDUCATION commodity derivatives exchanges, SEBI recognized

investor associations and commodities derivative
The mandate of SEBI is to protect the interest
trainers for creating awareness about securities
of investors in securities markets and to promote
and commodity derivatives market. The year 2020-
the development of, and to regulate, the securities
21 came with a unique set of challenges due to the
market. Investor education and awareness programs
COVID-19 pandemic, leading to a paradigm shift
has been a key strategy followed by SEBI to enhance
in the way of conducting awareness programs for
investor protection, promote investor confidence by
investors and general public. Due to restrictions on
enhancing their knowledge, skills and capability and
public gatherings, the physical conduct of awareness
foster their engagement in securities market. SEBI’s
programs was kept under abeyance. With the aim
investor education and awareness programs focus
of continuing to spread investor education and
on creating awareness among investors / general
awareness, SEBI came out with guidelines for the
public on relevant issues in securities market,
conduct of investor awareness programs online
understanding risks involved, rights and obligations
through webinars. In this regard, SEBI also provided
of investors, Do’s and Don’ts of investing in securities
webinar platform to MIIs, SEBI recognized investor
market, grievance redressal mechanism in the
associations, commodities derivatives trainers and
securities market, etc. All the education programs
securities market trainers (SMARTs) to conduct joint
are free for the participants.
programs.
A. Investor Awareness Programs
Webinars and other digital modes of
SEBI has been conducting various investor engagement were used to reach out to investors
awareness programs jointly with market infrastructure for various investor awareness initiatives of SEBI
institutions (MIIs) viz. stock exchanges, depositories, (details in Box Item 8.1).

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Box Item 8.1: Investor Education in Virtual Mode during COVID Times
The current year witnessed unprecedented challenges due to COVID-19 pandemic. There was surge of new
investors in the securities market during the year. SEBI continued its commitment to investor education
initiatives. Physical meetings could not be held. Virtual mode was adopted to reach out investors across the
country.
SEBI in association with Market Infrastructure Institutions (MIIs), SEBI recognized Investor Associations,
Commodities Derivatives Trainers (CoTs) and Securities Market Trainers (SMARTs) conducted 1,084
programs in virtual mode covering over one lakh participants. During these investor awareness programs
in virtual mode, useful information on securities market and basics of investing in securities market, mutual
fund investments, e-KYC, grievance Redressal mechanism, do's and don'ts, etc. were provided to the
participants. The main objective of conducting these programs was to make investors aware of their rights
and responsibilities and how to mitigate risk involved in the securities market. Special emphasis was given
to educate first time investors who had entered the securities market during the year.

During 2020-21, SEBI had conducted following Table 8.2: 

Regional Seminars / Webinars in
investor awareness activities across the country: Association with AMFI

i. 
Regional Seminars / Webinars in Association
Particulars 2019-20 2020-21
with Market Infrastructure Institutions
Total Regional Seminars /
During 2020-21, SEBI in association with MIIs 15 33
Webinars Conducted
conducted 652 regional webinars across the country
Number of Participants in
covering over 79,500 participants. So far, since the
Regional Seminars / Webi- 3,499 15,925
inception of regional seminar initiative in 2010, over nars
2,000 regional seminars had been conducted by SEBI
in association with MIIs covering over two lakhs iii. 
Investor Awareness Programs by SEBI
participants. Recognized Investor Associations

Table 8.1: 
Regional Seminars / Webinars in At the end of 2020-21, there were 22 SEBI
recognized investor associations and they were
Association with MIIs
spread across nine states. During 2020-21, SEBI
Particulars 2019-20 2020-21 recognized investor associations conducted 125
investor awareness webinars under the aegis of
Total Regional Seminars / SEBI Investor Protection and Education Fund (IPEF)
662 652
Webinars Conducted
covering over 9,500 participants across the country.
Number of Participants Since beginning of this initiative, SEBI recognized
in Regional Seminars / 49,990 79,583 investor associations had conducted 1,599 programs/
Webinars workshops.
iv. 
Commodities Awareness Programs by
ii. 
Regional Seminars / Webinars in Association SEBI Recognized Commodities Derivatives
with AMFI Trainers
 During 2020-21 SEBI in association with the As on March 31, 2021, there were 22 SEBI
Association of Mutual Funds in India (AMFI) had recognized Commodities Derivatives Trainers
conducted 33 regional webinars across the country (CoTs). During 2020-21, SEBI recognized CoTs
covering over 15,925 participants. had conducted 20 awareness programs on various

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exchange traded commodity derivatives covering WIW-2020 with the co-ordination of the MIIs, AMFI,
over 1,315 participants. So far, since inception of SEBI recognized institutions. A host of initiatives
the CoTs programs in 2017-18, approximately 135 were taken to encourage and promote investor
awareness programs had been conducted by CoTs awareness and education using digital platform
covering over 5,700 participants. across India. The objective of the event was to equip
existing and potential investors with the knowledge
v. 
Celebration of World Investor Week – 2020 by
of the securities market. As a part of celebration of
SEBI
WIW-2020, series of investor awareness activities
World Investor Week-2020 (WIW-2020) was were undertaken. A special message from Chairman,
the fourth edition of the global campaign promoted SEBI was displayed at SEBI’s official website, SEBI
by IOSCO to raise awareness about the importance investor website and websites of MIIs, AMFI and
of investor education and protection and highlight other associations.
the various initiatives of securities market regulators
As a part of the celebration, ‘Ring the Bell’
in these two critical areas. The WIW-2020 was
ceremony was organized by MIIs. Officials of MIIs
celebrated across India from November 23-29, 2020.
and senior officials of SEBI attended the ceremony.
Following the decision of the IOSCO Securities Market Booklet in Braille, videos curated
Committee on Retail Investors (Committee 8), specially for hearing impaired, revised Securities
all WIW-2020 events were held online due to Market Booklet and Financial Education Booklet
the COVID-19 pandemic. SEBI, as the national were also launched during the opening bell
coordinator, under the aegis of IOSCO celebrated ceremony.

Image 1: Ring the Bell Ceremony organized by NSE during WIW-2020 celebrations

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Securities and Exchange Board of India Annual Report : 2020-21

Image 2: Ring the Bell ceremony in the virtual presence of Mr. G. Mahalingam, Whole-Time Member, SEBI (Bottom left),
Mr. P.S. Reddy, MD & CEO, MCX (Top-right) and Mr. G.P. Garg, Executive Director, SEBI (Bottom right) on November 24, 2020

Bilingual digital/ physical banners about guest speakers on various securities market related
celebration of WIW-2020 were displayed in all offices topics by MIIs, AMFI, SEBI recognized Investor
of SEBI. Digital banners/ physical banners were also Associations and other associations for farmers’/
displayed at all offices of MIIs and other associations farmer producers’ organizations in the commodity
who had taken part in the celebration of WIW-2020. derivatives market for investors in securities market.
Digital ticker about the celebration of WIW-2020 was Approximately 12 crore people were reached
also displayed on the SEBI website, SEBI investor through webinars, newspaper articles, e-mails, SMS,
website and also on the websites of the participating television (TV) shows and radio programs, etc.
institutions. Digital Teaser was also run before the
i. 
Special investor awareness webinars were
beginning of the celebration of WIW-2020 on SEBI
also organized where market dignitaries were
website. Digital micro-site was developed and run
invited to address the participants.
on the SEBI investor website for the investors to
know about the various awareness programs being ii. 
Under a unique women centric initiative
conducted by MIIs, AMFI and other associations. “Be your own Laxmi” and programs
focusing towards young women earners,
In order to enhance the reach and increase
women entrepreneurs, women volunteers/
the number of investor education programs, SEBI
workers of self-help groups/non-government
launched Securities Market Trainers (SMARTs)
organisations were conducted by MIIs.
program. This new initiative was inaugurated by
Chairman, SEBI in the presence of Whole-Time iii. 
National level online quiz contests were
Member and other senior officials of SEBI. organized by MIIs across India for investors

Investor awareness campaigns through on equity and commodity derivatives. These

webinars were conducted independently and in co- programs witnessed a huge participation of

ordination with SEBI. SEBI Officials were invited as approximately two lakh people.

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iv. Knowledge series of videos related to equity Various print media advertisements were
market and commodity derivatives were published in leading newspapers about ‘Do’s
launched on various concepts by MIIs in and Don’ts’ of investing in securities market. The
various languages. major themes of these advertisements were - not
Awareness campaigns on various topics to believe in hot tips on trading, advantages of
were conducted during WIW-2020 on TV/Radio, trading on the stock exchange platform, grievance
Print and social media platforms viz. YouTube, redressal mechanism, etc. Awareness campaigns
Facebook, Twitter, LinkedIn, WhatsApp, etc. Radio on precautionary messages such as dabba trading,
jingles on awareness campaign for dabba trading, unsolicited tips, illegal trading in commodity
‘Mutual Fund Sahi Hai’ were aired on Radio FM in derivatives market were digitally displayed at
regional languages. Mumbai and Delhi Airports.

Table 8.3: Snapshot of the Reach during the World Investor week - 2020

Views/Reach
Particulars
(in crore)
Views
Twitter 0.190
Facebook 2.003
Instagram 3.784
You Tube 0.001
LinkedIn 0.022
TV shows >1.000
Online Resources (page views) 0.130

SMS Sent 0.500

Emails sent 1.200
Newspapers >1.000
Radio >0.600
Booklets, Flyers distributed >1.500
Lectures, Talks Series, Webinars Reached out 0.100
Note: Approximately 12 crore people were reached out to, during the WIW-2020
Source: Respective MIIs, Trade Bodies and Associations

vi. Celebration of Global Money Week-2021

Global Money Week-2021 (GMW-2021) was a (OECD-INFE) to raise awareness and to encourage
week-long, financial education awareness-raising a wide range of stakeholders to motivate children
campaign held under the aegis of Organisation and young people to learn about money matters,
for Economic Co-operation and Development livelihoods and entrepreneurship. The GMW-2021
-International Network on Financial Education was held from March 22-28, 2021.

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Securities and Exchange Board of India Annual Report : 2020-21

 Vision of Global Money Week: All children and financial sector regulators, stock and commodity
youth have access to high-quality financial education, derivatives exchanges, depositories, NCFE,
learn about money matters and are able to take smart NISM and SEBI empaneled resource persons,
financial decisions. conducted various financial education and
awareness webinars.
All GMW-2021 events were held online due
to the COVID-19 pandemic. SEBI, as the National Since the target group was ‘youth up to 30 years
coordinator, celebrated GMW 2021 in co-ordination of age’, emails were sent to various colleges/
with the other financial sector regulators viz. RBI, universities across the country informing them
IRDAI, PFRDA along with MIIs and SEBI recognized of the details of the events organized during
resource persons. Other organizations like National this Global Money Week.
Center for Financial Education (NCFE) and
The information about the various programs
National Institute of Securities Market (NISM) also
conducted during Global Money Week-2021
participated in the celebrations of GMW-2021. The
were provided on the micro-site that was
activities undertaken during the GMW-2021 were as
developed for GMW – 2021 on SEBI Investor
follows:
Website. A total of 1,232 financial awareness
a. 
Financial Education Webinars conducted programs through webinars covering more
during Global Money Week -2021 than one lakh participants were conducted
across India (Table 8.4).
SEBI, along with other participants viz. other

Table 8.4: Details of Programs conducted in India during the Celebration of GMW- 2021

Financial Education Webinars

Number of webinars Number of Participants
(by)

SEBI empaneled Resource Persons 1,119 96,470

NCFE for School Students 10 800

CDSL, MSE and SEBI jointly 37 3,136

SEBI, BSE and CDSL jointly 28 1,775

Commodity Awareness Webinars (by)

NCDEX 25 1,200

MCX 13 700

TOTAL 1,232 1,04,081

Source: Data received from Stock Exchanges, Depositories, NCFE and SEBI regional Offices

b. Quiz Competition:
A nation-wide Quiz competition was held forwarded to the registered participants. SEBI
by SEBI during GMW – 2021. Participants conducted the quiz on various topics based on
were invited to register for the online quiz. basic financial education and recent updates
Once participants registered for the online related to government schemes conducted for
quiz, an e-booklet on financial education was school students and the youth.

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c. Essay writing Competition • Radio: The campaign was broadcast in 11

languages across 155 radio stations in 70 cities
A nation-wide essay writing competition was
with over 76,500 spots.
held by SEBI during the week. A unique email
ID ([email protected]) was created for • SMS: Two rounds of SMS blasts were
the participants where they submitted their conducted pan India. SMSs were sent to 6.70
essays. Once the participants registered for crore audience with an average frequency of
the essay competition, links for the e-booklet two SMSs per individual.
on financial education was forwarded to the
So far, under mass media campaigns, more
registered participants.
than 77,680 TVCs, around 3,01,540 radio spots, over
vii. Mass Media Campaign by SEBI 6,260 insertions in various print editions, around
In order to increase investor awareness among 962 screens in cinema halls were covered under the
larger number of people and keeping in view the campaigns.
enormous increase in unsolicited investment tips,
viii. Other Investor Awareness Initiatives of SEBI
during 2020-21, SEBI continued its efforts in creating
awareness through media campaign on the theme of a. SEBI participated in the celebration of National
‘Cautioning investors against unsolicited investment Financial Literacy Week – 2021 which was
tips’. The campaign was undertaken to caution celebrated across India to boost financial
investors about unsolicited investment tips received literacy and financial education in the country.
through SMS so as to safeguard investors from A series of financial education webinars were
getting lured into promise of unrealistic returns. conducted for different target audiences like
The campaign was carried out through television, students, youth, etc. The participants in this
digital modes including SMS, print and radio with webinar were explained about the importance
following salient features - of financial literacy and financial education.

• TV Media: Television Commercials (TVCs) b. 

Special training programs were conducted
were telecasted across 74 channels covering 13 for police officials of Economic Offences
languages with 9,700 spots. Wing of Maharashtra and Goa Police during
2020-21, covering around 100 police officials.
• Digital Media: The campaign was live with
These training programs were organised
moving and static banners on 40 leading
in association with other regulators and
publishers/websites/over the top (OTT)
government organisations on different topics.
platforms covering 13 languages with 118
crore estimated impressions and 40 lakhs c. SEBI regularly provides suggestions/ inputs
clicks. Additionally, videos on OTT platforms for various reports and surveys conducted by
including YouTube had 12.2 crore video views. international organizations like IOSCO and
• Print Media: Advertisements were placed at OECD. SEBI contributed significantly to the
premium positions in 63 leading national and report on complaint handling and redressal,
regional newspapers in 13 languages covering sound practices enumerated in grievance
458 editions with a total of 1,062 insertions redressal report of IOSCO Committee 8 on
across editions. retail investors, etc.

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d. 
SEBI also actively participates in various about different educational material available on the
institutes/domestic committees like National website, popularization among various participants
Centre for Financial Education (NCFE), of investor awareness programs, etc. The contents
Technical Group on Financial Inclusion and uploaded on the investor website are updated
Financial Literacy of Financial Stability and periodically.
Development Council Sub-Committee and
C. Visit to SEBI
Investor Education and Protection Fund (IEPF)
along with other financial sector regulators SEBI had started the initiative ‘Visit to SEBI’

like Reserve Bank of India (RBI), Insurance where groups of students from colleges and

Regulatory and Development Authority of professional institutes, who are interested in learning

India (IRDAI), Pension Fund Regulatory and about the role of SEBI and securities market, visit

Development Authority (PFRDA), Ministry of different offices of SEBI. These sessions cover various

Corporate Affairs (MCA), etc. In 2020-21, SEBI topics like basic concepts of securities market, new

started chairing the NCFE Board. During 2020- developments in securities market etc.

21, SEBI has participated in three meetings of With the objective of increasing the reach
the IEPF Authority of MCA. of ‘Visit to SEBI’ programs, SEBI officials also

B. Dedicated Investor Website visit different colleges and different educational

institutions as a part of conducting securities market
A dedicated website http://investor.sebi.gov.in
related awareness programs at the respective
is maintained by SEBI for the benefit of investors. The
educational institutions.
website provides relevant educational/ awareness
material and other useful information such as Since the beginning of this initiative, 3,423

financial education booklets, securities market ‘Visit to SEBI’ programmes had been conducted

booklets in 13 languages, power point presentations covering more than 1.53 lakh participants.

on various topics such as introduction to securities Due to the outbreak of the COVID-19
market, KYC procedure, how to invest in an initial pandemic, the conduct of physical awareness
public offer, rights issue, etc. Audio visuals on programs was kept on abeyance during 2020-21.
SEBI grievance redressal mechanism, cautioning However, the policy for conduct of ‘Visit to SEBI’
investors against unsolicited investment tips, awareness programs through virtual mode using
not to be lured by collective investment schemes webinars was introduced and subsequent to that, a
promising unrealistic returns, etc. are also available total of 117 such programs were conducted in 2020-
on the SEBI investor website. Further, schedules of 21 covering over 11,600 participants.
various investor and financial education programs
D. Impact
 Assessment of the Awareness
are also displayed on the website for the information
Programmes
of investors. As compared to 95,000 page views in
During the year 2020-21, due to COVID-19
2019-20, SEBI’s investor website had received around
pandemic restrictions, impact assessment of
30,25,740 total page views in 2020-21. The large
awareness activities could not be conducted.
increase in the views of the SEBI investor website
may be accounted to various factors like celebration However, SEBI continued its investor
of World Investor Week-2020, Global Money Week - awareness programs online through Webinars. In
2021, informing investors through emails and letters this regard, guidelines were issued so that programs

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are conducted in an organized manner. Further, Individuals / organizations having prescribed

SEBI also provided WebEx platform to MIIs, SEBI qualifications / experience in the field related
recognized Investors’ Associations, Commodities to law, commerce, management, economics
Derivatives Trainers and Securities Market Trainers and financial markets are eligible to be
to conduct webinars. empaneled as Securities Market Trainers. The
E. New Initiatives for Investor Education during functioning of SMARTs is governed in terms of
the Year the operational guidelines for SMARTs.

i. Securities Market Trainers Program The primary objective of SMARTs program is to

During 2020-21, SMARTs was introduced for strengthen the investor education mechanism
enhancing SEBI’s investor education activities. of SEBI by complementing the investor
The scheme was launched by Chairman, education work of MIIs and SEBI recognized
SEBI during the celebration of WIW- 2020 on investor associations.
November 25, 2020.

Box Item 8.2: Securities Market Trainers

During the year SEBI introduced new program “Securities Market Trainers (SMARTs)” to supplement
SEBI’s efforts in the area of investor education and awareness. SMARTs is an important initiative of SEBI
considering the increasing interest among investors in the securities market. With the remarkable increase
in first time investors there is a greater need to increase the outreach of investor education programmes so
that investors understand the securities market better and make informed investment decisions.

SMARTs are expected to conduct Investor Awareness Programs for existing and prospective investors
in the securities markets. Topics covering different aspects of the securities markets viz. introduction to
securities markets, KYC, IPO, mutual funds, grievance redressal etc would be covered in these programs
conducted by SMARTs in various regional languages, in addition to Hindi and English.

During the year, since operationalization of the SMARTs program on November 25, 2020, a total of
146 individuals across 23 States and Union Territories covering 95 Districts on a pan India basis have been
empanelled as SMARTs. These SMARTs have conducted 287 programs covering approximately 15,000
participants across the country.

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Securities and Exchange Board of India Annual Report : 2020-21

Image 3: Launch of Securities Market Trainers (SMARTs) program on November 25, 2020

ii. 
Development of Content for Education / pertaining to securities market are prepared
Awareness Activities which are utilized for dissemination of
a. Common Financial Education Booklet information during different awareness
programs. During 2020-21, 10 such
During 2020-21, the common financial
standardized PPTs were prepared on different
education booklet was revised incorporating
themes related to securities market. These
the recent market developments, initiatives
presentations were developed after consulting
and making the content more reader friendly
and easy to understand. various stakeholders. Some of the themes on
which these presentations had been prepared
b. Securities Market Booklet
are introduction to securities market, KYC
During 2020-21, the securities market booklet procedure, how to invest in IPOs, rights issue,
titled ‘Securities Market – Understanding etc. The said PPTs are also available on SEBI
from Investor’s Perspective was revised, Investor website.
incorporating the recent market developments,
initiatives and making the content more reader
F. Financial Education Activities and Workshops
friendly and easy to understand.
Conducted by SEBI – Trained Resource
c. Thematic Power Point Presentations Persons
With an objective to bring uniformity in the
During the 2020-21, resource persons (RPs)
conduct of investor awareness programs
had conducted 1,170 webinars covering about 99,000
across the country, standardized power
participants.
point presentations (PPTs) on various themes

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Table 8.5: Financial Education Workshops / Webinars by Resource Persons

Particulars 2019-20 2020-21

Mode of Conduct Physical Contact Through Webinars

Total RP Programs/ Webinars Conducted 22,111 1,170

Total Participants of RP Programs/ Webinars 6,59,774 98,993

There was a decrease in the number of financial demat account on account of the ongoing
education programs conducted by RPs in 2020-21 as lockdown, subject to stipulated conditions and
compared to that of 2019-20. This decrease can be for rights issues opening up to December 31,
attributed to the COVID-19 pandemic. 2020.

At the end of March 31, 2021, there were ii. 

Further, in order to ensure that all eligible
844 SEBI empaneled RPs across 423 districts in 26 shareholders are able to apply to rights issue
states and six union territories. Since the inception during COVID-19 times, vide aforesaid
of the program, these RPs have conducted 1,06,707 circulars read with circular dated January
financial education workshops/ webinars covering 19, 2021, issuer companies were mandated to
over 55 lakhs participants, in more than 585 districts institute an optional mechanism (non- cash
of 28 States and six Union Territories. mode only) to accept the applications of the
shareholders, subject to ensuring that no third
G. Joint programs with Exchanges, Depositories, party payments shall be allowed in respect of
etc. any application, for rights issues opening up to
March 31, 2021.
SEBI has been conducting investor awareness
programs jointly with exchanges and depositories iii. 
In order to increase the efficiency of the voting

(called as Regional Seminars / webinars) details of process, pursuant to public consultation, it was
decided vide circular dated December 09, 2020,
which are already provided in 8.1 A.
to enable e-voting for all retail demat account
8.2.
INVESTOR
 CENTRIC POLICY holders by way of a single login credential,
MEASURES through their demat accounts or through
Going by its mandate, all the policy measures the websites of depositories/ depository
taken by SEBI have elements of investor protection. participants.

Few of investor centric policy that had been iv. 

In order to increase transparency, vide
undertaken during 2020-21 are discussed below: an amendment dated October 08, 2020 to
SEBI (Listing Obligations and Disclosure
A. Primary Market Requirements) Regulations, 2015, listed

i. 
Vide circulars dated May 06, 2020 and July 24, entities were mandated to make disclosures of
the fact of initiation of forensic audit and final
2020 physical shareholders were permitted to
forensic audit report to the stock exchanges.
submit their application for credit of rights
entitlements in physical form, in case such v. 
In order to ensure that investors have access
shareholders have not been able to open a to reliable, timely and adequate information

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Securities and Exchange Board of India Annual Report : 2020-21

that is material to investment decisions, an operating procedure had been issued to all
advisory was issued on disclosure of impact the exchanges having commodity derivatives
of COVID-19 encouraging the listed entities to segment for handling claims of investors.
evaluate the impact of the pandemic on their
iv. 
Review of Delivery Default Norms
business, performance and financials, both
qualitatively and quantitatively, to the extent Vide circular dated March 23, 2021, delivery

possible and disseminate the same. default norms were revised wherein the
penalty on seller for delivery default of
vi. 
In order to bridge the information asymmetry
agricultural commodities was increased from
arising due to sharing of information with
three per cent to four per cent of the settlement
select investors, SEBI Board in its meeting held
price plus replacement cost. The penalty on
in March 2021, decided to mandate disclosure
buyer in case of delivery default had now been
of audio/video recording and transcripts of
introduced.
post earnings conference calls.

C. Market Infrastructure Institutions

B. Secondary Market
i. 
Measures taken to Enhance the Effectiveness
i. 
Framework for Transactions in Defaulted
of Investor Protection Fund of Stock
Debt Securities Post Maturity Date/
Exchanges
Redemption Date
In order to enhance the effectiveness of
An operational framework was introduced
the Investor Protection Fund (IPF) and to
on June 23, 2020 for transactions in defaulted
improve the investor experience while making
debt securities and obligations of issuers,
claims against defaulting trading members,
debenture trustee(s), depositories and stock
exchanges were advised to operationalize
exchange(s).
a detailed standard operating procedure
ii. 
Additional Guidelines on Utilization of Fund (SOP). The SOP, inter alia, covers procedures
created out of the Regulatory Fee Forgone and timelines for obtaining information from
With the objective to ensure optimal utilisation investors, processing investor claims, review
of the fund created from the regulatory fee of claims and timeline for declaration of a
forgone by SEBI, vide circular dated October 19, trading member as a defaulter.
2020, additional activities were permitted for
the utilization of the fund viz. reimbursement D. Intermediaries
of mandi tax, incentivizing option premium, i. 
Use of Technology for Know Your Client
reimbursement of fees levied by clearing Process
corporations etc.
To facilitate the use of technology for the process
iii. 
Standard Operating Procedure for Handling of KYC procedure in the securities market,
Investor Claims so that the investors can get their KYC done
In order to have uniformity and transparency without visiting the office of intermediaries,
in handling of claims of investors in the cases usage of eSign, DigiLocker, online / app based
of default by trading member(s), standard KYC procedure, in-person verification through

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 Chapter - 8 : Protection of the Investor Interests

video, and online submission of Officially for investor requests / complaints, shall
Valid Document (OVD) / other documents commence from the date of its inward and
under eSign, was enabled. not from the date of data / system entry by the
ii. 
Execution of Power of Attorney by the Client RTA.
in favour of the Stock Broker / Stock Broker vi. 
Advisory No. 2 of 2021 - Payment of Dividend,
and Depository Participant Interest and Redemption to Investors

To protect the interest of investors by Vide advisory dated January 13, 2021, RTAs
discouraging the use of power of attorney (PoA) were advised that upon receipt of latest bank
in the securities market and to mitigate any
account details from investors, the RTA shall
chances of fraud by the brokers, vide circular
immediately update the same in the concerned
dated August 27, 2020, it was specified that
folio after due verification and credit all
PoA is optional and PoA which is executed in
unpaid / unclaimed money, captioned above,
favour of stock broker / stock broker depository
pertaining to that investor, to his / her account
participant by the client needs to be utilized for
irrespective of whether or not the investor has
transfer of securities held in beneficial owner
requested for the same or even if the investor
accounts, deliveries/settlement obligations,
has made only a partial request for the same
pledging/re-pledging etc.

iii. 
Entities permitted to undertake e-KYC E. 
Foreign Portfolio Investors and Foreign
Aadhaar Authentication service of UIDAI in Venture Capital Investors
Securities Market
The details of the investors centric policy for
Vide circular dated May 12, 2020, entities
FPIs such as liberalized investment cap and
were permitted to undertake e-KYC Aadhaar
easing the exit process for FPIs are already
authentication service of Unique Identification
provided in Chapter 6.
Authority of India (UIDAI) in securities
market.
F. Fund Management Activities
iv. 
Advisory No. 1 of 2020 – Availing Exemption
I. Mutual Funds
from TDS on Dividend.
The details of the investors centric policy for
Vide advisory dated July 24, 2020, registrar and
mutual funds such as (i) product labeling
transfer agents (RTAs) were advised to seek
in mutual fund schemes – Risk-o-Meter,
information regarding PAN of shareholders
(ii) Review of dividend options(s) / plan(s) in
for the purpose of exemption on tax deduction
case of mutual fund schemes and (iii) Listing
at source (TDS) on dividend, only in case the
information is incomplete or unavailable in of mutual fund schemes that are in the process

physical folio / demat account of the respective of winding up are also mentioned in chapter 5
shareholder of annual report

v. 
Advisory No. 1 of 2021 - In-warding of II. Investment Advisers
Investor requests/ complaints. a. 
 To ensure greater transparency and
Vide advisory dated January 12, 2021, RTAs accountability with reference to advisory
were advised that the timeline for compliance activities and to avoid conflict of interest, vide

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Securities and Exchange Board of India Annual Report : 2020-21

amendments to SEBI (Investment Advisers) guidelines were issued for proxy advisers
Regulations, 2013 notified on July 03, 2020 and with respect to formulation and disclosure of
‘Guidelines for Investment Advisers’ issued voting recommendation policies, disclosure
vide circular dated September 23, 2020, the IAs of methodologies and processes followed
are required: for making recommendations, timelines for
communication with clients and companies,
i. 
To have client level segregation at group
disclosures of conflict of interest, etc.
level (applicable to non-individual IAs) for
advisory and distribution activities and to IV. Real Estate Investment Trusts / Infrastructure
provide advisory services through a separately Investment Trusts
identifiable department or division -
• In order to widen the investor base, insurance
• To mandatorily enter into agreement companies and mutual funds were included
with clients. under the category of Strategic Investors vide
•  To maintain records of interactions with notification dated June 16, 2020. The details are
clients. provided in Chapter 5.

•  To charge fee from a client for providing • To provide an additional channel for
investment advice in the manner as investing funds, vide circular dated
specified by SEBI, which can be either November 04, 2020, norms for raising funds
through assets under advice mode or through rights issue in unlisted InvITs were
fixed fee mode, not exceeding prescribed introduced. The details are provided in
maximum limits. Chapter 5.
• To ensure while providing • In order to encourage more participation
implementation services to the advisory through preferential allotment, vide circular
clients that no consideration (including dated September 28, 2020 guidelines of
any embedded/indirect/in kind preferential issues and institutional placement
commission or referral fees by any name) were modified. The details are provided in
is received directly or indirectly at IA’s
Chapter 5.
group/family level.
• To facilitate investors to participate in the
ii. Further, to ensure that IAs have professional
unitholders meeting during the COVID-19
qualification, requisite experience and adequate
pandemic, vide circulars dated June 22,
financial resources to discharge advisory
2020, October 08, 2020 and February 26,
services effectively, enhanced eligibility criteria
2021 REITs and InvITs were permitted to
including net worth requirement, enhanced
conduct unitholder meetings through video
educational qualification and experience
conferencing or through other audio visual
requirement were prescribed for registration
means.
as an IA vide aforesaid amendments and
guidelines. G. Credit Rating Agencies/Debenture Trustees
III. Proxy Advisers Debenture trustees(s) play an important role

To improve awareness of clients, vide in the market ecosystem for protection of interest of
circular dated August 03, 2020 procedural investors and therefore, SEBI has taken a number of

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 Chapter - 8 : Protection of the Investor Interests

measures to enhance their role. Debenture Trustee(s) an action taken report (ATR) within 30 days
had been mandated to carry out independent due from the date of receipt of such complaint.
diligence with respect to creation of security so as
In case the ATR is not submitted by the company
to ensure that creation of security is adequate for the
within 30 days or DSE is of the opinion that
proposed issue of debt securities. The format for ‘due
the complaint is not adequately redressed
diligence certificate’ had also been standardized.
and the complaint remains pending beyond
Procedures had been standardised to ensure 30 days, a reminder shall be issued by DSE to
that event of default shall be reckoned at International the listed company through SCORES directing
Securities Identification Number (ISIN) level since expeditious redressal of the grievance within
all terms and conditions of issuance of security are another 30 days. For any failure to redress
same under a single ISIN. Consent from holders of investor grievances pending beyond 60 days
debt securities has also been reviewed and revamped by listed companies, stock exchange shall
for speedy enforcement of security. initiate appropriate action against the listed
All issuers had been asked to create a ‘Recovery company.
Expense Fund’ (REF) for their listed debt securities. Stock exchanges shall levy a fine of `1000
The purpose of creation of REF is to have adequate per day per complaint on the listed entity for
funds with debenture trustees towards recovery violation of Regulation 13 (1) of SEBI (LODR)
proceedings expenses in case of default. Regulations, 2015 read with SEBI circular no.
SEBI/HO/CFD/CMD/CIR/P/2020/12 dated
8.3. 
REDRESSAL OF INVESTORS’
22 January, 2020. Fines shall also be levied
GRIEVANCES
on companies which are suspended from
A. New initiatives in SCORES trading.
a. 
Handling of SCORES Complaints and DSE shall issue a notice to the listed entity
Standard Operating Procedure for Non- intimating them about the levy of fines
Redressal of Grievances by Listed Companies while also directing them to submit ATRs
Vide circular dated August 13, 2020 read with on the pending complaints and payment
circular dated October 22, 2020, procedure for of fines within 15 days from the date of
handling complaints by the stock exchanges such notice. In case the listed entity fails
as well as standard operating procedure for to redress the grievances and/or pay fine
actions to be taken against listed companies for levied within 15 days from the date of
failure to redress investor grievances were laid such notice, the concerned DSE shall issue
down. notices to the promoter(s) of such entities, to
ensure submission of ATRs on the pending
Stock exchanges shall be the first recourse for
complaints and payment of fines by the
certain categories of grievances against listed
listed entity within 10 days from the date of
companies. Upon receipt of the complaint
such notice.
through SCORES platform, the designated
stock exchange (DSE) shall take up the In case the listed entity fails to comply with
complaint with the company. The company is the aforesaid requirement and/ or pay fine
required to redress the complaint and submit levied within the stipulated period as per the

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Securities and Exchange Board of India Annual Report : 2020-21

notices, the DSE shall forthwith intimate the Once stock exchange(s) has exhausted all
depositories to freeze the entire shareholding options and if number of pending complaints
of the promoters in such entity as well as all exceed 20 or the value involved is more than
other securities held in the demat account of `10 lakh, stock exchanges shall forward the
the promoter. complaints against such listed companies to
SEBI for further action, if any.

Table 8.6: Timelines for Handling of Complaints

Sr. No. Activity No. of calendar days

1. Complaint Handling

a. Complaint received in SCORES by the Listed Company T

b. Response to be obtained from Listed Company Within T+30

c. If no response received, alert to Listed Company in the form of Reminder T+31

for Non-Redressal of Complaint

d. Response to be obtained from Listed Company Within T+60

2. Action in case of Non-Compliance

a. Notice to Listed Company intimating the fine @ `1000/- per day, per T+61
complaint to be levied for not resolving the complaints within 60 days

b. Notice to Promoters for non-resolution of complaints and non-payment of T+76

fine to the stock exchange.

c. Freezing of promoters shareholdings (i.e. entire shareholding of the T+86

promoter(s) in listed company as well as all other securities held in the
demat account of the promoter(s) ) in demat account.

d. Stock exchanges may take any other actions, as deemed appropriate.

e. Once Stock exchange has exhausted all options and if number of pending
complaints exceed 20 or the value involved is more than `10 lakh, the
exchange to forward the details of such Listed companies to SEBI for
further action, if any

B. Investor Grievances Received and Redressed per cent to 50,425 cases from 39,624 cases in 2019-
During 2020-21, new grievances received by 20. During the same period the number of pending
SEBI increased by 6.0 per cent to 58,873 from 55, actionable complaints has increased from 3,540 to
526 in 2019-20. The number of grievances resolved 5,171 (Table 8.7).
during 2020-21 also increased significantly by 27.3

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 Chapter - 8 : Protection of the Investor Interests

Table 8.7: Status of Investor Grievances Received and Redressed (Year-wise)

Pending Actionable
Financial Year Grievances Received Grievances Redressed
Grievances*

2019-20 55,526 39,624 3,540

2020-21 58,873 50,425 5,171

* excludes complaints against which regulatory actions are initiated.

At the end of March 31, 2021, 5,171 actionable grievances were pending (of which 4,986 complaints were
less than six months) (Table 8.8).

Table 8.8: Status of Pending Complaints (As on March 31, 2021)

Particulars Total Pending Cases

Complaints pending for less than 6 months 4,986

Complaints pending for more than 6 months 185

Total complaints pending as on 31.03.2021 5,171

SCORES enables investors to directly Of these total complaints received during

lodge complaints online and such complaints are 2020-21, 25,997 complaints (or 44.2 per cent of the
considered as E-complaint. On the other hand, total cases) pertained to stock brokers, followed
any physical complaint (P-complaint), along with by the depository participants (5,029 complaints
mandatory details viz., name, address, email, PAN, or 8.5 per cent of the total cases). During 2020-21,
mobile number received, against any of the entities there was a big rise in the complaints related to
is also uploaded on SCORES and thereby converted collective investment schemes (1,824 compared to
into an E-complaint. 78 in the previous year). On the contrary, complaints
against investment advisors, complaints from
Of the 58,873 new complaints received during
Public Grievances Portal and complains related to
2020-21, 52,475 complaints (or 89.1 per cent of the
refund/allotment/dividend/transfer/bonus/rights/
total complaints) were in the forms of E-complaints,
redemption/interest decreased by 55 per cent, 39
while remaining 6,398 complaints (or 10.9 per
per and 23.8 per cent, respectively, over the previous
cent complaints) were received in the forms of
year (Table 8.9).
P-complaint.

Table 8.9: Type/Category of Complaints

Sr.
Category 2019-20 2020-21
No.
1 Stock Broker 24,877 25,997
2 Depository Participants 2,718 5,029
3 Refund / Allotment / Dividend / Transfer / Bonus / Rights / Redemption / 6,045 4,609
Interest
4 Mutual Funds 2,727 3,941
5 PGPORTAL Received 5,228 3,188

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Securities and Exchange Board of India Annual Report : 2020-21

Sr.
Category 2019-20 2020-21
No.
6 Registrars to an Issue and Share transfer Agents 1,720 2,281
7 Collective Investment Scheme 78 1,824
8 Investment Adviser 3,334 1,499
9 Corporate Governance/Listing Conditions 1,352 1,145
10 Stock Exchanges 547 1,136
11 Prelisting/Offer Document (Shares) 119 1,068
12 Price/Market Manipulation 454 921
13 PACL Committee - 899
14 Others 933 820
15 Depository 239 597
16 Delisting of securities 378 563
17 Non-Demat/Remat 434 383
18 Accounting Manipulation by Listed Companies 350 352
19 Bankers to an Issue 135 336
20 Takeover/Restructuring 160 296
21 Debenture Trustee 556 278
22 Fake and Forged 207 241
23 Insider Trading 185 210
24 Commodity Exchanges 132 193
25 Buy back of securities 145 183
26 Portfolio Managers - 165
27 Merchant Bankers 67 108
28 Recovery and Refund Department 7 85
29 Research Analyst 246 75
30 Special Enforcement Cell - 71
31 Venture Capital Funds 106 67
32 Enforcement Division - 64
33 Prelisting /Offer Document (Debentures & Bonds) 178 55
34 Alternative Investment Fund 48 43
35 KYC Registration Agency (KRA) 39 43
36 Sub-broker 90 32
37 Price/Volume Manipulation in Commodity Future and Options 1,617 20
38 Credit Rating Agencies 32 11
39 Minimum Public Shareholding 28 11
40 Miscellaneous Surveillance Issues 4 8
41 Real Estate Investment Trust 3 8
42 Spreading Rumours / Buy Sell Tips 2 8
43 Custodian of Securities 2 6
44 Infrastructure Investment Trust 2 3
45 Underwriters 1 1
46 Foreign Institutional Investors 1 -
Total 55,526 58,873

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 Chapter - 8 : Protection of the Investor Interests

Table 8.10: Region-wise Investor Complaints Received and Resolved during 2020-21

Region Received Disposed

Head Office Region 26,421 22,182
(Maharashtra, Diu & Daman)
Northern Region (Delhi, Punjab, Himachal Pradesh, Jammu & Kashmir, 11,949 12,864
Uttar Pradesh and Uttarakhand)
Southern Region 7,815 4,713
(Andhra Pradesh, Telangana, Tamilnadu, Karnataka and Kerala)
Eastern Region (West Bengal, Assam, Odisha, Jarkhand and Bihar) 4,401 3,637
Western Regional Office 8,287 7,029
(Gujarat, Rajasthan, Madhya Pradesh, Chattisgarh and Goa)
Total 58,873 50,425

C. Analysis of Investors’ Feedback on the received 2,159 complaints for review as compared
Resolutions Provided / Satisfaction Analysis to 2,228 in the previous year. Further, during
2020-21, 2,391 review complaints were resolved
A review module was implemented in
SCORES in 2016-2017 wherein an investor can (compared to 2,269 in the previous year), while

make a one-time request for review of a complaint 941 review complaints were pending as on March

closed by a dealing officer of SEBI within 15 days 31, 2021 (as against 1,173 pending at the end of the

of closure of a complaint. During 2020-21, SEBI previous year).

Table 8.11: Status of Review Complaints (Number)

Review Complaints Received Review Complaints Redressed Pending Review

Financial Year
Year-wise Cumulative Year-wise Cumulative Complaints

2019-20 2,228 8,222 2,269 7,049 1,173

2020-21 2,159 10,381 2,391 9,440 941

D. Investors Feedback for Calls Answered on Table 8.12: Calls Data on Toll Free Helpline
SEBI Toll Free Helpline
Year No. of Calls Attended
During 2020-21, SEBI had attended to 2,32,215
2013-14 1,25,121
calls on toll free helpline service numbers 1800 22
2014-15 1,60,081
7575/ 1800 266 7575. The helpline service is available
in English, Hindi and six other regional languages 2015-16 1,67,759
every day from 9:00 a.m. to 6:00 p.m. (except on 2016-17 5,80,747
declared public holidays in Maharashtra) to investors
2017-18 6,55,845
from all over India
2018-19 4,84,462
Details of the calls received during the past
2019-20 3,61,512
years and current financial year i.e. 2020-21 is as
follows: 2020-21 2,32,215

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Securities and Exchange Board of India Annual Report : 2020-21

Figure 8.1: Calls answered during 2020-21

E. Investor Assistance – Replies to Queries. against trading members and clearing members
SEBI provides assistance/guidance to investors were resolved, reducing the pendency of cases,
by replying to their queries received through significantly. During 2020-21, 33,744 complaints
e-mail, letters, and on visit to SEBI Offices. were resolved, compared to 21,136 in the previous
In 2020-21, 5,476 queries were replied, out year. As on March 31, 2021, there were 1,562
of which 5,160 queries were replied through complaints pending with the stock exchanges as
e-mails, six through letters and 310 through against 8,540 pending complaints at the end of
phone-calls. Maximum number of queries were previous year.
with respect to investor complaints and other Almost 66.3 per cent of the total complaints
queries received during the year pertained to received during 2020-21 pertained to non-receipt
mutual funds, KYC, margins, Karvy order of of payment or securities by the clients (compared
SEBI, PACL refunds to investors, etc. to 80.5 per cent in 2019-20). Similarly, out of total
F. Issuance of No Objection Certificates complaints resolved during 2020-21, 72.8 per cent
During 2020-21, SEBI issued 57 No Objection of the total complaints pertained to non-receipt of
Certificates (NOCs) to the applicant companies payment or securities.
after satisfying itself that the complaints During 2020-21, 842 cases were received by
arising from the issue received by SEBI against the exchanges for the arbitration of complaints
the company have been resolved. against trading members as compared to 558 in
G. Complaints/Arbitrage cases with Stock the previous year. During 2020-21, 548 cases were
Exchanges resolved in 2020-21, as against 496 cases resolved in
During 2020-21, a large number of complaints 2019-20.

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 Chapter - 8 : Protection of the Investor Interests

Table 8.13: Status of Complaints and Arbitration cases with Stock Exchanges with respect to the Trading
Members

2019-20 2020-21
Pending at Pending at
Details
Received Resolved the end of Received Resolved the end of
the year the year
A. Complaints against Trading Member
1. Non-receipt of
22,374 16,213 7,792 17,754 24,565 981
payment / securities
2. Unauthorised trades 2,136 1,860 394 2,892 3,104 182
3. Brokerage and charges 378 352 37 796 805 28
4. Service related 1,290 1,236 96 3,297 3,232 161
Others 1,614 1,475 221 2,027 2,038 210
Total Cases 27,792 21,136 8,540 26,766 33,744 1,562
B. Arbitration cases related to Trading Members of the exchanges
Total Cases 558 496 185 842 548 479
Source: Stock Exchanges (including commodity exchanges)

Table 8.14: Status of Complaints and Arbitration cases with Stock Exchanges with respect to the Listed
Companies

2019-20 2020-21
Subject Matter
Received Resolved Pending Received Resolved Pending
A. Complaints against Listed Companies:
(a) Public / Further offerings 34 32 10 418 415 13
(b) Corporate Actions: 1,491 1,563 223 1,667 1,642 248
(c) Transfer of Securities: 278 301 121 444 437 128
(d) Miscellaneous: 1,953 1,988 553 2,166 1,997 722

B. Arbitration cases 492 464 151 342 330 163

•  omplaints against Exchange
C 474 443 145 338 327 156
Members
•  omplaints against Listed
C 1 1 0 0 0 0
Companies:
Source: BSE, NSE and MSEI

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Securities and Exchange Board of India Annual Report : 2020-21

8.4 
INVESTOR PROTECTION AND for ‘promoting investors education and training of
EDUCATION FUND intermediaries of securities markets’.

SEBI Investor Protection and Education Fund SEBI had constituted SEBI IPEF Advisory
(IPEF) was created by an executive order dated Committee as per the IPEF Regulations, 2009 for
July 23, 2007 under Section 11 of the SEBI Act, 1992 recommending investor education and protection
with initial corpus of `10 crore from SEBI General activities and utilization of the funds in the IPEF for
Fund. Subsequently, Securities and Exchange Board the said purposes.
of India (Investor Protection and Education Fund)
For 2020-21, `28.8 crore had been utilized
Regulations, 2009 were notified on May 19, 2009 for
from SEBI IPEF for various financial education and
administration of the SEBI (IPEF).
investor awareness activities carried out by SEBI as
The purpose of IPEF in terms of the above compared to `11.8 crore utilized during 2019-20.
regulations is protection of interests of investors
I. INFLOW OF MONEY INTO IPEF OF SEBI
and promotion of investor education and awareness
as provided in the regulations. These purposes are The details of the inflow of money into IPEF of

also the function of SEBI as contemplated under SEBI are provided in Table 8.15.

section 11(2) (f) of the SEBI Act, 1992 which provides

Table 8.15: Inflow of Money into IPEF of SEBI (Amount in ` crore)

Particulars March 31, 2020 March 31, 2021

Opening Balance (A) 127.87 883.44
Additions to the Fund :
(i) Income from Investments 50.98 45.29
(ii) Other Receipts 716.44 274.45
Total (B) 767.42 319.74
Utilisation / Expenses incurred from IPEF Fund (C) 11.84 28.84
Net Balance (A+B-C) 883.44 1,174.34

II. DETAILED REPORT ON UTILISATION OF THE FUND

The details of the utilisation of money from IPEF of SEBI are provided in Table 8.16.

Table 8.16: Utilization of IPEF of SEBI (Amount in ` crore)

As on As on
Utilization of IPEF
March 31, 2020 March 31, 2021
Financial Literacy 10.72 15.63
Committee Meeting 0.004 0.005
Investor Education 0.68 12.99
Seminar/Workshop by IA’s 0.42 0.20
Capital Grants - 0.01
Others 0.02 0.002
Total 11.84 28.84

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 Chapter - 8 : Protection of the Investor Interests

III. BENEFICIAL OWNER PROTECTION FUNDS OF EXCHANGES

Details of the inflow of money into the Beneficial Owner Protection Funds of exchanges (BSE, NSE and
MSEI) are provided in Table 8.17.

Table 8.17: Inflow of Money into Beneficial Owner Protection Funds of Exchanges * (Amount in ` crore)

Particulars March 31, 2020 March 31, 2021

Opening Balance (A) 1,422.56 1,401.78

Additions to the Fund :

(i) Income from Investments 72.01 71.00

(ii) Other Receipts 77.26 1,776.27

Total (B) 149.26 1,847.27

Utilisation / Expenses incurred from Fund (C) 130.37 619.17

Net Balance (A+B-C) 1,441.45 2,629.88

* NSE, BSE &MSEI ;Data for FY 2019-20 is audited; for FY 2020-21, BSE (audited), NSE (unaudited), MSEI (audited)

IV. DETAILED REPORT ON UTILIZATION OF THE FUNDS

The details of the utilization of money from Beneficial Owner Protection Funds of exchanges is provided
in Table 8.18.

Table 8.18: Utilization of Beneficial Owner Protection Funds of Exchanges * (Amount in ` crore)

As on As on
Utilization of Investor Protection Funds (Major Heads)
March 31, 2020 March 31, 2021

Investor Awareness and Education 21.14 46.54

Payment to Clients of Defaulters 553.33 70.91

Other Expenses 46.78 12.90

* NSE, BSE &MSEI ;Data for FY 2019-20 is audited; for FY 2020-21, BSE (audited), NSE (unaudited), MSEI (audited)

V. INVESTOR PROTECTION FUNDS OF DEPOSITORIES

Details of the inflow of money into the Investor Protection Funds of depositories is provided in
Table 8.19.

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Securities and Exchange Board of India Annual Report : 2020-21

Table 8.19: Inflow of Investor Protection Funds of Depositories (Amount in ` crore)

Particulars March 31, 2020 March 31, 2021

Opening Balance (A) 46.15 52.52

Additions to the Fund :

(i) Income from Investments 3.45 3.83

(ii) Other Receipts 10.16 10.19

Total (B) 13.61 14.02

Utilisation / Expenses incurred from Fund (C) 7.23 2.95

Net Balance (A+B-C) 52.52 63.59

* NSDL & CDSL; Data for FY 2019-20 is audited; for FY 2020-21 is unaudited (for both Depositories)

VI. DETAILED REPORT ON UTILIZATION OF THE FUNDS

Details of the utilization of money from Investor Protection Funds of depositories is provided in
Table 8.20.

Table 8.20: Utilization of Investor Protection Funds of Depositories * (Amount in ` crore)

As on As on
Utilization of Investor Protection Funds (Major Heads)
March 31, 2020 March 31, 2021

Investor Awareness Programs 5.61 1.18

Other Expenses 1.62 1.77

* NSDL & CDSL; Data for FY 2019-20 is audited; for FY 2020-21 is unaudited (for both Depositories)

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 Chapter-9 : Technology

CHAPTER NINE:
Technology

T
echnology has become a key enabler a. 
Facilitating innovation in markets
for markets across the globe. It presents through SEBI’s Innovation Sandbox and
the markets with both innumerable Regulatory Sandbox;
opportunities as well as challenges. In recognition of
b. 
Facilitating the adoption of new
the power of technology, SEBI has identified a series
technology including Distributed Ledger
of initiatives that would support its key mandate:
Technology in the bond market;
1. 
To protect the interests of investors in the
securities markets - c. Facilitating ease of doing business for
market intermediaries by enhancing the
a. 
Using sophisticated algorithms to
digital interfaces between them and SEBI
detect malpractices in the market like
in respect of a large range of functions.
insider trading, front running and price
manipulation; 3. To regulate the securities market -
b. 
Ensuring deployment of strong cyber a. 
Enhancement of the large scale
security measures and information automation of inspection of mutual
technology (IT) resilience in the market funds to ensure 100 per cent compliance
infrastructure to facilitate uninterrupted and timely corrective action;
trading and privacy of investor data;
b. 
Enhancement of the automated
c. Enhancing SEBI’s Investor Complaints
inspection of brokers’ use of client
Redressal System to facilitate speedier
securities;
resolution and transparency of the
process; c. 
Facilitation of technology enabled
d. Enhancing the technology infrastructure ínspection cloud' for effective coordination
supporting SEBI’s investor education of inspection of brokers by MIIs and
programs. SEBI.

2. 
To promote the development of the securities In order to keep pace with the demands
market - and challenges of markets, SEBI is investing in

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Securities and Exchange Board of India Annual Report : 2020-21

technology to improve its own productivity and 9.1. 

CYBER SECURITY AND SYSTEM
speed of response to the market through - RESILIENCE

a. Setting up a new and modern data centre; A. 

Cyber Security Measures for Market
b. 
Operationalization of SEBI’s own NOC-SOC; Infrastructure Institutions

c. 
Setting up private cloud infrastructure to SEBI had prescribed the cyber security
facilitate rapid scaling of all its systems; and cyber resilience framework for all Market
Infrastructure Institutions (MIIs). In order to further
d. 
Setting up a data lake for enhancing SEBI’s data
strengthen the framework to perform systematically
analytics capability for both structured and
critical functions relating to trading, clearing and
unstructured data;
settlement, SEBI had taken the following  measures
e. 
Revamping its network and connectivity across
recently-
all its regional and local offices;
a. All the critical information infrastructure (CII)
f. 
Workplace productivity enabled by going
of  all the  MIIs had been identified under the
mobile with SEBI’s own internal workflow
framework of National Critical Information
portal and facilitating secure Work from Home
Infrastructure Protection Centre (NCIIPC);
access;
b. All the three QRTAs viz. Karvy Fintech Private
g. 
A new system for digital tracking of all internal
Limited, Link Intime India Limited. and
files;
Computer Age Management Services Limited
h. 
Enhancing the end to end Case Management
were shortlisted as having elements of Critical
System of SEBI that tracks enforcement actions;
Information Infrastructure (CII) for mutual
i. 
Enhancing its access to data by entering into a funds transactions processing.
data sharing memorandum of understanding
c. In view of the various cyber security incidents
(MoU) with other government bodies;
and advisories, it has been decided to conduct
j. 
Setting up an innovative internship program cyber security penetration testing of select
that gives exposure to young people to the public domain websites of market participants
technology function in SEBI; and MIIs.
k. 
Streamlining the procurement processes of SEBI d. 
MIIs are required to implement various
for greater transparency and better governance measures related to multi-factor authentication
including setting up the IEM mechanism. (MFA) for verification of user access so as
Further, in all of these initiatives, SEBI seeks to to ensure better data confidentiality and
follow a spirit of continuous learning, consultation accessibility. Virtual Private Network (VPN)
and transparency through the key advisory remote access through MFA shall also be
committees that guide us throughout the year. implemented.  All MIIs needs to ensure that the
 Many of the IT initiatives of SEBI are multi- VPN remote login is device specific through
year projects with phased implementation as well as the binding of the media access control (MAC)
continuous enhancements. In the following sections, address of the device with the IP address
some of the major milestones of these initiatives that to implement appropriate security control
were reached are illustrated. measures.

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 Chapter-9 : Technology

e. In the context of large scale Work from Home B. Cloud Facility for Inspection of Stock brokers
in the wake of COVID-19, all MIIs had been During the year 2019-20, SEBI had undertaken
advised to define an appropriate remote access a project of sharing information/data between
policy framework incorporating the specific the joint inspection team members through cloud
requirements of accessing the enterprise facility in association with National Stock Exchange
resources securely located in the data centre, of India Limited. The cloud facility aims at reduction
from home using internet connection. of manual exchange of inspection data among
inspection teams. The project is now operational and
f. 
Incident reporting system has been put in
had been used for inspections conducted during the
place to report any cyber security incident.
year 2020-21.
g. In order to ensure faster restoration of systems
C. Automation of Inspection of Mutual Funds
and processes in case of any disaster, SEBI
The project to automate the inspection of
had mandated significant reduction in the
mutual funds was initiated in 2019. In 2020-21, 18
maximum time taken to restore operations
new alerts were implemented in addition to the
from the Disaster Recovery Site (DRS) of the
originally developed 42 alerts. Currently, historical
MII after declaration of disaster.
data from October 2018 onwards is already available
h. All MIIs had taken various initiatives to detect in the system. On an average, two million investor
advanced cyber-attacks in near time and faster transactions per day (with a peak of eight million
mitigation of attacks. transactions) are being processed on a daily basis
on this system. It is proposed to integrate data from
9.2. TECHNOLOGY IN MARKET ECOSYSTEM
custodians and valuation agencies in the system in
A. Usage of Block Chain Technology 2021-22 which will help in building new alerts.

SEBI is working with the MIIs to build D. Offsite Inspection of Brokers: Use of Client
applications using Distributed Ledger Technology Securities
(DLT) for the corporate bond market. An in-house system driven mechanism had
One of the objective of this project is to build been developed to track the movement of all client
platforms for recording and monitoring of the asset securities lying with the stock brokers to prevent
misappropriation of clients’ securities by the brokers.
cover of a debenture in order to ensure its adequacy
The offsite supervisory process was divided in to two
so that in the event of default, investors’ rights are
phases. In the first phase, broker’s securities holding
protected. Covenant monitoring would also be
data (maintained client-wise and International
enabled as part of the system road map.
Securities Identification Number-wise (ISIN-wise)
It is envisaged to use the inherent property of was reconciled with depository data at ISIN level. In
a DLT platform and create a distributed database the second phase, the end of day (closing balance)
which shall be stored at the respective system/sites of client-wise securities holding data was computed
each of the depositories. The nodes of the platforms based on the data received from different sources like
would be extended to other relevant entities in exchanges, clearing corporations and depositories

phased manner. Interoperability would be designed and reconciled with the closing balance provided by
the brokers. Any mismatch in data is flagged as an
into the platform ab initio.
alert to the exchanges on a weekly basis.

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Further, as the system generates the alerts on input for all clients trading in the shortlisted scrips
the basis of data provided by the MIIs, it is more and calculates overall delta positions of the clients.
reliable. The automation process has resulted in This entails overall processing of close to 20 million
the off-site inspection of all stock brokers (more trades daily along with the associated details to
than 1100) with 100 per cent data for identifying check the risk probability of an investor indulging
possible misuse of clients’ securities. During 2020- in insider trading based on the pattern of his delta
21, this system was even more helpful considering position over time. Further, the alert builds a suspect
the reduction in onsite inspections on account of library which allows the system to catch repeat
COVID-19 related constraints. offenders at a later date. The alert is then utilized for
further processing.
E. Delta-based Insider Trading Alert
9.3 TECHNOLOGY IN SEBI
This new insider trading alert was entirely
developed in-house by the surveillance team A. Committees
and the IT team. The alert development process In line with SEBI’s strong tradition of
involved multiple rounds of development, short consultation and seeking of expert advice in
implementation timeline and a series of iterations in policy formulation and decision making, SEBI has
the alert logic. The alert, which is significantly more five advisory committees in the technology area,
sophisticated than the existing insider trading alert, with distinguished members having significant
has given a boost to SEBI’s surveillance in complex experience and insight in IT matters including
equity derivatives market consisting of futures and practitioners, regulators and academics. These five
options contracts. The alert utilizes trade data as committees are -

No. of Meetings
Sr
Committees during the year
No.
2020-21

1 Project Advisory Committee headed by Dr. Deepak Phatak that advises SEBI on it
various IT projects right from conceptualization and procurement to implementation.
23
Multiple subcommittees were formed for various projects (NOC/SOC, Data Lake,
Data Analytics, Private Cloud, Network Revamp, etc).

2 Committee of Financial and Regulatory Technologies that advises SEBI on emerging

01
trends in technology and their potential application to the securities market.

3 Technical Advisory Committee headed by Dr. Ashok Jhunjhunwala that advises

SEBI on all matters relating to the IT infrastructure and policies to be made 7
applicable to various market participants.

4 High Powered Steering Committee on Cyber Security that advises SEBI on all
matters related to Cyber Security to help build a secure cyber ecosystem in the 1
securities market.

5 Information Systems Security Committee (ISSC) that advises SEBI on handling of

1
specific cyber security incidences.

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B. Setting up a New and Modern Data Centre i. Ensuring adherence to the advisories received
from Indian Computer Emergency Response
SEBI had implemented a large scale tier 3+ data
Team (CERT-In) and other subscribed sources;
center. The new data center is currently hosting SEBI’s
Private Cloud Infrastructure (SPCI). It is envisaged to ii. Issuance of cyber security advisories to -
consolidate infrastructure from other data centers in a. SEBI Employees;
Mumbai to the new Data Center. The consolidation
b. Market Infrastructure Institutions.
of all hardware will increase manageability of server
side hardware and result in better turn-around times D. Setting up Private Cloud Infrastructure to
for service requests. Facilitate Rapid Scaling of all its Systems

C. Operationalization of SEBI’s own SOC-NOC In 2020-21, SEBI implemented its private cloud
infrastructure also known as ‘SPCI’. It is proposed
During 2020-21, SEBI operationalized its
that new and upcoming projects will utilize the
Cyber Security Operations Centre (SOC) which
SPCI and in most cases no separate hardware
monitors and defends enterprise-wide information
procurements will be required. Usage of commodity
technology systems. The Security Operations Centre hardware will be encouraged where practicable. The
and Network Operations Centre (SOC-NOC) system SPCI is already hosting many applications such as
continuously monitors SEBI’s computer systems for Resource Person Portal, File Tracking System (IONS)
cyber threats and attacks and works to block such and Data Lake.
attacks immediately. The system is designed to
E. Implementation of Data Lake at SEBI
take proactive security actions such as blocking of
malicious websites, emails, users and IPs, quarantine With advent of technologies such as machine
of spam emails and computers infected with viruses; learning (ML) and artificial intelligence (AI), it
and cleaning of infected computers and files. is essential for a regulator like SEBI to leverage
sophisticated algorithms, artificial intelligence and
SOC consists of multiple cyber security
machine learning to address critical challenges
technologies and services. The system is designed to
for data analytics arising when processing of vast
secure processes and technologies and will help SEBI
amount of data, either structured or unstructured.
to protect confidentiality and privacy of regulatory This is expected to be achieved through a data lake
and market data at various end points at SEBI. solution which can support open source analytical
The integration and fine tuning of SEBI’s IT tools such as R, Python, etc. with interoperable
systems and applications with technologies deployed features.
as part of SOC-NOC systems was implemented During the year, SEBI completed its tendering
during 2020-21. Continuous integration and fine process for implementation of the proposed
tuning of systems along with 24 x 7 monitoring Data Lake. The proposed Data Lake will have
and reporting ensures cyber security visibility and characteristics such as visualization, time series/
defense. machine learning analytical capabilities, ability to
seek and search both structured/unstructured/semi-
In addition to the above, following steps were
structured data, self-serviced business intelligence
taken to improve cyber security readiness of SEBI’s
capabilities, in memory processing of data etc.
systems –

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The implementation of Data Lake is now replaced the existing Document Management
underway. System (DMS) and can handle various types
of documents including inwards, outwards,
F. Revamping SEBI’s Network and Connectivity
across all its Regional and Local Offices office notes, circulars and files. It also has other
user friendly functionalities like delegation
SEBI had recently initiated the process to
of activities, consolidated graphic dashboard
revamp its IT network infrastructure. As part of
and generation of pendency and Management
the revamp, it is proposed to upgrade its network
Information System (MIS) reports.
devices, IP telephony, wireless solution etc. across its
Head office, Regional offices and Local offices. The c. Case Management System
new solution SEBI Enterprise-wide Integrated IT 
Case Management System (CMS) is an
Network Infrastructure (SIT-NET) is expected to be electronic workflow based system where
scalable taking into account the growth of manpower audit trail details of each enforcement case is
and IT resources in the organization. The new registered from its inception to closure. CMS is
solution will also tightly integrate with the already used by all departments of SEBI. Integration of
implemented SOC-NOC technologies. Further, CMS with SAP finance through online/offline
the new solution is expected to leverage emerging payment gateways has helped to capture/
technology solutions to build an integrated video process all financial details pertaining to a case
conferencing solution across all offices of SEBI.
digitally along with reconciliation of receipts.
G. Internal Productivity Enhancement Automation of the order upload process
has helped SEBI officials to reduce delay in
SEBI initiated numerous projects during the
publishing orders on the SEBI website. Some
year which are at various stages of planning and
significant enhancements carried out in CMS
implementation -
during the year were-
a. SHARE Mobility App
i. 
Enhancement of Prosecution, Securities
During the year, the SHARE Mobility App
Appellate Tribunal (SAT) and enquiry
'SEBI Connect' for all SEBI officials, was
workflows;
launched. The app caters to the needs of
SEBI officials such as claims processing, ii. Inclusion of operative details of orders;
leave application processing, conference iii. Regulatory changes for levying penalty in 11B
room booking, attendance details, worklist proceeding;
for various approvals. The app is a ready
iv. Action taken report enhancements;
reckoner for internal circulars, images, videos,
presentations, links to Rajbhasha section, etc. v. 
Implementation of payment gateways for

b. Inward Outward and Office Noting System settlement scheme, 11B settlement proceedings
and integration with CMS for online payment
 In 2020-21, SEBI implemented a new state-of-
by entities;
the-art file tracking system, named Inward
Outward and Office Noting System (IONS) vi. Implementation of offline payment gateway
in order to track all the documents handled to capture/process payments received though
during the course of its work. The system has cheque;

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vii. Automatic publishing of 11B orders in addition for MFs and portfolio management services,
to AO orders on the SEBI website. alert system for investment advisor/research
analyst, changes in renewal fees of depository
H. Ease of Business/ Investor Convenience
participants and annual fees of stock brokers,
a. Resource Person Portal online risk based supervision reports of
 The Resource Person (RP) program aims to merchant bankers and registrar and transfer
spread financial education to various identified agents.
target groups in numerous districts across the
e. SEBI Complaints Redressal System
country. The RP portal is being actively used
by RPs for digitally raising workshop and SEBI Complaints Redressal System (SCORES)

claim requests. This year it became the first which is the investor grievance redressal
digital platform to be hosted on SEBI’s Private system of SEBI, is the backbone platform
Cloud. It is also being enhanced with digital for investors for raising complaints against
payment and settlement functionality for RP registered intermediaries, MIIs etc. This year
claims which will facilitate quicker settlement some of the significant enhancements carried
of online claims. out in SCORES were -

b. Securities Market Trainers Portal i. The application programming interface (API)

for forwarding of PMO Public Grievance
The Securities Market Trainers (SMARTs) is
(PMOPG complaints) against unregistered
a new initiative of SEBI to enhance investor
entities, received from Centralized Public
education activities and generate awareness
Grievance Redress and Monitoring System
regarding securities market by engaging
(CPGRAMS) was implemented. This
trainers from various fields. An online
digitization had helped SEBI departments
platform – SMARTs portal was developed for
handling the complaints against unregistered
streamlining the workshop and claim approval
entities to process the complaints more
process for trainers.
efficiently. It also helped in maintaining
c. Investor Awareness Mobile App an electronic audit trail of the complaint
 The Investor Awareness Mobile App was movement reducing lots of manual work of
developed in-house and published on Google record keeping done earlier.
Play Store (Android). This app aims to explain
ii. 
The facility of automatic routing of the
the concepts of securities market to users in a
complaints against listed companies to stock
simple and engaging way. SEBI is also in the
exchange has been implemented during the
process of launching the app for iOS users.
year. It has significantly reduced the time of
d. SEBI Intermediary Portal redressal of investor grievances.

The SEBI Intermediary Portal (SI Portal) acts iii. SCORES website was enhanced by enabling
as a principal interface between SEBI and its the provision to accept pictures and audio
registered intermediaries. During 2020-21, files as attachments while lodging complaints
various enhancements were made in the SI by investors. This has helped them to provide
Portal such as improved online compliance more information regarding their complaints.

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9.4 FINTECH AND REGTECH INITIATIVES facilitates online submission of applications for

A. Innovation Sandbox participating in the Innovation Sandbox.

a. 
Vide circular dated February 02, 2021, the B. Regulatory Sandbox
framework for the Innovation Sandbox was SEBI had issued its Regulatory Sandbox
revised. A few salient features of the revised framework on June 05, 2020 where entities
framework are - regulated by SEBI were granted certain facilities and
i. To promote innovation both in terms of flexibilities to experiment with FinTech solutions in
new products and services as well as new a live environment and on a limited set of customers
ways of delivering existing products and for a limited time frame.
services so as to -
9.5 OTHER DEVELOPMENTS
• Create new opportunities in the securities
I. 
INFORMATION EXCHANGE WITH
market;
GOVERNMENT AGENCIES/REGULATORS
• To make existing services more efficient /
SEBI has been working with government
investor friendly/ inclusive;
agencies and other regulators to sign MoU so as
This would be achieved by giving access to
to create a digital mechanism to share information
both test data and test environment to financial
bi-laterally. This is expected to make various aspects
institutions, FinTech firms, startups including
of investigation and enforcement by SEBI more
entities not regulated by SEBI as well as
efficient and timely.
individuals.
On July 08, 2020, SEBI signed a MoU with
ii. 
Creation of non-restrictive, graded
Central Board of Direct Taxes (CBDT), Government
entry criteria by introducing two-stage
of India, for data exchange between the two
eligibility criteria viz. Stage-I and Stage-
organizations. The MoU was signed by Ms. Anu J
II.
Singh, Pr. DGIT (Systems), CBDT and Ms. Madhabi
iii. 
Any applicant meeting the Stage-I Puri Buch, Whole Time Member, SEBI in the presence
criteria i.e. know your client criteria and of senior officers from both the organizations via
genuine need to test the solution, shall be video conference.
permitted in the Innovation Sandbox and
II. SEBI ITD INTERNSHIP PROGRAMME
be allowed to test for 60 days.
With a growing focus on technology and
iv. 
Availability of Innovation Sandbox
data analytics, several educational institutions offer
test kit (comprising of test data, test
various courses catering to the emerging needs of the
environment, APIs, configurable access
industry. In order to provide hands on training and
rights, etc.) to the eligible applicants by
exposure to the students of such institutes, SEBI IT
enabling organizations.
department has designed an internship program for
b. 
SEBI along with the members of the enabling one year. The interns accepted under this program
organizations on Innovation Sandbox had been given an opportunity to work on different
launched the Innovation Sandbox portal IT projects including data analytics (DA), regulatory
(https://innovation-sandbox.in/) which business processes and reporting and SAP. Such

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projects provided an exceptional opportunity to the eProcurement portal. Currently one tendering
interns to apply their IT and DA skills while gaining process had been completed through this
valuable exposure to the functioning of the Indian portal. From 2021-22, the eProcurement portal
securities markets. A total of 11 interns were selected will be used extensively.
and they completed their internship with SEBI IT
ii. Appointment of Independent External
department. Summary of the projects undertaken by
Monitors for Implementation of Integrity
the interns are -
Pact
i. Text analytics used for processing of large pdf
SEBI had implemented the Integrity Pact (IP)
files;
for procurements above Rupees two crore.
ii. Insider-trading alerts; Following personnel had been appointed as
iii. De-duplication of addresses; Independent External Monitors (IEMs) to
oversee the implementation of IP –
iv. 
Picture Based Integrated News Information
Analyzer and Key Information Accumulator a. 
Smt. Rajni Sekhri Sibal, IAS, Ex-Secretary
used for analyzing the stock recommendation Government of India; and
videos and analyzing it with the trade and b. Shri Ajai Kumar, Ex-CMD, Corporation Bank.
order logs.
IV. RESPONSE TO COVID-19 OUTBREAK
The advertisement of SEBI ITD internship
After the COVID-19 outbreak, SEBI
program 2021 has now been issued for
implemented the following steps to strengthen its
engagement of interns for the year 2021-22.
Business Continuity Plan (BCP) –
III. PROCUREMENT PROCESS - COMPLIANCE
i. Provision was made to allow SEBI officers
During 2020-21, various initiatives were to access their office desktops remotely and
implemented to improve efficiency and transparency securely.
in the procurement process. Some of the major
ii. Provision for video conferencing using Cisco
initiatives are as follows–
WebEx.
i. Use of e-Procurement Portal iii. 
Enhancement of internet leased line
SEBI has engaged services of MSTC Ltd. connectivity and enhanced storage resources
(a Government of India Company) for its for critical users in SEBI.

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CHAPTER TEN :
Regulatory Action, Supervision and
Enforcement

10.1 MANNER OF OVERSEEING MARKETS i. Review of Regulatory Measures Taken by

SEBI in View of Ongoing Market Volatility
A. Surveillance
In view of high volatility in stock markets
I. SURVEILLANCE MECHANISM
during March 2020 owing to concerns relating to
Continuous surveillance of the securities
COVID-19 pandemic, SEBI introduced various
market is important for maintaining market integrity
regulatory measures with the objective of ensuring
to enhance investor confidence. The stock exchanges
orderly trading and settlement, effective risk
are on the frontline as far as real time surveillance
management, price discovery and maintenance
of the market segments that they operate in is
of market integrity. The measures were reviewed
concerned. Complementing the surveillance
and extended periodically as volatility in stock
infrastructure of the stock exchanges, SEBI has in-
markets continued to be on the higher side.
house systems in place to monitor activities across
all market segments i.e. equity and commodity Subsequently, in view of changed market
derivatives to ensure proper management of large environment and market feedback, SEBI
exposure, default risk and market disruption and to withdrew some of the measures viz.
check unfair trading practices. reduction of market wide position limit
(MWPL) of certain derivatives scrips,
a. Major Surveillance Measures during 2020-21:
higher margin for certain non-futures and
Equity and Equity Derivatives Segment
options scrips, etc., from close of business
During the worst travails of the COVID-19 on November 26, 2020.
pandemic, it is noteworthy that the securities
ii. 
Review of the Framework for Additional
markets did not shut down even for a single
Surveillance Measures
day and SEBI jointly with the exchanges
and the depositories, ensured the smooth SEBI introduced additional surveillance
functioning of the securities markets. measures (ASM) in March 2018 as a preventive

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measure to identify scrips based on surveillance long term ASM satisfied the additional
indicators viz. high price/volume variation and criteria comprising high-low price
client concentration, low delivery-based trading, variation during past six months and
etc., and take prompt surveillance actions in the low non-promoter holding. This check
form of higher margins, stricter / reduced price was to be carried out while undertaking
bands and trade for trade-based settlement. review with respect to inclusion/stage–
Considering the trends in the broader market wise movement of stocks in the ASM
and to have a dynamic surveillance approach, framework. Stock exchanges were
the ASM framework is periodically reviewed in advised to place such stocks directly
consultation with the stock exchanges. under Stage IV of Long Term ASM and
retain such stocks in Stage-IV till such
The following changes were undertaken to
time the stocks satisfied the criteria.
the ASM framework during 2020-21 to further
strengthen the framework: • Upon review of the surveillance action
under short-term additional surveillance
• Identification of stocks for surveillance
measures (Short-term ASM), the
action under long-term additional
requirement of levying 100 per cent
surveillance measures (Long-term
margin on top clients (identified based
ASM) is undertaken as per six objective
on gross trading turnover) was done
criteria. Criteria 1 and 2 of long-term
away with. However, at the same time
ASM comprise parameters viz. high-
the minimum margin requirement
low price variation / close-to-close price
applicable on stocks under Short Term
variation, market capitalization and
ASM Stage I & II and Long-term ASM
concentration of top clients. Upon review
Stage I was enhanced.
of the threshold pertaining to market
capitalization parameter of the said iii. System Driven Disclosures under Regulation
criteria 1 and 2, it was decided to reduce 7(2) of PIT Regulations, 2015
the threshold to ‘greater than `100 crore’ With the objective of improving ease of
from ‘greater than `200 crore’. doing business, and to eliminate any gaps
• Events of extreme volatility were in compliance due to the system of manual
observed in case of stocks having low submissions, SEBI had engaged with stock
non promoter holding. Consequently, exchanges and depositories to automate
the stock exchanges were advised to disclosures filed under Regulation 7(2) of PIT
also check whether the stocks under the Regulations, 2015.

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Box Item 10.1 : Surveillance Measure pertaining to ‘Persistent Noise Creators’

With the advent of algorithmic trading (Algos), it was observed that the overall order messages (order
entry, modification and deletion) by Algos have significantly increased over the years. The exponential rise
in such order messages has increased the overall information processing costs for market players including
those trading through Algos. Such order messages may have an intention to avoid execution. By submitting
large number of order messages that are either modified to avoid execution or cancelled, an entity may
increase the overall information asymmetry for other players in the market.

In this regard, an order based surveillance measure was introduced to address the issue of excessive
order modifications carried out to avoid execution by certain entities (i.e. noise creators). The surveillance
measure monitors the daily noise created by an entity in a scrip / contract.

The criteria to select an entity as a Noise Creator is as follows:

i. Value Based Order to Trade Ratio;

ii. Overall Modifications; and

iii. Percentage of Modifications carried out to avoid execution.

The instances identified based on the aforesaid three conditions are considered as “1 instance” count.

The surveillance action applicable on such entities is based on count of instances over a period of
rolling 20 trading days. The entities having an instance count of over 99 are disabled for trading for 15
minutes across exchange(s) in the equity and equity derivatives segments, on the 21st day.

Any additional instance of repetitive violation on consecutive trading days by an entity account (say
N times) on a rolling 20 trading days’ basis will lead to trading disablement for a period of ‘N’ instances X
15 minutes. To begin with, the maximum disablement will be Limited to 2 hours (i.e. N < = 8).

The stock exchanges had issued the circular / notice in this regard on March 26, 2021 and the same had
been made effective from April 05, 2021 and the first surveillance action on such Persistent Noise Creators
will be on May 05, 2021 based on 20 trading days’ window.

iv. 
Framework for Dealing with Unsolicited and giving fraudulent, misleading/false
Messages information relating to listed companies,
inducing them to deal in such stocks. The
It had come to the notice of SEBI that unsolicited
circulation of such misleading messages is not
messages containing stock tips/investment
only detrimental to the interest of the investors
advice with respect to listed companies are
but also adversely affects the integrity of the
increasingly being circulated through bulk
securities market.
SMS, websites and social media platforms like
WhatsApp, Telegram, etc. Such messages were Consequently, SEBI has been taking several
sent to investors and general public usually measures to prevent circulation of misleading
making recommendations in specific stocks messages to deal in stocks. The following
of listed companies, indicating target prices measures were undertaken during the year:

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• The framework of stock exchanges to providing their services to the investors)

handle instances / complaints in scrips were advised to ensure strict compliance
where price movement was observed with the Telecom Regulatory Authority
on account of circulation of unsolicited of India’s Telecom Commercial
messages / references was reviewed Communication Customer Preference
and strengthened. This included the Regulations (TCCCP Regulations).
criteria for inclusion in information list
v. 
Usage of Consolidated Financial Results
and current list, retention period of the
instead of Standalone Financial Parameters
scrip in information and current list,
for Surveillance Measures
additional details / clarification to be
sought from company, etc. Surveillance measures / actions used to
consider PE based on the standalone financial
• Additionally, SEBI issued a press release
dated October 14, 2020 cautioning all statements. The only exception to the norm

investors and general public not to rely was Graded Surveillance Measure (GSM)

on unsolicited stock tips/investment framework where PE multiple based on

advice circulated through bulk SMS, the consolidated financial statements was
websites and social media platforms. considered.
Investors were further advised to exercise With a view to adopt a uniform approach, stock
appropriate due diligence before dealing exchanges were advised to use consolidated
in the securities market. financial parameters in place of standalone
• Besides, in order to create awareness financial parameters, wherever applicable,
and caution the investors regarding for surveillance measures viz. additional
circulation of unsolicited stock tips/ surveillance measures, trade-for-trade (TFT)
investment advice, an audio-visual and bi-monthly revision of price band.
campaign through mediums like radio,
vi. Review of Surveillance Measures in Respect
television, print, digital and SMS was
of Companies with High Promoter Pledge
launched since January 2021.
With respect to the surveillance measures in
• SEBI also wrote letters to Ministry of
the matter of companies with high promoter
Electronics and Information Technology
pledge, it was felt that usage of encumbrance
and Telecom Regulatory Authority
instead of pledge would better mitigate the
of India, highlighting the misuse of
potential risk to the securities market, as
websites, social media and bulk SMS
which provide unsolicited stock tips / encumbrance ensures a wider coverage also

investment advice with respect to listed including lien, negative lien, etc.

entities and lure gullible investors to Thus, based on the above considerations and
invest in these stocks. also to align the concept across regulations,
• Further, vide press release dated March stock exchanges were advised to take into
23, 2021 all SEBI registered entities account ‘encumbrance’ in place of ‘pledge’ for
including MIIs (which use bulk SMS for surveillance measures thereon.

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vii. 
Updation of Know Your Client details for detect abnormality (if any) with respect to
Surveillance Purpose client trading activity, the CDEs have been
providing transactional alerts to the trading
In an attempt to update the Know Your Client
members. To strengthen this process further,
(KYC) details of market constituents, for
CDEs in November 2020, in consultation with
more effective surveillance, stock exchanges
SEBI, had put in place suitable mechanism to
and depositories were advised that certain
monitor action taken by trading members on
attributes of KYC of the clients / client master
such alerts. Further, two new transactional
database viz. name, address, PAN, valid
alerts had been added.
mobile number, valid email-id and income
range be made mandatory. In this regard, Additionally, CDEs had advised their
stock exchanges and depositories were respective trading members to strengthen the
advised to issue necessary instructions to their surveillance measures undertaken by them,
respective constituents to update the requisite specifically with respect to aspects related to
information. analysis of the trading behaviour of the clients
who appear repeatedly in the transactional
b. Major Surveillance Measures during 2020-21:
alerts, monitoring of sudden trading activity
Commodity Derivatives Segment
in dormant account, maintaining profile of the
i. Review of Commodity Watch System clients, etc.

SEBI has prescribed a Commodity Watch iv. Additional Margins

System (CWS) to the commodity derivative In order to deal with the high volatility
exchanges (CDEs) that includes surveillance in commodity derivative contracts and to
alerts (online/ offline) so as to detect aberrations maintain the integrity of the market, CDEs take
in the market movements. During 2020-21, the regulatory measures with respect to margins.
CWS was reviewed and updated in order to In this direction and with a view to strengthen
improve upon existing set of alerts and include the risk management, the framework for ASM
a few new alerts and surveillance reports. and event based Additional Surveillance
ii. 
Surveillance Meetings with Commodity Margin (E-ASM), introduced in 2019-20, was

Derivative Exchanges reviewed pursuant to which the following

measures were taken:
SEBI conducts monthly surveillance meetings
• ASM framework was withdrawn
with the senior officials of the CDEs. These
systematically, in a phased manner.
meetings are aimed at discussing the recent
developments in the market, any emergent • E-ASM framework was rationalized.
surveillance concerns and required actions to A five per cent margin would become
address the surveillance concerns. applicable on both long and short side
in the commodity (for all the running
iii. 
Review and Updation of the Extant
as well as yet to be launched contracts),
Surveillance Obligations, as applicable on
if the top two contracts based on open
Trading Members
interest meet the following revised
With a view to facilitate trading members to criteria of price movement:

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

Disclosure Form (VID Form). The VID Form has

Duration
Price Movement been made available for download on the website
(Trading days)
of SEBI. A separate inward and outward channel
High / Low Variation has been put in place for communicating with the
Within 5 days
+/-10 per cent informants while maintaining confidentiality. OIP
also maintains a dedicated hotline number for
High / Low Variation
Within 10 days providing information relating to the submission
+/-15 per cent
of VID Form.
E-ASM would be applicable for a period of 15 trading days
In the financial year 2020-21, OIP has not
from the date of event.
received any VID Form.
v. Special Margin
B. Inspections
In view of the increased price volatility,
a special margin of 20 per cent was made I. 
INSPECTION OF MARKET
applicable on the short side of Chana INFRASTRUCTURE INSTITUTIONS
contracts in the year 2017-18. The said margin With the objective of having oversight on the
structure was reviewed and the existing activities carried out by the market infrastructure
special margin of 20 per cent imposed on institutions (MIIs) comprising stock exchanges,
Chana contracts was reduced in a staggered clearing corporations and depositories, SEBI had
manner to 15 per cent from October 01, 2020 conducted various inspections during 2020-21.
and thereafter to 10 per cent from January 01,
During 2020-21, comprehensive inspections
2021.
of MSEIL and NSE IFSC Limited were carried out
II. OFFICE OF INFORMANT PROTECTION by SEBI. Inspections of National Stock Exchange
of India Limited (NSE) and BSE Limited had been
In order to strengthen the investigation
initiated and the same were in progress (as on March
and enforcement mechanism to curb instances
31, 2021).
of insider trading, a need was felt to provide for
a mechanism that incentivises people having During 2020-21, inspections of NSE Clearing
personal knowledge of any incidence of insider Limited (formerly National Securities Clearing
trading to report the same to SEBI. For the said Corporation Limited), National Securities Depository
purpose, Chapter IIIA of the Securities and Limited (NSDL) and Indian Clearing Corporation
Exchange Board of India (Prohibition of Insider Limited (ICCL) had been carried out by SEBI.
Trading) Regulations, 2015 (PIT Regulations) was Further, on-site inspections of Central Depository
published in the Official Gazette on September 17, Services Limited (CDSL) and Metropolitan Clearing
2019 and the provisions came into force on December Corporation of India Limited (MCCIL), which were
24, 2019. Accordingly, the Office of Informant scheduled earlier for the year 2020-21, were put on
Protection (OIP) was established in January hold due to ongoing COVID-19 pandemic.
2020 under Chapter IIIA of the PIT Regulations As per LODR Regulations, stock exchanges are
for receiving and processing the information required to monitor the compliance by listed entities
pertaining to the violation of the insider trading with the provisions of these regulations. In February
laws submitted through the Voluntary Information - March 2021, SEBI initiated inspection of stock

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Securities and Exchange Board of India Annual Report : 2020-21

exchanges focused on their listing functions including respective stock exchanges and depositories,
pre-listing, post listing, buyback and delisting aspects. so that all aspects of the functioning of the

During 2020-21, on-site inspection of the entity are examined by stock exchanges/

surveillance function of NSE was completed. The depositories and SEBI simultaneously.

inspection was conducted with the objective of Joint inspection had minimized multiple
improvement in the surveillance systems and inspections of the same entity by SEBI, stock
procedures of the exchanges. Pursuant to the said exchanges and depositories during the same
inspection, various observations/ suggestions had year, thereby reducing the regulatory burden
been made to the exchange for implementation. The on intermediaries.
surveillance functions of other exchanges had been In light of the COVID-19 pandemic, inspections
 
monitored off-site through several measures. During of TM/CM/DPs during 2020-21 were carried
2020-21, inspection of surveillance function of CDSL
out remotely by use of online facilities and
was undertaken with the objective of improvement
thereby obviating physical visit to the office
in the surveillance systems and procedures of the
of intermediary. It was also decided that
depository.
information already available with the MIIs

II. 
INSPECTION OF BROKERS AND will not be sought from the TM/CM and DP so
DEPOSITORY PARTICIPANTS as to avoid unnecessary burden on entities.
With a view to ensure compliance of SEBI
  After joint inspection, based on its findings,
 
regulations, SEBI conducted inspection enforcement actions for all violations
of various intermediaries registered with pertaining to activities of TM/CM /depository
SEBI. During 2020-21, 92 trading members/ participant were initiated by single institution
clearing members (TM/CM) and 58 depository i.e. either SEBI/stock exchange for TM/CM or
participants (DPs) were inspected (Table
SEBI/depository for depository participants,
10.1). The inspections were with due focus
resulting in one single consolidated action
on compliance of SEBI regulations/ circulars.
against the entity. The distribution of cases
During the inspections, handling of funds
between SEBI/ stock exchanges /depository
and securities of clients, settlement of running
were done periodically by a joint committee
accounts on timely basis, segregation of clients
comprising representatives from SEBI, stock
and proprietary funds/ securities, pledging
exchanges and depositories.
of securities by the clients, investor grievance
redressal mechanism, KYC compliances Table 10.1: Inspection of Brokers and Depository
and norms, clearing operations, etc. were Participants
examined.
Particulars 2019-20 2020-21
The inspection of TM/CM and DPs were
 
carried out at a group level i.e. all activities of Brokers* 146 92
an entity having exposure to equity segment,
Depository Participants 81 58
commodity derivative segment and depository
participant were inspected simultaneously. * the brokers include equity, equity derivatives and
These inspections were conducted jointly with commodity derivatives brokers.

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

III. 
INSPECTION OF BROKERS BY STOCK CM are required to carry out internal audit on a half
EXCHANGES yearly basis by independent auditors. Stock exchanges
In addition to the joint inspections with SEBI, the also levy penalties for delay in filing of the internal audit
stock exchanges also carried out inspections as per the reports by TM/CM. Summary of inspections conducted
policy framed by them in consultation with SEBI. TM/ by stock exchanges are given in the (Table 10.2).

Table 10.2: I nspections of Brokers by Stock Exchanges

Year NSE*# BSE*# MSEI*# MCX# NCDEX# ICEX

2019-20 599 321 52 316 138 16

2020-21 431 240 27 305 117 28

* For 2019-20: Include inspections carried out by respective clearing corporations

# For 2020-21: Include inspections carried out by respective clearing corporations

IV. INSPECTION OF DEBENTURE TRUSTEES with the help of online facilities and thereby obviating
AND CREDIT RATING AGENCIES the need of visiting the entity’s office physically.

During 2020-21, two debenture trustees and six Pursuant to the joint inspection of the credit
credit rating agencies were inspected (Table 10.3). rating agencies, actions on all observed violations
The inspections were comprehensive with focus were taken up separately depending on the kind
on compliance of SEBI regulations/ circulars. The of instrument rated viz. observations pertaining
debenture trustee inspections covered aspects such to listed securities were looked into by SEBI while
as maintenance of asset cover, signing of trust deed observations pertaining to bank loans and the
on time, checking documents for creating security instruments were looked into by RBI.
etc. The credit rating agencies inspections covered Table 10.3: Inspection of Debenture Trustees and
aspects such as analysis of rating committee note, Credit Rating Agencies
minutes of the rating committee, disclosures made
Particulars 2019-20 2020-21
on website and checking for various compliances
under SEBI circulars etc. Credit Rating agencies 7 6
The credit rating agencies’ inspections were Debenture Trustees 2 2
conducted jointly with Reserve Bank of India (RBI)
ensuring that all aspects of the rating pertaining to
V. 
INSPECTION OF OTHER
listed securities and bank loans are looked into by
SEBI and RBI respectively. This initiative of joint INTERMEDIARIES

inspections has led to inspection of all the aspects During 2020-21, inspections were conducted
including bank loans and other instruments under for six merchant bankers and 24 Registrars to an Issue
the purview of RBI. & share transfer agent (RTAs & STAs). Of 24 RTA
In light of the COVID-19 pandemic, inspections inspections, ten were special purpose inspections
of one debenture trustee and three credit rating and covered areas related to dematerialisation
agencies during 2020-21 were carried out remotely requests (Table 10.4).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 10.4: I nspections of Merchant Bankers, RTA/STA and Qualified RTAs

Particulars 2019-20 2020-21

Merchant Bankers 20 6

Registrars to an Issue and Share Transfer Agents 18 24#

Offsite Inspection of Qualified RTAs* 3 3

# 10 inspections were special purpose inspection

* RTAs having more than 2 crore folios

VI. INSPECTION OF PORTFOLIO MANAGERS, (IAs), research analysts (RAs) and foreign venture
ALTERNATIVE INVESTMENT FUNDS, capital investors (FVCI) (though custodians) had
VENTURE CAPITAL FUNDS, INVESTMENT been carried out to verify whether the books of
ADVISERS, RESEARCH ANALYSTS accounts, records and other documents are being
AND FOREIGN VENTURE CAPITAL maintained in the specified manner including the
INVESTORS compliance in respect of Anti-Money Laundering/
Inspection of books of accounts, records Combating the Financing of Terrorism (AML/CFT)
and other documents pertaining to the portfolio and KYC norms. During the financial year 2020-21,
managers, alternative investment funds (AIFs), inspections of 20 IAs, 12 RAs, 10 FVCIs, two PMs,
venture capital funds (VCF), investment advisers one AIF and one VCF were carried out (Table 10.5).

Table 10.5: I nspections Conducted of Other Intermediaries / Funds

Intermediary / Fund 2019-20 2020-21

Portfolio Managers 7 2

Alternative Investment Funds 5 1

Venture Capital Funds 1 1

Investment Advisers 32 20

Research Analysts 13 12

Foreign Venture Capital Investors* 0 10*

* Included with Inspection of Custodians

C. Investigation a. Initiation of Investigations

SEBI conducts investigation if it has reasonable SEBI initiates investigation based on reference
received from sources such as SEBI’s Integrated
ground to believe that any person has violated
Surveillance Department, other operational
SEBI (Prohibition of Fraudulent and Unfair Trade
departments within SEBI, exchange reports,
Practices) Regulations, SEBI (Prohibition of Insider external government agencies, media reports,
Trading) Regulations, etc. complaints etc.

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

b. Process of Investigation Takeovers accounted for three cases (3.2 per

cent) and 20 cases (21.3 per cent) pertained to
The steps involved during investigation process
other violations of securities laws. (Table 10.7)
include an analysis of market data (order
and trade log, transaction statements, etc.), Table 10.7: Category-Wise Nature of Investigations
exchange report, data from the depository, KYC
Investigations
documents obtained from brokers, depository
Taken Up
participants, etc., bank records like account Particulars

statements and KYC details, information 2019-20 2020-21

about the company including financial results
Market manipulation and
and shareholding pattern, major corporate 35 41
price rigging
developments including events around them,
‘Issue’ related manipulation 2 0
call data records, information obtained from
market intermediaries and alleged entities etc. Insider Trading 49 30
The purpose of the investigation is to gather
evidence and to identify persons/ entities Takeovers 2 3

behind manipulation, frauds, irregularities Miscellaneous1 73 20

and violations of securities laws so that
appropriate and suitable regulatory action can Total 161 94
be taken, wherever required. Note: 1 Miscellaneous includes alleged violations of/by
- i) Listing Conditions ii) Statutory Auditors ii)
c. Trends in Investigation Cases
Disclosure requirements iv) SCRA v) Preferential
During 2020-21, 94 new cases were taken up for Allotment Requirements etc.
investigation and 140 cases were completed in Since several investigation cases involve
comparison to 161 new cases taken up and 170
multiple allegations of violations, water-tight
cases completed in 2019-20 (Table 10.6).
classification under specific category becomes
Table 10.6: Trends in Investigations difficult. Therefore, cases have been classified

Cases Taken up Cases Completed on the basis of main charge / violations.

Year
for Investigation
e. Nature of Investigation Cases Completed
2019-20 161 170
During 2020-21, 46 cases (32.9 per cent)
2020-21 94 140 completed pertained to market manipulation
and price rigging, 40 cases (28.6 per cent)
d. Nature of Investigation Cases Taken Up
pertained to insider trading, four cases (2.9 per
During 2020-21, 41 cases (43.6 per cent) taken
cent) pertained to takeovers, two cases (1.4 per
up for investigation pertained to market
cent) pertained to ‘issue’ related manipulation
manipulation and price rigging, 30 cases
and 48 cases (34.3 per cent) pertained to other
(31.9 per cent) pertained to insider trading.
violations of securities laws (Table 10.8).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 10.8: Investigations completed

Investigations Completed
Particulars
2019-20 2020-21

Market manipulation and price rigging 39 46

‘Issue’ related manipulation 1 2

Insider Trading 57 40

Takeovers 1 4

Miscellaneous* 72 48

Total 170 140

Note: *Miscellaneous includes alleged violations of/by - i) Listing Conditions ii) Statutory Auditor ii) Disclosure
requirements iv) SCRA v) Preferential Allotment process etc.

f. Regulatory Action Initiated and appreciation of facts. The actions include

issuing administrative warning, initiating
After completion of investigation,
enquiry proceedings against registered
enforcement action is initiated wherever
intermediaries, initiating adjudication
violations of securities laws relating to
proceedings for levy of monetary penalties,
securities market are observed. Action is
passing directions under Section 11 of
decided based on the principles of objectivity,
the SEBI Act and initiating prosecution
consistency, materiality and quality of
(Table 10.9).
evidence available, after thorough analysis

Table 10.9: Type of Regulatory Action Initiated

Number of Entities
Regulatory Action Approved by Competent Authority
2019-20 2020-21

Adjudication proceedings 1,294 1,283

Proceedings under Section 11 of SEBI Act 678 253

Administrative warning 69 214

Enforcement actions under Summary Settlement 20 9

Prosecution Proceedings 10 3

Proceedings under Intermediaries Regulations 0 1

g. Corporation Finance Investigation Department investigate securities laws violations involving

SEBI set up the Corporation Finance different components of the financial
Investigation Department (CFID) in December reporting processes including integrity and
2020, with the primary objective to holistically accuracy in financial statements and other

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

issuer disclosures. CFID is envisaged to be I. ENFORCEMENT MECHANISMS

a specialized investigation department for
early detection and examination of financial The enforcement action is initiated mainly
statements fraud /financial irregularities by based on finding of investigation, inspection or
the listed companies that directly or indirectly forensic audit alleging violation(s) pertaining to
manipulate the prices of their securities. laws regulating the securities market.

During 2020-21, CFID had taken up 10 cases a. Section 11/11B Proceedings:

pertaining to financial statements fraud and
Under these proceedings, SEBI issues directions
one case in miscellaneous category. Of the
or prohibitive orders in the interest of investors
11 cases, three cases (two cases in financial
or the securities market, either pending
statements fraud and one miscellaneous) had
investigation/inquiry or on completion of such
been completed in 2020-21. Regulatory action
investigation/enquiry. Under Section 11B of
initiated by CFID is given at (Table 10.10).
the SEBI Act 1992, SEBI may suspend trading
Table 10.10:Type of Regulatory Action Initiated by
of any security in a recognized stock exchange;
CFID
restrain persons from accessing the securities
market; prohibit any person associated with
Regulatory Actions approved by No. of entities
the Competent Authority the securities market to buy, sell or deal in
2020-21
securities; and direct any intermediary or
Administrative warning issued 3 any person associated with the securities
Proceedings under Section 11 of 5 market not to dispose of or alienate an asset
SEBI Act, 1992 forming part of any transaction which is under
Adjudication proceedings under 7 investigation.
Chapter VI of SEBI Act,1992
b. Enquiry Proceedings:
Note: SEBI set up the CFID in December 2020
SEBI suspends or cancels the certificate of
D. Enforcement Activities registration of an intermediary after conducting
Under the SEBI Act 1992, SCRA, 1956 and enquiry under the intermediary regulations on
the Depositories Act, 1996 SEBI broadly pursues the recommendation of the enquiry officer/
two streams of enforcement actions, that is, designated authority appointed for that
administrative/civil or criminal. Administrative/ purpose.
civil action includes issuing directions such as
c. Adjudication Proceedings:
remedial orders, cease and desist orders, suspension
or cancellation of certificates of registration of Under chapter VIA of the SEBI Act 1992,
intermediaries and imposition of monetary penalties SEBI may appoint an adjudicating officer
under respective statutes. Proceedings of a criminal for conducting an enquiry and imposing
nature involve initiating prosecution proceedings monetary penalties for contravention of any
against violators by filing criminal complaints before provision of the SEBI Act, 1992 or any rules or
the competent court. regulations made thereunder.

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Securities and Exchange Board of India Annual Report : 2020-21

d. Prosecution Proceedings: complaints filed by SEBI for violation of the

securities laws are tried by the SEBI Special
SEBI initiates proceedings by filing a
Courts/ Sessions Court. Offences under the
criminal complaint against any person, for
aforesaid securities laws are compoundable by
contravention of any provision of the SEBI Act
the court.
1992, SCRA 1956, Depositories Act, 1996, or
any rules or regulations made thereunder.
II. ENFORCEMENT ACTION TAKEN
SEBI also initiates prosecution proceedings
for non-payment of penalty imposed by the Enforcement actions are initiated as approved

adjudicating officer or the Board or if a person by the competent authority wherever violations

fails to comply with any directions or order of laws and obligations relating to the securities

issued under the SEBI Act 1992, SCRA 1956, market are observed. Actions are determined

Depositories Act, 1996. Prosecution compliant based on the principles of objectivity, consistency,

is also filed by SEBI against the entities materiality and quality of evidence available after a

where they fail to comply with the summons thorough analysis and appreciation of facts. (Table

issued by the investigating authorities. SEBI 10.11) presents a snapshot of the various types of

is also empowered to launch prosecution for enforcement actions taken by SEBI during 2020-21.

violations of the provisions related to issue Prohibitive directions issued under Section 11 of

and transfer of securities and non-payment the SEBI Act 1992, were issued against 984 entities,

of dividend by listed companies or those adjudication orders were passed against 2,050

companies which intend to get their securities entities, followed by cancellation of registration of

listed on any recognised stock exchange. The 10 intermediaries.

Table 10.11: Type of Enforcement Action Taken

Number of Entities against

whom Enforcement Action
Enforcement Action Taken was Taken
2019-20 2020-21
Prohibitive directions issued under Section 11 of the SEBI Act 1992 766 984
Adjudication orders 1,818 2,050
Prosecutions filed 94 153
Conviction by courts 66 6
Action  taken  under SEBI (Intermediaries)  Regulations, 2008
(i) Cancellation 2 10
(ii) Suspension 0 3
(iii) Warnings issued 22 2
Total 2,768 3,208

Note: the figure excludes 456 administrative warning/ warning letters issued/caution letters, 45 deficiency observations
issued and 83 advice letters issued by operational departments.

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

a. Section 11/11B Proceeding who, after considering the recommendations

made by the Designated Authority passes
During 2020-2021, SEBI initiated enforcement
appropriate orders.  Both the DA and the
action under sections 11, 11B and 11D in 225
DM are required to issue show cause notice
cases, while it has disposed of 125 cases. At the
and afford opportunity of personal hearing
end of March 31, 2021, 476 cases were pending
to the noticees.  However, pursuant to SEBI
for action (Table 10.12).
(Intermediaries) (Amendment) Regulations,
Table 10.12: 
Age-wise Analysis of Enforcement 2021, opportunity of personal hearing before
Actions – Section 11/11B Proceedings the DM is to be given only if the DM is of
Number of Cases the prima facie view that it is a fit case for
Particulars cancellation of certificate of registration.
2019-20 2020-21
i. Enquiry by Designated Authority
Cases pending at the 309 376
beginning of the period During 2020-21, SEBI initiated enquiry

Cases added during the 218 225 under Intermediaries Regulations,

period 2008 in 46 cases. Enquiry reports were
submitted by DA in 116 cases and
Cases disposed of during 151 125
the year enquiry was pending in 31 cases at the
end of the year (Table 10.13).
Cases pending at the end 376 476
of the period Table 10.13: 
Age-wise Analysis of Enquiry
Proceedings by Designated Authorities
Break–up of pending cases at the end of the period
Particulars 2020-21
Cases older than 2 years 236 281
Cases Pending at the beginning of the 101
Cases older than 1 but less 55 94
than 2 years period

Cases less than 1 year 85 101 Cases added during the period 46

Total 376 476 Cases completed during the year 116

b. Enquiry Proceedings Cases pending at the end of the period 31

Under the Intermediaries Regulations, 2008, Break up of Pending Cases at the end of the period
the enquiry proceedings had two stages.  The
first stage is before the Designated Authority Cases older than 2 years 8
(DA) who is appointed to prepare a report
Cases Older than 1 but less than 2 5
recommending one of the measures stipulated years
in the regulations such as suspension/
cancellation of certificate of registration, issue Cases less than 1 year 18
of censure etc.  The second stage is before
Total 31
the Designated Whole Time Member (DM)

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Securities and Exchange Board of India Annual Report : 2020-21

ii. 
Proceedings before the Designated Table 10.15: 
Age-wise Analysis of Enforcement
Whole Time Member under Regulation Actions - Adjudication Proceedings
27 of Intermediaries Regulations, 2008
Particulars 2020-21
Upon submission of Enquiry reports,
Cases Pending at the beginning of the 637
the recommendations made by the DA
period
are placed before the Designated Whole
Cases added during the period 291
Time Member for passing of final orders.
During 2020-21, 169 enquiry reports Cases disposed of during the year 440
were disposed by passing appropriate
Cases pending at the end of the period 488
orders. 217 enquiry recommendations
were pending at the end of the period Break up of Pending Cases at the end of the period

(Table 10.14). Cases older than 2 years 189

Table 10.14: 
Age-wise Analysis of Enquiry Cases Older than 1 but less than 2 years 62
Proceeding by Designated Member
Cases less than 1 year 237
Number Total 488
Particulars of Cases
d. Prosecution Proceedings:
2020-21
During 2020-21, SEBI initiated 20 Prosecution
Cases pending at the beginning of the 270
period cases, while 24 cases were disposed of by the
courts. At the end of March 31, 2021, there
Cases added during the period 116
were 1,160 Prosecution cases pending before
Cases disposed of during the year 169 various courts (Table 10.16).
Cases pending at the end of the period 217 Table: 10.16: 
Age-wise Analysis of Enforcement
Break–up of pending cases at the end of the period Actions - Prosecution Proceedings

Cases older than 2 years 209 Particulars 2020-21

Cases older than 1 but less than 2 years 7 Cases pending at the beginning of the 1,164
period
Cases less than 1 year 1
Cases added during the period 20
Total 217
Cases disposed of during the period 24
c. Adjudication Proceedings:
Cases pending at the end of the period 1,160
During 2020-21, SEBI initiated adjudication
Break up of pending cases at the end of the period
proceedings in 291 cases, while it disposed of
440 cases. At the end of March 31, 2021, 488 Cases older than 2 years 1,033
cases were pending for action (Table 10.15). Cases older than 1 but less than 2 years 103
Each case comprises of several entities. In
Cases less than 1  year 24
respect of 488 cases pending, the number of
entities are 4,512. Total 1,160

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

E. Fraudulent and Unfair Trade Practices the orders passed under section 11/11B in 2020-21
shows that 53 orders passed related to violation of
SEBI has put in place a framework to prevent
PFUTP Regulations, 2003 (market manipulation),
the occurrence of fraudulent and unfair trade
19 orders related to deemed public issue, 10 orders
practices in the form of the SEBI (Prohibition of
were for violation of PIT Regulations, 2015, five
Fraudulent and Unfair Trade Practices Relating
orders each for violation of SAST regulations and
to Securities Market), Regulations, 2003 (PFUTP
CIS Regulations and nine orders were in relation to
Regulations). The PFUTP Regulations are amended
violation of SEBI (Investment Advisers) Regulations,
from time to time and the last amendment was done
2013 (IA Regulations) (Table 10.18).
on October 19, 2020
Table 10.18: Nature of Violation in Section 11/11B
During the year, SEBI has taken up 41 new cases
Proceedings
related to Fraudulent and Unfair Trade Practices
(FUTP) violations, while it has also completed 46 Number of cases
cases related to FUTP violations. Details of FUTP Nature of violation
2019-20 2020-21
cases completed during the year are given in Table
10.17. PFUTP 61 53

PIT 4 10
Table 10.17: Fraudulent and Unfair Trade Practices
Cases during 2020-21 SAST 11 5

No. of No. of Deemed Public issue 2 19

Type of FUTP Cases Cases
ILDS Regulations* 13 0
Taken-up Completed
CIS Regulations** 10 5
Price and Volume 34 37
Manipulation cases IA 0 9
Front Running 1 2 Others 50 24
Others# 6 7 Total 151 125
Total 41 46
Note: Penalties of `20.15 crores in 7 cases imposed for the

Note: #Represents cases pertaining to accounting fraud, violation of PIT Regulations, PFUTP Regulations

mis-selling, misleading corporate announcements, and Non – Compliance of SEBI order under section

acting as unregistered stock broker, etc. 11B (2) of SEBI Act, 1992.

* SEBI (Issue and Listing of Debt Securities) Regulations;

10.2 REGULATORY ACTIONS
** SEBI (Collective Investment Scheme) Regulations
A. Orders
During 2020-21, interim orders were passed in
During 2020-21, SEBI disposed of 125 cases
57 cases and final orders were issued (where interim
under section 11/11B of the SEBI Act, as compared
order passed in 2020-21 or before -2020-21) in 39
to 151 cases disposed of in 2019-20. An analysis of
cases (Table 10.19).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 10.19: 
Interim Orders and Final Orders Table 10.20: E
 nquiry Reports submitted against
during 2020-21 Intermediaries

Interim Final Enquiries

Nature of violation Particulars
orders orders# Conducted

PFUTP 5 11 Registrars to Issue and Share 2

Transfer Agents
PIT 2 2
Merchant Bankers 4
Deemed Public issue 3 13 Brokers 88
CIS Regulations 1 1 Investment Advisors 2

IA Regulations 41 8 Underwriters 1

Portfolio Managers 3 0 Others 19

Regulations Total 116
Others 2 4
II. DEBARMENT/ DISGORGEMENT
Total 57 39 SEBI initiated enforcement action under
# Final orders where interim orders passed in 2020-21 or sections 11, 11B and 11D in 225 cases, while it has
before 2020-21 disposed of 125 cases. Out of 125 disposed cases,
I. 
STATUTORY WARNING/ENQUIRY direction of debarment was issued in 78 cases, both
debarment and disgorgement direction issued in 12
(UNDER INTERMEDIARIES
cases and only disgorgement direction issued in one
REGULATIONS)
case. At the end of March 31, 2021, 476 cases were
During 2020-21, SEBI initiated enquiry under pending for action.
SEBI (Intermediaries) Regulations in 46 cases. III. N
UMBER OF INTERIM AND FINAL
Enquiry reports were submitted by DA in 116 cases ORDERS PASSED IN CASES OF
and enquiry was pending in 31 cases at the end of the COLLECTIVE INVESTMENT SCHEMES
year. AND DEEMED PUBLIC ISSUANCES

Upon submission of enquiry reports, the a. 

Regulatory Actions against Unauthorized
Collective Investment Schemes
recommendations made by the DA are placed before
the Designated Whole Time Member for passing of During 2020-21, SEBI passed five orders against
final orders. During 2020-21, enquiry was completed entities found to be carrying out unauthorized
Collective Investment Schemes as against
and recommendation in the enquiry report were
10 orders in 2019-20. The final orders, inter-
made in 116 cases for further necessary action.
alia, directed the company (and its directors)
169 enquiry reports were disposed by passing
to wind up its existing collective investment
appropriate orders. 217 enquiry recommendations schemes (CIS) and make repayments to
were pending at the end of the period. investors within a specified time period.
Of the above enquiries, 88 were against brokers, Additionally, during 2020-21, SEBI, after
followed by merchant bankers (four), registrars to examination, referred 186 cases of unauthorized
issue and share transfer agents (two), investment money mobilization to jurisdictional agency /
advisors (two) and underwriters (one) (Table 10.20). regulator concerned, viz., State Governments,
Reserve Bank of India, Ministry of Corporate

218
 Chapter-10 : Regulatory Action, Supervision and Enforcement

Affairs, Ministry of Agriculture etc. as these I. FOR

 VIOLATIONS PERTAINING TO
cases did not fall under SEBI’s purview. FRAUDULENT AND UNFAIR TRADE
b. Regulatory Actions against Deemed Public PRACTICES
Issues SEBI completed adjudication proceedings
During 2020-21, SEBI passed 19 orders against against 901 entities for engaging in fraudulent and
various entities which had raised money from unfair trade practices. Penalties worth `405.56 crore
the public through issuance of non-convertible were levied for such violations.
debentures/ non-convertible redeemable
II. 
FOR INSIDER TRADING RELATED
preference shares without complying with
statutory/ regulatory provisions governing a VIOLATIONS
public issue as against two orders in 2019-20. SEBI completed adjudication proceedings
B. Adjudicating Orders against 21 entities for engaging in insider trading.

During 2020-21, SEBI completed adjudication Penalties worth `2.55 crore were levied for such
proceedings against 2,050 entities involving 440 violations.
cases. The proceedings were completed through III. FOR TAKEOVER RELATED VIOLATIONS
714 adjudication orders against 1,905 entities and 45
SEBI completed adjudication proceedings
settlement orders against 145 entities. The types of
against 75 entities for engaging takeover related
violations for which the entities were penalized are
given below (Table 10.21). violations worth `13.51 crore were levied for such
violations.
Table 10.21: 
Type of Violations in Adjudication
Orders IV. FOR DISCLOSURE VIOLATIONS
Number SEBI completed adjudication proceedings
Nature of Violation of Entities against 227 entities for violating disclosure
2020-21
requirements specified in PIT and SAST Regulations.
PFUTP 901 Penalties worth `6.09 crore were levied for such
Takeover Related 75 violations.
Disclosure (SAST/PIT) 227 V. FOR OTHER VIOLATIONS
Investor Grievances Related 4 SEBI completed adjudication proceedings
Listing / LODR 48 against 279 entities for other violations pertaining
Stock Broker Regulations/ Circulars 66 listing requirements, broker regulations, CIS, non-
redressal of investor grievances, non-compliance with
Non-Compliance with SEBI Orders 14
SEBI orders, non-compliance summons etc. Penalties
Insider Trading 21
worth `59.30 crore were levied for such violations. No
CIS Regulations 48 penalties were levied against 402 entities.
Non-compliance with summons 47
During 2020-21, SEBI passed 96 adjudication
Others 52 orders against registered intermediaries of which
No Penalty 402 maximum pertained to brokers (72), followed by
Settlement 145 depository participants (five), and remaining on
various other intermediaries (Table 10.22).
Total 2,050

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Securities and Exchange Board of India Annual Report : 2020-21

Table 10.22: 
Adjudication Orders Passed against C. Recovery Proceedings
Intermediaries I. RECOVERY PROCEEDINGS
Adjudication The Securities Laws (Amendment) Act, 2014
Particulars
Orders Passed was notified in August 2014 amending the SEBI Act,
Registrars to Issue and 1 SCRA 1956 and the Depositories Act, 1996 w.e.f. July
Share Transfer Agents 18, 2013. As per Section 28A of the SEBI Act and the
corresponding provisions of SCRA 1956 and the
Merchant Bankers 3 Depositories Act, SEBI is empowered to recover
Depository Participants 5 money from persons who fail to pay the penalty
imposed by an adjudicating officer or fail to comply
Credit Rating Agencies 2 with any directions of the Board for refund of money
Brokers 72 or fail to comply with the direction of disgorgement
order or fail to pay any fees due to the Board. During
Sub-brokers 3 2020-21, 470 recovery proceedings were initiated for
recovery of `2,648.6 crore. A total of `410.8 crore was
Mutual Fund/AMC 2
recovered during the year. Recovery proceedings
Portfolio Managers 2 were completed in 158 cases after recovering the
outstanding dues (Table 10.23).
Custodian 1
In pursuance of SEBI Order dated July 01,
DDP 1
2015 directing refund of money to the investors in
Exchange 3 a deemed public issue in the matter of Shah Group
Builders Ltd., SEBI completed refund in full to
FPI 1
investors as per the certification of peer reviewed
Total 96 chartered accountants.

Table 10.23: Recovery Proceedings by SEBI

2019-20 2020-21

Description CIS Other Total CIS Other Total

&DPI than CIS &DPI than CIS
& DPI & DPI
Recovery Certificates / Notice of Demand 102 751 853 69 401 470
drawn by SEBI
No. of Certificates Cancelled 2 74 76 0 67 67
Amount covered under Certificates (` crore) 5,494 1,357 6,851 2,261 388# 2,649
Amount Recovered (` crore) 44 27 70 374 37^ 411
Arrests and detention of Defaulter 0 0 0 0 0 0
Cases where recovery is completed 1 186 187 1 157 158
No. of Certificates Pending at the year end 269 1,679 1,948 335 1,858 2,193
Notes:1. #Amounts in other than CIS & DPI cases includes interest and costs till the date of issuance of Recovery Certificate.
2. ^Figures are subject to reconciliation with the banks.

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

II. SPECIAL ENFORCEMENT CELL filed before the Hon’ble Supreme Court from
time to time. As on March 31, 2021, SEBI filed
The Special Enforcement Cell was constituted
22 status reports before the Hon’ble Supreme
by SEBI to specifically handle work relating to
Court in this matter.
the verification process of documents for refund
submitted in terms of the directions of the Hon’ble b. Amount received from the Saharas:
Supreme Court with respect to the appeals filed by
Pursuant to the various orders passed by the
M/s. Sahara India Real Estate Corporation Limited
Hon’ble Supreme Court and the attachment
(SIRECL) and M/s. Sahara Housing Investment
orders dated February 13, 2013 passed by
Corporation Limited (SHICL) and applications
SEBI, an aggregate amount of `15,473 crore has
connected therewith. Developments in regard to the
been recovered by SEBI as on March 31, 2021.
same is given below:
These amounts along with interest earned on
a. Background them after providing for making refunds to the
bondholders have been deposited in various
SEBI is implementing the judgement of the
Nationalized Banks in terms of the judgment
Hon’ble Supreme Court dated August 31,
dated August 31, 2012 of the Supreme Court.
2012 which inter-alia upheld directions issued
As on March 31, 2021, the total amount
by SEBI to SIRECL and SHICL (collectively
deposited in these banks is `23,191 crore.
referred to hereinafter as the “Saharas”) to
forthwith refund the amounts collected from c. Status of Refunds made by SEBI
the investors under Red Herring prospectus
As on March 31, 2021, SEBI received 19,616
(RHPs) issued by the Saharas with 15 per cent
applications involving 53,549 accounts
interest from the date of receipt of money till
and issued refunds with respect to 16,909
the date of payment.
applications involving 45,451 accounts for an
In accordance with the directions contained aggregate amount of `129 crore including the
in the said judgment of the Hon’ble Supreme interest amount of `62 crore. 483 applications
Court, the actions of SEBI are overseen by involving 1,797 accounts were referred back to
Justice (Retd.) B. N. Agarwal appointed by the applicants for addressing the discrepancies.
the Hon’ble Supreme Court in the said matter Seven applications involving eight accounts
and details are provided in the status report fall under the disputed category (Table 10.24).
Table 10.24: Status of Refunds made by SEBI
Account
No. of Amount Claimed by
Particulars / Control
Cases* Bondholder (`)
Nos.
Application received with Original Bond Certificates / Passbooks 19,616 53,549 81,59,72,994
Disputed Cases 7 8 1,02,000
Pending with the Investors 483 1,797 2,34,14,722
Pending with Sahara 332 1,121 1,64,14,450
Pending with SEBI 122 532 76,23,000
Closed cases (Investor not responded/No Record Found 2,487 4,784 5,39,60,235
Cases – Received after 01/04/2016)
Cases already refunded 16,909 45,451 Principal: 66,35,27,200
Interest: 62,33,81,036
Note: *An application may fall in more than one category, hence the number of cases are not mutually exclusive.

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Securities and Exchange Board of India Annual Report : 2020-21

D. Prosecution Proceedings Table 10.26: Nature of Violations in Prosecutions

Launched during 2020-21
During 2020-21, 20 prosecution cases were
launched against 153 persons/entities as compared to No. of
38 prosecutions launched against 94 persons/ entities cases filed
Nature of Violation
in 2019-20 (Table 10.25). Out of the 20 prosecution during
2020-21
cases, 10 cases were launched for violation of PFUTP
Regulations, 2003, five cases for non-payment of Non-payment of Penalty Imposed by 5
penalty imposed by Adjudicating Officer, three Adjudicating Officer

cases for non-compliance with summons issued Non-compliance with Summons Is- 3
by the investigating authority and one case each sued by the Investigating Authority
for violation of PM Regulations, 1993 and CIS Violation of SEBI (PFUTP) Regulations 10
Regulations, 1999 (Table 10.26).
Violation of SEBI (PM) Regulations 1
Table 10.25: Prosecutions Launched
Violation of SEBI (CIS) Regulations 1
Total till the end
During the Year Total 20
of the Year
Year No. of Against No. No. of Against No. As on March 31, 2021, the highest number of
cases of Persons/ cases of Persons/ prosecutions were launched in Head office/ Western
Entities Entities
region (1,095) followed by Northern region (380),
2019-20 38 94 1,824 7,916 Eastern region (246) and Southern region (123)
2020-21 20 153 1,844 8,069 (Table 10.27).

Table 10.27: Region-wise Data on Prosecution Cases Filed

As on March 31, 2020 As on March 31, 2021

Region
Number of Percentage Number of Percentage
Cases of Total Cases of Total

Head Office/Western Region 1,078 60 1,095 60

Northern Region 379 21 380 21

Southern Region 123 6 123 6

Eastern Region 244 13 246 13

Total 1,824 100 1,844 100

As on March 31, 2021, the highest number of (209), Northern region (154), and Southern region
prosecutions cases were pending at Head office/ (98) (Table 10.28).
Western region (699) followed by Eastern region

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

Table 10.28: 
Region-wise Data on Prosecution As on March 31, 2021, the courts have disposed of
Cases Pending 688 prosecution cases filed by SEBI out of which
241 cases resulted in convictions and 277 cases were
As on March 31, 2021
compounded (Table 10.30).
Region Number Percentage
of Cases of Total Table 10.30: N
 umber of Prosecution Cases decided

Head Office/Western 699 60 by the Courts up to March 31, 2021

Region
Type of Decision by the Courts Total
Northern Region 154 14
Convictions 241
Southern Region 98 8
Compounded 277
Eastern Region 209 18
Abated 30
Total 1,160 100
Dismissed/Discharged 130
SEBI launches prosecutions for violation of Withdrawn 7
provisions of the SEBI Act, 1992; Companies Act,
Adjourned Sine Die/Filed for the 3
1956/2013; Depositories Act, 1996; SCRA 1956; and Present
the Indian Penal Code, 1860. As on March 31, 2021,
Total 688
1,844 prosecution cases have been launched out of
which 1,538 cases are launched for violation of the During 2020-21, six cases resulted in
provisions under the SEBI Act. The details of the convictions. All the six cases pertained to non-
prosecutions launched are given below (Table 10.29): payment of penalty imposed by the Adjudicating
Officer.
Table 10.29: Nature of Prosecutions Launched

Number of Cases E. Settlement and Compounding

Nature of Prosecution As on As on I. SETTLEMENT
Launched March March
31, 2020 31, 2021 During the financial year 2020-21, SEBI received
239 applications for settlement. 216 applications
SEBI Act 1,519 1,538
were disposed of by passing appropriate settlement
SCRA 1956 97 98
orders, which include 58 applications disposed
SEBI Act, SCRA 1956 & 2 2 of under SEBI Settlement Scheme, 2020, 158
Companies Act
applications under the normal settlement process
SEBI Act & Companies Act 74 74 and 187 applications were rejected or withdrawn
SEBI Act & Indian Penal 5 5 (Table 10.31). During the Financial Year 2020-21, in
Code respect of 158 applications settled under the normal
Companies Act, 1956 83 83 settlement process, SEBI collected `68 crore towards
Securities Contracts 7 7 settlement charges compared to `52 crore in the
(Regulation) Act, 1956 previous year. In addition to this, `1.6 crore was
Depositories Act, 1996 29 29 collected as disgorgement charges.

Indian Penal Code 8 8 A Settlement Scheme was operationalized

Total 1,824 1,844 in terms of Regulation 26 of the Settlement

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Securities and Exchange Board of India Annual Report : 2020-21

Regulations in the matter of trading in illiquid April 1, 2014 to September 30, 2015 against whom
stock options at BSE which covered 14,720 entities. proceedings were pending. The period of the
The purpose of the Scheme was to provide a scheme was from August 01, 2020 to December
one-time settlement opportunity to the entities 31, 2020. A total number of 1,018 entities availed
that have executed reversal trades in the stock the benefit of the scheme and an amount of
options segment of BSE during the period from `87.4 crore was collected as settlement charges.

Table 10.31: Settlement Applications Filed with SEBI

No. of
No. of No. of
Pending at the Applications Settlement Pending at
Settlement Applications
Year Beginning of the Disposed of Charges the end of
Applications Rejected/
Period by-Passing (`) $ the Period
Received# Withdrawn
Orders##

2019-20 312 249 100 51,81,03,523 143 318

2020-21 318 239 216* 68,23,82,499 187 150**

2020-21 Additionally, a consolidated Settlement Order was passed against 1,018 entities in the SEBI Settle-
ment Scheme, 2020 wherein an amount of `87,38,42,500/- was collected as settlement charges.

Note:
# U
 nder the SACP Regulations, 2014 which is repealed and replaced with SP Regulations, 2018 with effect from January
01, 2019, the process is now known as settlement instead of consent.
## The number of applications may include disposal of applications filed during previous financial years.
$ Out of total amount of `68,23,82,499/-; `66,34,18,888/- was received towards settlement charges, `1,89,63,611/- towards
summary settlement charges and `7,20,000/- was recovered as legal charges.
* Includes 58 entities who availed of the SEBI Settlement Scheme, 2020.
** Four applications were returned after registration.

II. COMPOUNDING applications, three applications were compounded

during the year while two applications were rejected
A total of 29 applications were filed before the
by the Court. As on March 31, 2021, there were 24
Courts (four fresh applications filed during 2020-
applications pending with Courts for compounding
21 and 25 pending applications from the previous
(Table 10.32).
years) for compounding of the offences. Out of the 29

Table 10.32: Compounding Applications Filed by the Accused in Criminal Courts

Applications Disposed Applications

No. of Applications Applications  Compounding
Pending
Pending Filed during Charges Received by
as on
as on April 01, 2020 2020-21 Compounded Rejected SEBI (`) in 2020-21
March 31, 2021

25 4 3 2 6,31,718 24

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10.3 LITIGATION During the financial year 2020-21, 545 new

appeals were filed as compared to 630 appeals in
A. Appeals in Securities Appellate Tribunal
the last financial year. An increase was observed in
During 2020-21, 545 appeals were filed before dismissal of appeals (in favour of SEBI) as compared
the Securities Appellate Tribunal (SAT). A total of to the year 2019-20, as a total number of 236 appeals
236 appeals were dismissed (ruled in favour of SEBI) were dismissed out of the total 392 appeals disposed
while 69 were allowed (ruled against SEBI). As on of by Hon’ble SAT (i.e. in about 60 per cent appeals,
March 31, 2021, 632 appeals were pending before the orders of SEBI were upheld).
SAT (Table: 10.33).
A total of 69 appeals were allowed (against
Table 10.33: Status of Appeals before SAT SEBI) by the Tribunal in the financial year 2020-21,
as compared to 78 appeals in the same category
Status of Appeals 2019-20 2020-21
in the last financial year. Similarly, a decline was
Appeals Pending at the 379 479 observed in the number of SEBI Orders upheld with
beginning of the year modification, wherein the number has reduced to 38
appeals as compared to 121 appeals in the year 2019-
Appeals Filed during the 630 545
year 20. Further, 17 appeals were withdrawn during the
financial year 2020-21.
Appeals Dismissed 217 236
About 60 per cent of the total disposed cases
Appeals Remanded 96 32 pertained to the violation of the SEBI (Prohibition
of Fraudulent and Unfair Trade Practices relating
Appeals Allowed 78 69 to Securities Market) Regulations, 2003, of which 65
per cent were decided in favour of SEBI. Further, out
SEBI Orders Upheld with 121 38
Modifications of the total 392 disposed appeals, 25 appeals (about
6 per cent) pertained to the violation of the SEBI
Appeals Withdrawn 18 17 (Prohibition of Insider Trading) Regulations, 2015.

Appeals Pending at the 479 632 Further, a sharp decline was observed in
end of the year the number of appeals being remanded for fresh
consideration by SEBI. As compared to 96 appeals
B. Trends Observed from Orders of SAT remanded in the last financial year, only 32 appeals
were remanded, out of the total 392 appeals disposed
In the wake of COVID-19 pandemic, during
of during 2020-21.
the financial year 2020-21, the Hon’ble Tribunal
deferred the holding of physical hearings. As a
C. Appeals in Supreme Court
measure to adapt to the prevailing circumstances,
the Tribunal immediately shifted to electronic As on March 31, 2021, there were 356 cases
mode of filing of appeal memos/ applications/ pending before the Hon’ble Supreme Court
affidavits and conducting of hearings through (compared to 291 pending in the previous year)
virtual mode. (Table 10.34).

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Securities and Exchange Board of India Annual Report : 2020-21

Table 10.34: Status of Litigation before Supreme Court

2019-20 2020-21
Particulars
Filed Disposed Pending* Filed Disposed Pending*

Cases filed by SEBI 41 13 133 58 14 177

Cases filed by Parties 28 26 158 39 18 179

Total 69 39 291 97 32 356

Note: *Pending at the end of each financial year

D. Litigations in High Courts and Other forums

As on March 31, 2021, there were 1,283 cases pending before the High Court (compared to 1,169 cases in
the previous year) (Table 10.35).

Table 10.35: Status of Litigation before High Courts

2019-20 2020-21
Particulars
Filed Disposed Pending* Filed Disposed Pending*

Cases filed by SEBI 7 16 66 11 6 71

Cases filed by Parties 222 120 1,103 225 116 1212

Total 229 136 1,169 236 122 1,283

Note: *Pending at the end of each financial year

As on March 31, 2021, there were 387 cases pending before 'other' forum (apart from Supreme Court,
High Court, SAT and SEBI Special court (compared to 384 cases in the previous year) (Table 10.36).

Table 10.36: Status of Litigation before Other Forum

2019-20 2020-21
Particulars
Filed Disposed Pending* Filed Disposed Pending*

Cases filed by SEBI 3 4 16 2 1 17

Cases filed by Parties 136 174 368 77 75 370

Total 139 178 384 79 76 387

Note: *Pending at the end of each financial year

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

During 2020-21, 977 cases were filed and pending at different stages before various judicial
646 cases were disposed of across various judicial forums (Table 10.37).
forums. As on March 31, 2021, 3,818 cases were

Table 10.37: Fora-wise Status of Cases

During 2020-21
Forum
Filed Disposed Pending
Supreme Court 97 32 356
High Court 236 122 1,283
Securities Appellate Tribunal 545 392 632
SEBI Special Court 20 24 1,160
Civil Court 2 17 103
Criminal Court (Other than criminal complaints filed by SEBI) 0 1 8
Consumer Forum 58 36 192
NCLT 14 15 55
NCLAT 4 3 7
Labour Commissioner /Labour Court 0 0 8
Commissioner of GST & CX / Sales Tax Appellate Tribunal 0 1 2
Commissioner of Income Tax 0 0 6
Permanent Lok Adalat 1 2 4
The Debt Recovery Tribunal 0 1 2
Total 977 646 3,818

E. Important Court Pronouncements possession of UPSI (UPSI) in the scrip of Dynamatic

I. SUPREME COURT OF INDIA Technologies Limited

Judgment Dated November 18, 2020 in C.A. The Supreme Court while disposing of the
No. 2981-82/2020 - in the matter of SEBI vs. Udayant appeal observed that the observations made by SAT
Malhoutra should not be treated as a precedent in any other
case and further clarified that the order passed by
An appeal was filed by SEBI challenging the
SEBI must necessarily be in accordance with Section
order dated June 27, 2020 and July 23, 2020 of the
11(4) of the SEBI Act.
SAT wherein the SAT had quashed the ex-parte
impounding order dated June 15, 2020 passed II. HIGH COURTS
by SEBI against Shri Udayant Malhoutra which
a. 
Judgement dated September 29, 2020 in W.P.
inter alia directed Shri Malhoutra to deposit
(L) No. 3298 of 2020 in the matter of T Takano
approximately `3.8 crore towards the notional
vs. SEBI & Bhartendra Gupta and W.P. (L)
loss allegedly avoided by him while trading in
No. 3293 of 2020- in the matter of A. T. Rajan

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Securities and Exchange Board of India Annual Report : 2020-21

vs. SEBI & Bhartendra Gupta (Bombay High in this case, the Court observed that the
Court) Inspection Report does not form the basis of
the Show Cause Notice. Furthermore, as SEBI
In the Writ Petition filed by the petitioners,
had clarified that the Inspection Report was
the questions for consideration before the
not used against the petitioners and does not
Court were whether the impugned show cause
form basis of the Show Cause Notice. Upon
notice violates the procedure laid down under
considering the arguments of SEBI, the Court
Rule 4 of the SEBI (Procedure for holding
held that no direction as sought for by the
inquiry and imposing penalties) Rules, 1995
petitioners was, therefore, warranted and
and that the action of SEBI to proceed further
dismissed the Writ Petitions.
with the inquiry without furnishing necessary
documents was in breach of the principles of Appeal filed by Mr. T Takano against the
natural justice. said HC order is pending before the Supreme
Court.
In this case, a Show Cause Notice (SCN) was
issued against the petitioner on August 04, b. 
Judgment dated October 06, 2020 in W.P. (L)
2020. The petitioners requested SEBI to furnish No. 3441 of 2020- in the matter of J K Paper
all the documents including Inspection Report. Limited vs. SEBI (Bombay High Court)
SEBI replied that all the documents relied
In the Writ Petition, the question for
upon by SEBI were provided along with the
consideration before the Court was whether
Show Cause Notice but that the inspection
SEBI is obliged to grant a personal hearing to
report being an internal document could not
the petitioner while considering an exemption
be provided to the petitioners.
application under Regulation 29 of the SBEB
As regards the first contention, the Court Regulations, 2014 (“SBEB Regulations”) . The
observed that petitioners had the remedy Court answered the question in negative:
to approach the SAT and that a SCN is only
• The power to grant relaxation under
prescribed in Rule 4(1) and the impugned SCN
Regulation 29 is a discretion to be
is issued under Rule 4(1) and, therefore, there
exercised by SEBI, and the conditions
is no question of omitting any steps. SEBI is
to be imposed are in the interest of the
required to follow the procedure laid down
investors.
under Rule 4. The Court held that since the
learned counsel for the petitioner accepted the • It is a settled position that the requirement

clarification, the grievance of the petitioners of compliance with the principle of

does not survive. natural justice can vary in different

situations and conditions. Even where
As regards providing the Inspection Report
situations where principles of natural
to the petitioners, the Court observed that the
justice require an opportunity of hearing,
preliminary Report under Regulation 9 of the
it does not in all circumstances mean a
SEBI (Prohibition of Fraudulent and Unfair
personal hearing.
Trade Practices Relating to Securities Market)
Regulations, 2003 is a matter of internal • The apprehension expressed by the SEBI

administrative discipline. Even otherwise, that by reading duty to give personal

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

hearing in this Regulation would have is bound by its statutory obligation under
adverse ramifications on its working Regulation 18 (15) (c) of obtaining consent of
cannot be said to be unwarranted. the unit-holders of the Scheme. The consent of
SEBI has framed several regulations on unit-holders will be by a simple majority.
various aspects of the securities market.
The Court also observed that the Trustees had
A large number of applications are filed
been entrusted with a very important duty
before it. It will hamper the functioning
of looking after and protecting the interest of
of the SEBI if the exercise of its every
the unit-holders who are members of public
power is preceded by mandatory
or a section of public and that the Trustees,
personal hearing, whether the regulation
while exercising powers under the Mutual
provides for it or not.
Funds Regulations, discharge a public duty
• Therefore, there is no duty on the and perform public function. Any violation of
Board while considering an exemption public duty by the Trustees and corresponding
application under regulation 29 of SBEB denial of rights of unit-holders would entitle
Regulations, 2014 to give a personal unit-holders to invoke Article 226 of the
hearing to the applicant. Constitution of India for enforcing the public
duty. If the Trustees commit violation of
• Once there is no requirement of a
statutory Regulations, the Court, in exercise
personal hearing under regulation 29,
of its extraordinary jurisdiction under Article
we do not find that there is a special
226 of the Constitution of India is certainly
case made out by the petitioner or any
empowered to issue a writ of mandamus for
extraordinary circumstances exist to give
enforcement of statutory Regulations.
special direction for the petitioner.
As regards the question whether a writ Court
c. 
Judgment dated October 24, 2020 in W.P. Nos.
can interfere with the decision of the trustees
8545/2020, 8644/2020, 8748/2020 along with
to wind-up schemes, the Court observed that
W.A. No.399/2020 – in the matter of Franklin
it cannot enter into an arena of the merits of
Templeton Mutual Fund cases (High Court of
the decision which is essentially a commercial
Karnataka)
decision. It should be best left to the experts in
The issue under consideration before the High the field and hence observed that it is unable
Court of Karnataka was whether obtaining to interfere with the ultimate decision taken by
consent of the unit-holders in accordance with the Trustees to wind up the said Schemes.
the provision of Regulation 18 (15) (c) of the
The Court also upheld the constitutional
MF Regulations, 1996 is a condition precedent
validity of Regulations 39, 40 and 41 of the MF
for winding up of a Scheme in accordance with
Regulations, 1996 and held that the same are
Regulation 39 (2) (a) of the said Regulations.
not arbitrary, or violative of Articles 14 and 21
The Court held that when the Board of Directors of the Constitution of India.
of a Trustee company, by majority, decides
Appeals filed against the said HC Order is
to wind up a Scheme by taking recourse to
pending before the Supreme Court.
Regulation 39 (2) (a), the Trustee company

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Securities and Exchange Board of India Annual Report : 2020-21

d. 
Judgment dated February 12, 2021 in W.P. e. 
Judgment dated February 25, 2021 in
No. 13682/2020 I. Unnikrishnan vs. UOI and W.P.No.4939/2020 in the matter of BRD
others and W.P. No. 22430/2020 in the matter Securities Ltd. Vs. SEBI (High Court of
of G. Anoop vs. UOI and others (High Court Kerala)
of Kerala)
The petitioner had challenged the Show Cause
SEBI had issued a Show Cause Notice inter Notice dated April 05, 2019, the supplementary
alia to Mr. G. Anoop and Mr. I. Unnikrishnan Show Cause Notice dated December 12, 2019
(Noticees), who were alleged to have acted as and the notice for hearing dated January 14,
‘unregistered debenture trustees’ in the matter 2020 issued by SEBI in the matter of deemed
of deemed public issue of debentures and bonds public issue of equity shares by the petitioner
by BRD Securities Ltd. The aforementioned company, contending that the Show Cause
Noticees challenged the SCN, questioning Notices were issued after an inordinate delay,
SEBI’s jurisdiction in the matter and also the that they are ultra vires the provisions of
applicability of the DB Regulations, 1993. The the Companies Act, 1956 and SEBI Act and
High Court was pleased to dismiss the writ violative of Article 14 and Article 19(1)(g) of
petitions with the following observations: the Constitution of India.

• The petitioners have no case that they are The writ petition was dismissed with the
holding registration to act as Debenture following observations:
Trustees. Therefore, there is prima facie
• Though the information sought for by
violation of Section 12(1) of SEBI Act.
SEBI related back to the year 2001, the
• Even though the company is an NBFC, required information is those which
as far as regulation of issue of debentures are required by the petitioner to be
is concerned, it is the duty of SEBI statutorily maintained. Therefore, the
to protect the interest of investors in delay in issuing these SCNs, cannot
securities. As long as NBFCs are not cause prejudice to the petitioner.
specifically excluded from the purview
• Under Section 11(2)(f) of the SEBI Act,
of SEBI Act, SEBI will have jurisdiction
promoting investor education is one of
over securities transactions of an NBFC,
the functions of SEBI.
including the Debenture Trustees.
• Prima facie, the delay in initiation of the
• The proceedings of SEBI are only at the
proceedings will not cause prejudice to
show-cause stage. The petitioners have
the company. Even if the petitioner is
the opportunity to establish their case
incapacitated to provide any information
before the Board.
required by the SEBI, the petitioner can
• The function of the Court is to see that very well give reasoned explanation for
lawful authority is not abused but not to the same to SEBI.
appropriate to itself the task entrusted to
• The issue is presently only at a show-
that authority.
cause stage. It will be thoroughly
inappropriate for the Court to interfere

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

with the statutory proceedings at this in the peculiar circumstances of the case, will
stage. not vitiate the proceedings, but the penalty
amount deserves to be substituted by a
III. SECURITIES APPELLATE TRIBUNAL
lesser penalty. Accordingly, the Hon’ble SAT
a. 
Order dated July 08, 2020 in Appeal no. 583 of modified the penalty to warning and disposed
2019 – ICICI Bank Limited Vs. SEBI of the appeal.
This appeal was filed against the Adjudication b. 
Order dated July 17, 2020 in Appeal No.
Order dated September 12, 2019, whereby 150/2020 – Anant R. Sathe Vs. SEBI
the Appellant was held guilty of violating
This appeal was filed challenging the SEBI
Clause 36 of the Equity Listing Agreement
communication vide which the request of
read with Section 21 of the Securities
the appellant seeking certain documents was
Contract (Regulation) Act, 1956 (‘SCRA’)
declined on account of the reason that all the
and Regulation 12(2) of the PIT Regulations,
documents relied upon by SEBI were duly
1992, for failure to make timely disclosure of
provided.
the “Binding Implementation Agreement”
which the Appellant had entered into with The matter pertained to an investigation
the dominant shareholders of the Bank of conducted by SEBI, in the scrip of Kirloskar
Rajasthan on the morning of May 18, 2010, Brothers Ltd. (KBL) and the show cause notice
with respect to an amalgamation of Bank of dated December 11, 2019, issued alleging that
Rajasthan and the Appellant. A total penalty the appellant had violated the provisions of
of `10 lakh was imposed on the Appellant. Section 12A of the SEBI Act, 1992 read with
Regulations 3 and 4 of the PFUTP Regulations.
While considering the matter, Hon’ble SAT
On receipt of the show cause notice, the
held that there was certainty and materiality
appellant had sought an inspection of
in the said agreement and the same wasn’t
documents collected during the investigation,
a draft proposal but a binding agreement
which were duly provided to him. Vide letter
containing information relating to the swap
dated February 12, 2020, the appellant sought
ratio and the outer time limit for completing
certain additional documents which was
the steps/formalities concerned. The
declined by SEBI.
disclosure made by the Appellant regarding
the amalgamation, ultimately demonstrated Hon’ble SAT ruled that the authority is
that the appellant was aware of potential risk required to supply the documents that they
and impact of proposed amalgamation on its rely upon while serving the show cause notice
share prices, thus making it a price sensitive which in the instant case was complied with
information (PSI). Hon’ble SAT observed and the same was sufficient for the purpose
that the disclosure was necessary as material of filing an efficacious reply to his defence.
and PSI relating to the performance of a Hon’ble SAT while holding that the request
company is to be disclosed on a continuous for supply of additional documents made by
basis. Hon’ble SAT held that though there is the Appellant is misconceived, dismissed the
an issue of delay in the matter, that by itself, appeal.

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Securities and Exchange Board of India Annual Report : 2020-21

c. 
Order dated November 05, 2020 in Appeal no. The Hon’ble SAT while dealing with the
120 of 2017 – Reliance Industries Limited and contentions of the appellants inter alia held that
Others Vs. SEBI the route taken by RIL with the help of other
appellants who perpetuated the scheme in
This appeal was filed against the SEBI
cornering a substantive portion of the market-
Order dated March 24, 2017, vide which the
wide position limit in the November RPL
appellants were prohibited from dealing in
Futures contract was manipulative. It was also
equity derivatives in the F&O Segment for
held that such manipulation cannot be treated
a period of one year. Vide the said Order,
as mere position limit violation, as the same
Reliance Industries Limited (‘RIL’) was also
was a pre-planned strategy for manipulation.
directed to disgorge an amount of `447.27
crore along with an interest of 12 per cent p.a. The Hon’ble SAT vide its majority view upheld
from November 29, 2017 onwards, till the date the SEBI Order and dismissed the appeal.
of payment. Against the Order of the Hon’ble SAT, RIL and
others have preferred an appeal before the
Hon’ble SAT in its Order took note of the fact
Hon’ble Supreme Court of India.
that a resolution was passed by the Board of
Directors of RIL, for sale of its assets to raise d. 
Order dated December 07, 2020 in Appeal No.
funds for completion of various projects. The 389 of 2020 – Rajen Kirtanlal Shah Vs. SEBI
fund raising included sale of around 22.5 crore and Anr.
shares of Reliance Petroleum Limited (‘RPL’) This appeal was filed challenging disposal
(a 75 per cent subsidiary of RIL). Certain of SCORES complaint by SEBI, vide
agents were appointed by RIL to reap profits communication dated August 26, 2020. The
by cornering future position limits beyond the complainant/Appellant had filed a complaint,
permissible limit. against a Portfolio Manager, on SCORES
Earlier the SEBI Order had found that by platform on August 11, 2020. The appellant
splitting the trades across agents to take had entered into a Portfolio Management
separate position limits on behalf of RIL and Agreement (‘PM Agreement’) on December
cornering a huge actual open interest position 13, 2017, for managing the investments of the
of 93.63 per cent (as on 29/11/2007) of the Appellant. The Appellant had contended that
November futures of RPL, RIL has acted in the terms and conditions of the term sheet
a fraudulent manner. It was observed that in attached to the PM Agreement were changed
last 10 minutes of the last day of trading for without his prior consent. It was further
the November futures i.e., 29/11/2007, RIL contended that such unilateral changes were in
had sold around 2.25 crore shares of RPL breach of the PM Agreement and in violation
in cash segment and significantly brought of the provisions of the SEBI (Portfolio
down the price of scrip and consequently also Managers) Regulations, 1993. While disposing
brought down the settlement price for the F&O of the complaint, SEBI had observed that the
Segment. The same led to bringing the price of Appellant had entered into the agreement
the scrip down and depressed settlement price for discretionary services with the portfolio
resulting in an unjust profit of `513.12 crore. manager and the fund manager had taken

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adequate steps to recover the funds on behalf considering the Corporate Insolvency
of the investors. Resolution Process under the Insolvency and
Bankruptcy Code, 2016 (‘IBC’) against FDSL
Hon’ble SAT while opining that the complaint
and the moratorium under Section 14 of the
is in the nature of private dispute with regard
IBC, an addendum to the Impounding Order
to investments made by the appellant with
was issued on March 30, 2020, wherein the
the Portfolio Manager, held that such private
directions against FDSL were directed to be
disputes relating to financial transactions
kept in abeyance, while the moratorium is in
cannot be adjudicated on the SCORES platform
force.
and the appellant has remedy of invoking the
arbitration clause under the agreement which The Appellant preferred an appeal against the
the appellant has already invoked. Considering said impounding Order, which was disposed
the same, the Hon’ble SAT dismissed the of by the Hon’ble SAT vide its Order dated
appeal. May 27, 2020, directing the Appellant to file
a reply to order-cum-show cause notice. Vide
e. 
Order dated January 19, 2021 in Appeal no.
the said Order, SEBI was directed to decide the
211 of 2020 – Amalendu Mukherjee Vs. SEBI
matter finally by July 6, 2020. In compliance
This appeal was filed challenging the SEBI with the same, SEBI had issued the Order
Order dated July 06, 2020, whereby the dated July 06, 2020. Vide the said Order, it
appellant was directed to disgorge an amount was held that the appellant had traded in the
of `2,30,34,010/- along with an interest at the scrip of Ricoh while being privy to the UPSI
rate of 12 per cent, for the violation of Section and made unlawful gains and also avoided
12A(d) and (e) of the SEBI Act and Regulations losses. Aggrieved by the said Order of SEBI,
3(i) and 4 of the PIT Regulations 1992 read the Appellant had preferred the instant appeal.
with Regulation 4(1) of the PIT Regulations,
Hon’ble SAT while observing that the Appellant
2015. Vide the said order, the appellant was
was soul of FDSL (being the promoter holding
also prohibited from dealing in securities
73 per cent of its shareholding and Managing
market, directly or indirectly, for a period of
Director) held that he was in-charge of FDSL’s
seven years from the date of depositing the
day to day management. Hon’ble SAT also
said amount.
observed that it is an established law that for
Based on the findings of the investigation, in the misdeeds of corporates going under CIRP,
the scrip of Ricoh India Limited (‘Ricoh’) SEBI their promoters/directors/officials responsible
had issued an interim ex-parte impounding for those misdeeds can be visited with the
order dated March 17, 2020, against Fourth legal liabilities. It also held that the attribution
Dimension Solutions Limited (‘FDSL’) and of FDSL activities (now under CIRP) to the
the Appellant (who was a majority promoter appellant does not suffer from any lacunae and
and the Managing Director of FDSL) inter there is no legal error in lifting the corporate
alia directing to impound an amount of veil in order to get to the root of the suspected
`2,30,34,010 (jointly and severally), being the fictitious transactions between FDSL, Ricoh
illegal gains made on account of trades carried and other entities. Accordingly, the Hon’ble
out by FDSL, in the scrip of Ricoh. Thereafter,

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SAT dismissed the appeal and directed the The main contention of the appellant was
Appellant to pay the disgorgement amount, that in view of the order declaring the
along with interest, within 30 days. appellant insolvent, the penalty could not
have been imposed. Hon’ble SAT held that the
f. 
Order dated March 09, 2021 in Appeal No.
Adjudication Order imposing a penalty for
489/2018 - Vinit Kumar vs. SEBI
violation of Regulations 3 and 4 of the PFUTP
This Appeal was filed challenging the SEBI Regulations is not a “debt” as contemplated
order dated October 08, 2018, passed in respect under Section 17 read with Section 46(3) of
of the Recovery Certificate. Earlier, a penalty of the Presidency Town Insolvency Act, 1909
`25,00,000 was imposed on the appellant vide and therefore, leave of the Court was not
the Adjudication Order dated March 31, 2013 required under Section 17. Further, as the
for violation of the provisions of the PFUTP appellant has ceased to be an insolvent and
Regulations. The said order was remanded has been discharged from insolvency on
by Hon’ble SAT vide its order dated July 26, January 21, 2020, there is no embargo upon
2018 for considering the issue of insolvency the Recovery Officer to recover the amount
proceedings against the appellant. Thereafter, from the appellant. Accordingly, Hon’ble SAT
the impugned order came to be passed. dismissed the appeal.
10.4 AMENDMENTS TO REGULATIONS
I. The details of the amendments of regulations have been given in respective chapter.

Sr. No. Date Title

1 April 07, 2020 SEBI (Foreign Portfolio Investors) (Amendment) Regulations, 2020
2 April 17, 2020 SEBI (Regulatory Sandbox) (Amendment) Regulations, 2020
3 May 08, 2020 SEBI (Payment of Fees) (Amendment) Regulations, 2020
4 June 16, 2020 SEBI (Substantial Acquisition of Shares and Takeovers) (Amendment)
Regulations, 2020
5 June 16, 2020 SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations,
2020
6 June 16, 2020 SEBI (Infrastructure Investment Trusts) (Second Amendment) Regulations, 2020
7 June 16, 2020 SEBI (Real Estate Investment Trusts) (Second Amendment) Regulations, 2020
8 June 22, 2020 SEBI (Issue of Capital and Disclosure Requirements) (Second Amendment)
Regulations, 2020
9 June 22, 2020 SEBI (Substantial Acquisition of Shares and Takeovers) (Second Amendment)
Regulations, 2020
10 July 01, 2020 SEBI (Substantial Acquisition of Shares and Takeovers) (Third Amendment)
Regulations, 2020
11 July 01, 2020 SEBI (Issue of Capital and Disclosure Requirements) (Third Amendment)
Regulations, 2020
12 July 03, 2020 SEBI (Investment Advisers) (Amendment) Regulations, 2020
13 July 17, 2020 SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2020

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Sr. No. Date Title

14 July 22, 2020 SEBI (Settlement Proceedings) (Amendment) Regulations, 2020
15 August 05, 2020 SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment)
Regulations, 2020
16 August 05, 2020 SEBI (Employees’ Service) (Amendment) Regulations, 2020
17 September 28, 2020 SEBI (Issue of Capital and Disclosure Requirements) (Fourth Amendment)
Regulations, 2020
18 October 08, 2020 SEBI (Debenture Trustees) (Amendment) Regulations, 2020
19 October 08, 2020 SEBI (Issue and Listing of Debt Securities) (Amendment) Regulations, 2020
20 October 08, 2020 SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment)
Regulations, 2020
21 October 08, 2020 Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
(Amendment) Regulations, 2020
22 October 19, 2020 SEBI (Alternative Investment Funds) (Amendment) Regulations, 2020.
23 October 19, 2020 SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities
Market) (Second Amendment) Regulations, 2020
24 October 29, 2020 SEBI (Mutual Funds) (Second Amendment) Regulations, 2020
25 October 29, 2020 SEBI (Prohibition of Insider Trading) (Second Amendment) Regulations, 2020
26 January 08, 2021 SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations,
2021
27 January 08, 2021 SEBI (Alternative Investment Funds) (Amendment) Regulations, 2021
28 January 08, 2021 SEBI (Listing Obligations and Disclosure Requirements) (Amendment)
Regulations, 2021
29 January 11, 2021 SEBI (Investment Advisers) (Amendment) Regulations, 2021
30 January 21, 2021 SEBI (Intermediaries) (Amendment) Regulations, 2021
31 February 04, 2021 SEBI (Mutual Funds) (Amendment) Regulations, 2021
32 March 16, 2021 SEBI (Portfolio Managers) (Amendment) Regulations, 2021
33 March 16, 2021 SEBI (Research Analysts) (Amendment) Regulations, 2021
34 March16, 2021 SEBI (Investment Advisers) (Second Amendment) Regulations, 2021
35 March 23, 2021 Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations)
(Amendment) Regulations, 2021
36 March 30, 2021 SEBI (Stock Brokers) (Amendment) Regulations, 2021
37 March 30, 2021 SEBI (Merchant Bankers) (Amendment) Regulations, 2021
38 January 13, 2021 Repeal of the SEBI (Central Database of Market Participants) Regulations, 2003
39 March 23, 2021 Repeal of the SEBI (Regulatory Fee on Stock Exchanges) Regulations, 2006
40 March 30, 2021 Repeal of the SEBI (Underwriters) Regulations, 1992

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Securities and Exchange Board of India Annual Report : 2020-21

II. SEBI had undertaken a detailed review of its regulatory framework, for rationalization of compliances
and removal of redundancies, as given in Box 10.2.

Box Item 10.2: Rationalization of Compliances

SEBI has been, as a long-standing institutional practice, proactively undertaking independent review of its
various regulations in consultation with investors, market participants and expert committees. One of the
main objectives of this continuous process is to reduce the compliance burden of the market participants
without compromising on investor protection and market efficiency/ transparency.

In line with the exercise undertaken by the Government of India to review and rationalize the compliance
burden on businesses and citizens in India, SEBI had carried out a detailed review of its regulatory frame-
work and identified certain compliance items for rationalization or removal of redundancies. The overall
exercise is being undertaken in a phased manner, as prescribed by the Government. While the first phase
involved rationalization of 14 compliance items by March 31st which has been successfully achieved by SEBI,
the second phase involves rationalization of 25 items by August 15, 2021, the work on which is under pro-
cess.

10.5 
NEW REGULATIONS (AIMS AND companies having stressed assets have
OBJECTIVES) so far been utilized by one company.

During the year 2020-21, no new regulations b. Corporate Governance

were notified. • In view of the disruptions arising from
the COVID-19 pandemic, during the
10.6 PROGRESS OR IMPACT ASSESSMENT year, SEBI had provided a number of
OF THE NEW REGULATIONS/RULES relaxations to listed entities including
a. Primary Market extensions for submission of financial
results and other reports (details given at
• Rationalization of eligibility and
Chapter 3) for the quarter / year ended
disclosure requirements relating
March 30, 2020. It was observed that over
to Rights Issues has led to positive
90 per cent of listed entities submitted
outcomes. For example, in 2020-21, 21
financial results while more than 93 per
companies raised a total of `64,058.61
cent of listed entities submitted other
crore, representing 15 per cent increase
reports, (viz. shareholding pattern,
in terms of amount raised compared to
quarterly corporate governance report
2019-20.
and investor grievance report) within the
• The temporary relaxation in pricing extended timelines.
of preferential issues as available for
• In light of the uncertainty resulting
preferential issues until December 31,
from the COVID-19 pandemic, SEBI
2020 as a COVID-19 measure was utilized
had issued an advisory on disclosure of
by 10 companies.
material impact of the pandemic on listed
• The relaxations as available for listed entities (as detailed at Chapter 3). Prior

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

to issuing the advisory on disclosure of processing such demat request, was also
material information, SEBI had observed prescribed.
that listed entities had made disclosures
• In the inspection of RTAs conducted by
under SEBI (Listing Obligations and
SEBI, the instances of flags generated
Disclosure Requirements) Regulations,
by the depository system viz the client
2015, primarily intimating shutdown
companies of these RTAs, was taken up as
of operations owing to the pandemic
an additional theme for scrutiny. A total
and resultant lockdowns, but not the
of 1,04,398 demat alerts were generated
impact of the COVID-19 pandemic on
during the period of inspection. Out of
its financials. Pursuant to issuance of the
these 1,04,398 a total of 509 alerts were
said advisory, it was observed that out
selected for scrutiny. Out of which, it is
of the top 500 listed entities, 254 entities
observed that in 503 instances, all RTAs
had made disclosures on the impact of
have processed the demat request with
the COVID-19 pandemic on the business
additional due diligence, as prescribed
as per the indicative list given in the
in the circular. Whereas, in six instances
advisory.
there was lack of additional due diligence
• SEBI had mandated listed entities to make and the matter is being taken up for
disclosures regarding forensic audit, as further action.
detailed at Chapter 3. Pursuant to the
All listed companies were required to provide
said mandate, seven entities have made
the list of its members as on March 31, 2019
disclosures regarding fact of initiation
to the depositories for implementation of this
of audit, of which two entities have also
circular. About 673 listed companies have
submitted the final forensic report.
not furnished this data; SEBI has internally
c. Associated Intermediaries taken up the matter for action against these
companies.
• SEBI issued the Circular No. SEBI/
HO/MIRSD/RTAMB/CIR/P/2019 dated d. 
Impact of Pledge/re-Pledge of Clients'
November 05, 2019 (Enhanced Due Securities
Diligence for Dematerialization of
SEBI, vide circular dated February 25, 2020,
Physical Securities) which required
prescribed that from June 01, 2020, Margin
the Depository system to additionally
obligations to be given in form of securities
validate the name of the member of the
by client shall be by way of pledge / re-pledge
listed company as on March 31, 2019,
in the depository system and title transfer
against the name of the beneficiary
of securities to the client collateral demat
account holder, for all dematerialization
account of the trading member (TM) / clearing
requests received from the stipulated
member (CM) for margin purposes shall not be
date. In case of mis-match in above, the
permitted. However, in view of the situation
system is required to generate an alert
arising due to COVID-19 pandemic, it was
/ flag and the additional due diligence
decided to extend the implementation date of
to be carried out by the RTAs before
the aforesaid circular to August 01, 2020.

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Securities and Exchange Board of India Annual Report : 2020-21

One of the modes through which securities can monthly basis making it dynamic and based on
be pledged / re-pledged is mobile application. actual underlying investments of the schemes,
As there has been a significant increase in (c) mandating investments of Multi Cap Funds
mobile trading, investors are using mobile across large, mid and small cap companies to
application for pledging their securities be true to label, (d) mandate to provide clear
with their TMs. Margin pledge / re-pledge segregation between income distribution
instructions are confirmed by the client by and capital distribution to investors and
way of One Time Password (OTP) received on renaming of dividend options, (e) Disclosure
mobile number / email address of the client of transactions in debt and money market
irrespective of the mode through which pledge (including IST) in the scheme portfolio with a
instructions has been given by the client i.e. time lag of 15 days, (f) guidelines for votes cast
either through mobile application, pledge / re- by mutual funds have an impact in terms of
pledge request form or through PoA. increasing transparency and empowering the
investors to take informed decisions.
Pledge / re-pledge of securities has significantly
curbed the misutilisation of clients’ securities The following policy measures
which was otherwise possible when TMs using (a) Enhancement of Overseas Investment limits
PoA would sell clients’ securities for self or for mutual funds, (b) Introduction of “Flexi
pledged them with Banks / NBFCs for raising Cap Fund” as a new category under Equity
loans. Schemes provide flexibility to the mutual funds
to meet market needs. Further, policies such as
SEBI, vide circular dated August 27, 2020,
(a) mandate to maintain certain percentage of
has also restricted the use of PoA only for
liquidity across open ended debt schemes even
settlement obligations for trades executed on
during stress time, (b) guidelines issued for
the Stock Exchange. For off market transfer of
inter scheme transfers, (c) resource to trustees,
shares, authentication by the client by way of
(d) introduction of code of conduct for fund
OTP is necessary.
managers and dealers, (e) guidelines for
Safety of clients’ securities has improved votes cast by mutual funds will lead to better
significantly and past instances, where large risk management  of schemes and therefore
number of clients’ securities were misused by resilience in the face of market challenges.
the TMs for self or for raising loans against
Overall, these policy measures leading to
these clients’ securities for their own use, would
bring more confidence and transparency in the
not recur. This has boosted the confidence of
mutual fund industry, and thereby showing
investors and during the 2020-21, more than
AUM growth of around 41 per cent and folios
1.4 crore new demat accounts were opened.
growth of around nine per cent over the
e. Growth of Mutual Fund Industry previous year.
Policy measures such as (a) mandate to carry out f. Alternative Investment Funds
certain percentage of transactions in Corporate
• Despite COVID-19 pandemic constraints,
Bonds/Commercial Papers through RFQ
AIF Industry has seen significant growth
platform, (b) disclosure of Risk-o-meter on a
in 2020-21 over the previous year. During

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 Chapter-10 : Regulatory Action, Supervision and Enforcement

2020-21, `43,492 crore of fund raised by aided in the overall growth of the portfolio
AIFs and `47,081 crore investment made management service industry.”
by AIFs.
h. Municipal Bond Market
• The introduction of Performance
Local governments in India can tap capital
Benchmarking of AIFs provides
market in order to raise funds through
greater transparency and flexibility to
issuance of municipal debt securities either
showcase the performance based on
through public issue and private placement
different criteria and help the investors
and get it listed under SEBI (Issue and Listing
in assessing the performance of the AIF
of Municipal Debt Securities) Regulations,
industry. The first report on performance
2015 (‘Muni Bonds Regulations’). Further,
benchmarking of AIF was published on
with an objective to rationalize the process for
October 01, 2020. It is expected that this
issuers to raise resources through issuance of
initiative shall attract more investment in
debt securities, SEBI has recently reviewed
AIF Industry.
the Muni Bonds Regulations to widen
• SEBI has introduced template for Private the definition of issuers, mandate escrow
Placement Memorandum (PPM) and mechanism for repayment, facilitate ease of
requirement of Audit of terms of PPM. issuance etc. This enables municipalities to
However, to provide flexibility to AIFs gear up infrastructure in the urban areas. SEBI
and to attract higher investment in AIFs, issued a Guidance Note in July 2020 clarifying,
waiver from the aforesaid requirement inter alia, the eligibility conditions for issuers,
is provided to the fund where each due diligence requirements, disclosure of
investor commits to a minimum capital pending litigations etc.
contribution of `70 crore.
Till date, nine issuers have raised `1,840 crore
g. Portfolio Management Services through privately placed municipal debt
securities. Recently, two issuers (Lucknow
AUM under portfolio managers increased
Municipal Corporation in November 2020 and
from `18,14,371 crore as on March 31, 2020 to
Ghaziabad Nagar Nigam in March 2021) have
`20,67,205 crore as on March 31, 2021. SEBI
issued municipal bonds worth `200 crore and
(Portfolio Managers) Regulations, 2020 were
`150 crore respectively.
notified on January 21, 2020, which inter alia
enhanced the minimum net worth requirement i. Infrastructure Investment Trusts and Real
for portfolio managers as well as qualifying Estate Investment Trusts
criteria for the Principal Officer and employees,
To attract investment in infrastructure and real
which has improved the confidence of the
estate and to facilitate monetization of assets,
investors as only serious players can get the
SEBI provided the regulatory framework
registration as portfolio managers. Further,
for InvITs and REITs in 2014. The original
discretionary portfolio managers have been
framework has been tweaked to facilitate easier
permitted to invest in only listed securities,
access to capital while providing adequate
resulting in the increased liquidity of the
safeguards for investors. Specifically, certain
clients’ portfolio. These measures may have
amendments have been made including:

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Securities and Exchange Board of India Annual Report : 2020-21

• enabling entry and exit of sponsors, UPI mechanism upto the value of INR
• rationalisation of unit holding conditions, 2 lakhs. This will help in widening the
investor base in debt securities.
• multiple modes of fund raising etc.
ii. 
Standardization of timelines for
All major decisions are subject to applicable
listing of securities issued on private
investor approval to protect the interest of
placement basis
investors.
In order to standardize the timelines
InvITs have seen significant interest from
for listing of debt securities issued on
investor community during the last few years
a private placement basis, SEBI, on
including from marquee foreign players. At
October 05, 2020 mandated issuers of
the end of 2020-21, 15 InvITs are registered
such securities to complete the listing
with SEBI, holding more than `2.72 lakh
process by T+4 days where T is the issue
crore worth of assets in various sectors
closure day. This facilitates issuers in
including highways, power, gas transmission
attracting more investors as it reduces
and telecom. During 2020-21, 2 InvITs have
the time taken in allotment of securities;
monetized infrastructure assets of `2 lakh
this also enables investors to liquidate
crore approximately.
their investments faster.
REITs have seen significant interest from
iii. 
Framework for Transactions in
investor community especially from marquee
Defaulted Debt Securities Post Maturity
foreign players. At the end of 2020-21, 4 REITs Date / Redemption Date
are registered with SEBI. During 2020-21, 2
SEBI on June 23, 2020 introduced an
REITs have monetized real estate assets of
operational framework for transactions
`24, 000 crore approximately. Presently, REITs
in defaulted debt securities and also
hold `70,000 crore approximately. Worth of
prescribed the obligations of issuers,
assets.
debenture trustee(s) and stock exchange
j. Corporate Bond Market (s) while permitting such transactions.
Some of the measures taken by SEBI for the This enables investors in such defaulted
development of corporate bond market in the securities to liquidate their investment.
financial year 2020-21 are as under: The sum total of these measures has
i. Introduction of Unified Payments further deepened in the corporate bond
Interface mechanism and Application market, resulting in issuance of corporate

through App/ Online interface bond increasing from `1.74 lakh crore in
`2008-09 to `7.82 lakh crore in 2020-21
SEBI in November 2020 facilitated the
i.e. a Compounded Annual Growth Rate
UPI mechanism for blocking of funds
(CAGR) of 13.34 per cent.
of investors for investing in corporate
Concurrently, during the same period
bonds. Further, stock exchanges have
trading in corporate bonds increased
developed an application for bidding
from `1.48 lakh crore in 2008-09 to
in the corporate bonds wherein the
`12.6 lakh crore in 2020-21.
funds would be blocked through

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 Chapter - 11 : International Engagements

CHAPTER ELEVEN:
International Engagements

11.1 INTERNATIONAL ENGAGEMENTS carried out by FSB from time to time. During 2020-
HAVING IMPLICATIONS FOR INDIAN 21, SEBI, inter-alia, provided inputs on works related
MARKETS to -

SEBI engages with a range of foreign regulators, i. Draft consultative document providing
standard setting bodies, law enforcement agencies guidance for dealing with central counterparty
and international fora to promote regulatory and resolution,
enforcement co-operation. SEBI has emerged as a ii. Liquidity risk in open-ended funds,
key member of international standard setting bodies,
iii. Impact of COVID-19 government support
where it is making effective contribution to their
measures on credit ratings,
programmes. As a member of various international
forums, it acts as central facilitation cell for regulatory iv. COVID-19 support measures and exit
issues, concerns and technical assistance in various strategies,
aspects of securities markets regulations. Through v. Debt overhang and unviable corporates,
these international forums, it also engages in
vi. Climate related disclosures, etc.
knowledge sharing to promote mutual co-operation
and establish inter-regulatory dialogue. Some key  In the context of COVID-19 pandemic, FSB
engagements are as follows: members have been regularly sharing information
on evolving financial stability threats and on the
I. 
ENGAGEMENT WITH THE FINANCIAL
regulatory, supervisory and other financial policy
STABILITY BOARD
measures adopted by financial authorities. This
 SEBI is one of the three members of Financial assists the members in keeping abreast of the
Stability Board (FSB) representing India. SEBI measures implemented by their counterparts, the
participates in the FSB plenary meetings and rationale behind such measures and their possible
Regional Consultative Group meetings. SEBI impact on the market. SEBI has been providing
contributes in various work streams of FSB through updates on various measures taken on account of
response to surveys, questionnaires and reviews as COVID-19.

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Securities and Exchange Board of India Annual Report : 2020-21

II. ENGAGEMENT WITH THE provided inputs for various projects/ surveys
INTERNATIONAL ORGANIZATION OF of IOSCO such as –
SECURITIES COMMISSIONS i. 2020 update regarding reviews on regulation of
 International Organization of Securities money market funds and incentive alignment
Commissions (IOSCO) has a total of 229 members recommendations for securitization;
which includes 129 ordinary members, 33 associate ii. Stock-take of privilege related practices and
members and 67 affiliate members. IOSCO Board is a procedures;
governing and standard-setting body comprising of iii. Thematic review on business continuity plans,
34 securities markets regulators. SEBI is an ordinary iv. Survey on enforcement toolbox;
member of IOSCO and also a member of the IOSCO
v. Assessment of implementation of the IOSCO
Board. The policy work of IOSCO is conducted by
Principles relating to regulators;
its eight policy committees under the aegis of the
vi. 2020 Multilateral Memorandum of
Board. SEBI has representation in seven of these
Understanding (MMoU) Monitoring Group
policy committees. SEBI’s engagement with IOSCO
Survey, etc.
is detailed below:
c. Asia-Pacific Regional Committee
a. In the wake of COVID-19 pandemic breakout,
IOSCO Board decided to hold frequent virtual Asia-Pacific Regional Committee (APRC) is

meetings. In the initial stages of the pandemic one of the four regional committees constituted
by IOSCO to focus on regional issues relating
during March-April 2020, six emergency
to securities regulation. APRC comprises of
virtual meetings were held. These emergency
24 members and nine non-voting associate
meetings deliberated over systemic risk issues
members from the Asia-Pacific jurisdictions.
associated with COVID-19 and its impacts on
SEBI is a member of APRC.
the securities markets including:
On account of the outbreak of COVID-19
i. Updates on measures being taken by Board
pandemic, APRC held frequent telephonic
members in response to market volatility; and
calls/ virtual meetings to monitor the emerging
ii. Framework for cross-border information situation and ways in which regulators were
sharing and co-ordination (including with dealing with the resulting fallout for the
FSB). financial markets. During the half-year ending
September 2020, meetings were held almost
SEBI also updated IOSCO members of various every month. Total eight meetings were held
supervisory/ regulatory measures taken by it during the financial year. Further, meetings of
in the wake of COVID-19 in these meetings. APRC forums such as Enforcement Directors,
SEBI participated in nine meetings of IOSCO Supervisory Directors, etc. were also held
Board held during the financial year 2020-21. in March 2021. SEBI participated in all these
meetings.
b. SEBI participates in the various work streams
of IOSCO and makes contributions to the APRC provided a platform to its members
policy decisions on different issues pertaining to exchange their respective experiences in
to the securities market. During the year, SEBI responding to COVID-19. It also surveyed the

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 Chapter - 11 : International Engagements

members on potential cross-border spillover SEBI also contributed to the APRC survey
effects arising from the pandemic. Some of on cross-border supervisory co-operation and the
the important issues deliberated in APRC survey of APRC’s Sustainable Finance Working
meetings are as under:
Group.
i. The APRC Enforcement Directors’ Meeting
d. Growth and Emerging Markets Committee
deliberated on the following issues:
• Restriction on enforcement activities Growth and Emerging Markets Committee
affected by the digital disruption and (GEM Committee) of IOSCO seeks to promote
COVID-19 pandemic; the development and greater efficiency of
• Challenges through trading behaviors’ emerging securities and futures markets
analysis for market manipulation by establishing principles and minimum
activities as well as legal proceedings; standards, providing training programs
• Law enforcement on unfair digital asset and technical assistance for members and
trading practices, etc. facilitating exchange of information and
ii. The APRC Supervisory Directors’ Meeting transfer of technology and expertise. The
focused on following issues: Committee comprises of 91 members and 22
• Supervisory approach using offsite non-voting associate members which include
mechanism and AI/ big data; the world’s fastest growing economies and 10
• Third-party IT risk management; of the G-20 members. SEBI is a member of the
• Digital asset supervision and GEM Committee as well as the GEM Steering
development; Committee. The GEM Steering Committee
• Sustainable finance, regulatory and held a meeting in July 2020 and, further, the
supervisory response in the context of GEM Committee met during IOSCO annual
asset management. meeting in November 2020. SEBI participated
iii. The APRC Plenary Meeting, apart from in both these meetings.
receiving reports from its various working
groups/work streams, discussed topics such Apart from discussing the impact of COVID-19

as- on GEM Committee jurisdictions and their

• APRC supervisory MMoU; policy responses, the GEM Committee also

deliberated on important issues related
• Sustainable finance;
to fintech in emerging markets, capacity
• Fund raising activities;
building online toolkit, development of
• Surge in retail online share/ crypto
emerging capital markets, etc. Further, SEBI
trading;
participated in the project regarding the use
• Market fragmentation and cross-border
of innovation facilitators (innovation hubs,
regulation;
regulatory sandboxes, and accelerators) and
• Issues around remote working/
misconduct risks/ frauds and scams/ also contributed to the Steering Committee

operational resilience in the context of Note regarding the impact of COVID-19 on

COVID-19 etc. emerging markets.

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Securities and Exchange Board of India Annual Report : 2020-21

e. SEBI also contributed significantly to the report of information for regulatory and enforcement
of IOSCO Policy Committee-8 on ‘Complaint purposes. The objective of such bilateral MoUs is to
Handling and Redress System for Retail strengthen cross-border co-operation in the area of
Investor’. securities regulations.

III. ENGAGEMENTS WITH ORGANIZATION During 2020-21, SEBI has entered into MoU
FOR ECONOMIC CO-OPERATION AND with two more securities regulators, for mutual co-
DEVELOPMENT operation and exchange of information viz. -

a. In 2011, India and the Organization for i. The Financial and Consumer Affairs Authority
Economic Co-operation and Development of Saskatchewan, Canada.
(OECD) launched the India-OECD Corporate ii. The Financial and Consumer Services
Governance Policy Dialogue to deepen Commission of New Brunswick, Canada.
policy discussions between the OECD and
 This will facilitate mutual assistance, contribute
key decision makers in India. SEBI has been
towards efficient performance of the supervisory
attending the meetings of the OECD Corporate
functions and enable effective enforcement of laws
Governance Committee as an invitee and has
and regulations governing the securities markets.
been closely co-operating with OECD in the
area of corporate governance. During the As of March 31, 2021, SEBI was a signatory
2020–21, meetings of the OECD Corporate to 29 bilateral MoUs to facilitate mutual assistance,
Governance Committee were held in May contribute towards efficient performance of the
2020 and November 2020. Further, following supervisory functions, aid in imparting technical
reports were published by OECD, in close co- domain knowledge and enable effective enforcement
operation with SEBI - of the laws and regulations governing the securities
markets. This includes three MoUs signed by
i. OECD report on ‘Duties and Responsibilities of
erstwhile Forward Markets Commission, prior to its
Boards in Company Groups’ dated June 2020
merger with SEBI. In addition to the above, following
that includes a case study prepared by SEBI on
MoUs have also been signed by SEBI -
the regulatory framework for company groups
in India. i. Twenty-eight bilateral MoUs with the
securities market regulators of the member
ii. OECD report on ‘Ownership structure of
states of European Union (EU)/ European
listed companies in India’ dated July 2020 that
Economic Area (EEA) (including the United
highlights the unique Indian characteristics
Kingdom (UK) which was then a part of the
with respect to the ownership landscape and
EU). These MoUs pertain to consultation, co-
the presence of institutional investors in Indian
operation and the exchange of information
capital markets.
relating to the supervision of the alternative
IV. BILATERAL ENGAGEMENTS investment fund managers. These MoUs

A. Memorandum of Understanding enable Indian fund managers to manage or

market alternative investment funds (AIFs) in
 SEBI has signed bilateral Memorandum of the respective European member states and
Understanding (MoU) with a number of securities the fund managers from such jurisdictions
regulators for enhancing co-operation and exchange to manage or market AIFs in India thereby

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 Chapter - 11 : International Engagements

mutually benefiting AIF industry in India as issues and also shares the same on requests made by
well as in the counterpart jurisdictions. such authorities. During the year, SEBI exchanged
information with other regulators on various issues
In light of UK’s withdrawal from the EU on
including implementation of COVID-19 induced
account of Brexit, an updated MoU has since
lock-down, trading system of stock exchanges,
been signed with the Financial Conduct
commodity derivatives market risk management,
Authority, UK and the same has come into
capital market surveillance system, financial literacy
force on December 31, 2020, i.e., at the end of
and investor awareness programs, communication
transition period pursuant to Brexit.
recording policy of regulators, exchange of banking
ii. MoU with the European Securities and information, fintech companies’ public offering,
Markets Authority under the European listed company share buy-backs, crowdfunding,
Markets Infrastructure Regulation (EMIR) entry of new market infrastructure institutions,
had been signed for establishing co-operation functioning of self-regulatory organizations , etc.
arrangements, including the exchange of Further, a conference call was organized for the
information regarding central counter parties officials of a securities market regulator to discuss
which are established and recognized in on mutual fund platform of a stock exchange.
India by SEBI and which have applied for EU
VI. 
PARTICIPATION IN OTHER
recognition under EMIR.
INTERNATIONAL PROGRAMMES/
iii. Capital Market Collaborative Agreement CONFERENCES/ STUDY TOURS
signed with the Securities Commission of
SEBI receives requests from its international
Malaysia.
counterparts, IOSCO, and other trade/ industry
B. Other Engagements forums to nominate speakers to make presentations

 During 2020-21, based on the discussions at and share experiences in conferences/ seminars/
training programmes. This provides a great
the India-UK Economic and Financial Dialogue,
opportunity for SEBI officials to engage with
a joint India – UK Sustainable Finance Forum
international regulators and participants and
was constituted with SEBI as a member. The joint
contribute to the global regulatory agenda. Further,
forum aims to develop a framework for India-UK
SEBI on a regular basis organizes study tours of SEBI
co-operation on sustainable finance along with
officials to overseas authorities. These study tours
facilitating the exchange of best practices on policies
help the officials in gaining deeper understanding of
and regulation related to sustainable finance. The
the systems and mechanisms. SEBI in the past had
first meeting of the forum was held on January
benefitted from these experiences and the knowledge
21, 2021 wherein discussions centered around
transfer helps improve the processes within SEBI.
mobilisation of sustainable finance and greening the
financial system. During the year, in-person programmes
could not be held owing to COVID-19 pandemic.
V. 
ENGAGEMENT WITH OTHER
However, virtual interactions were organized by
INTERNATIONAL REGULATORS/
taking benefit of the opportunities afforded by
ORGANIZATIONS
technology. SEBI officers made presentations and
 SEBI engages with regulators globally in shared their insights at various forums such as APRC
order to obtain information/ clarification on topical Enforcement Directors’ Meeting, APRC Supervisory

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Securities and Exchange Board of India Annual Report : 2020-21

Directors’ Meeting, etc. SEBI officers also provided during the calendar year 2020, a total of 4,670
their insights in a meeting with the officials of Asian instances of exchange of regulatory assistance took
Development Bank which was held to assist them in place between all securities regulators under the
their project focusing on development of small and MMoU. (Table 11.2) below highlights the regulatory
medium-sized enterprises in Asia. assistance exchanged by all securities regulators
under the MMoU.
VII. 
EXCHANGE OF INFORMATION WITH
FOREIGN REGULATORS Table 11.2: R
 egulatory Assistance between all
Securities Regulators
SEBI is committed towards co-operation with
foreign counterparts for exchange of information Type of References 2019 2020
and providing assistance. In this regard, SEBI
is a signatory to the IOSCO MMoU concerning MMoU Information Requests 4,319 4,670
consultation and co-operation and the exchange Source: IOSCO
of information since April 2003, in addition to the
VIII. 
VISITS OF FOREIGN DELEGATIONS/
bilateral MoUs signed by SEBI. These arrangements
DIGNITARIES TO SEBI
have proven to be an effective tool in cross border
co-operation in combating financial fraud and SEBI generally hosts a number of foreign
misconduct. SEBI, thereby, provides co-operation delegations from regulatory bodies, governments,
and exchanges information with its counterparts in and businesses. These meetings foster deeper levels
other jurisdictions for the purpose of investigation of co-operation and facilitate a better understanding
and regulatory enforcement. of the Indian securities market and further
collaboration with the visiting institutions. Owing
During 2020-21, a total of 51 requests were
to the COVID-19 pandemic, while physical visits
received from the overseas regulators seeking
were avoided during the year, by leveraging on the
SEBI’s assistance. SEBI responded to such requests
technology, engagements were held virtually (video
subject to the provisions of the applicable MoU/
conferencing/ telephonic calls and e-mails) with
MMoU. Similarly, 24 requests were made by SEBI
foreign delegations.
to its regulatory counterparts in other jurisdictions.
Further, SEBI received information through six IX. MINISTRY REFERENCE - CONTRIBUTION
unsolicited references from three securities market TO VARIOUS INTERNATIONAL TREATIES
regulators who are members of the IOSCO. Table AND DIALOGUES
11.1 highlights the regulatory assistance made and SEBI provides inputs on various issues, agenda
received by SEBI. items and topics relating to the securities markets
Table 11.1: Regulatory Assistance for various international dialogues. During 2020-21,
SEBI provided inputs for/ in various international
Type of References 2019-20 2020-21 dialogues such as:

Requests received by SEBI i. 10th India - US Financial Regulatory Dialogue;

63 51
from Foreign Authorities
ii. 10th India - UK Economic and Financial
Requests made by SEBI 29 24 Dialogue;

According to latest data available from IOSCO, iii. 1st India - UK Financial Regulatory Dialogue;

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 Chapter - 11 : International Engagements

iv. 6th India - Korea Finance Ministers’ Meeting; company and its operations is communicated in
a timely and cogent manner to its investors and
v. 6th India - Japan Financial Dialogue;
stakeholders. Accordingly, an advisory containing
vi. India - EU Dialogue on the Financial illustrative list of information that the listed entities
Regulations; may consider disclosing and related guidelines were
vii. 4 Indo - Swiss Financial Dialogue;
th issued by SEBI on May 20, 2020.

viii. 7th Trade Policy Review of India by WTO; B. Sustainable Finance Initiatives

ix. G-20 Finance Track priority areas in 2022; IOSCO is progressing on the work in various
areas related to sustainable finance, including
x. G-20 Finance Ministers and Central Bank
sustainability-related disclosures for issuers. In
Governors Meeting;
this regard, SEBI has decided to introduce new
xi. Meetings of the FSB plenary and its Committees, requirements for sustainability reporting by listed
etc. entities. The new report which shall be called the
11.2 
ISSUES HIGHLIGHTED DURING Business Responsibility and Sustainability Report
VARIOUS ENGAGEMENTS shall replace the existing Business Responsibility
Report. The new reporting requirements are expected
In addition to issues discussed in the various
to bring in greater transparency through disclosure
engagements held during the year, the following
of material environmental, social and governance
important and topical issues had also been discussed:
(ESG) related information to enable market
A. COVID-19 Related Disclosures participants to identify and assess sustainability-
In May 2020, IOSCO issued a statement related risks and opportunities. These requirements
on ‘importance of disclosure about COVID-19’ set the stage for taking a leap for better disclosures in
encouraging fair disclosure by issuers about the ESG space in India.
COVID-19 related impacts. It highlighted the C. Retail Market Conduct
importance to investors and other stakeholders of
The risks exacerbated by the COVID-19
having timely and high quality information about
pandemic such as misconduct risks, fraud, and
the impact of COVID-19 on issuers´ operating
operational resilience are some of the priority issues
performance, financial position and prospects. The
IOSCO will deal with as part of its 2021-22 work
statement, among other things, also highlighted the
program. In this regard, IOSCO has published
importance of transparent and complete disclosures,
a report aimed at assisting IOSCO members in
noting that in an environment of heightened
addressing emerging conduct issues in retail
uncertainty, disclosures should be entity-specific and
markets arising from the pandemic and other similar
transparent, particularly when involving significant
crises. The report identified the common drivers
judgments and estimates.
of this misconduct and actions taken by firms and
In this context, it is worthwhile to note that regulators to mitigate risks and retail investor harm.
SEBI highlighted the importance of a listed entity Considering that this area has been identified as one
ensuring that all available information about the of the priority areas for 2021-22, deliberations on this
impact of COVID-19 related disruptions on the aspect are ongoing.

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Securities and Exchange Board of India Annual Report : 2020-21

CHAPTER TWELVE:
National Institute of Securities Markets

T
he National Institute of Securities Markets securities markets. Activities under the NISM
(NISM) has been established by SEBI as a umbrella are enumerated in following broad
public trust registered under the Bombay sections:
Public Trusts Act, 1950 and a society under Societies
12.1 ACADEMIC PROGRAMMES
Registration Act, 1860. NISM was established with
a vision to ‘lead, catalyse and deliver educational The School for Securities Education is involved
initiatives to professionalise the securities markets’ in designing and offering academic programmes that
and a mission ‘to engage in capacity building among focus on creating cadre of professionals in securities
stakeholders in the securities markets through markets. During the academic year 2020-21, NISM
financial literacy, professional education, enhancing has conducted three full-time programmes viz.
governance standards and fostering policy research’
i. 
Post Graduate Diploma in Management
Since its inception, NISM has been carrying (Securities Markets);
out a wide range of capacity building activities
ii. L.L.M. (Investment and Securities Laws);
aimed at enhancing quality standards in the
securities markets and for increasing participation iii. Post Graduate Certificate in Securities Markets
therein, addressing various stakeholders such as the and one week-end programme namely, Post
investors, issuers, intermediaries, regulatory staff as Graduate Certificate in Management (Data
well as academics. Science in Financial Markets).

NISM articulates and implements its mission Details of the academic programmes during the
of improving market quality through its six schools, current academic year in comparison with the
each having specific domain presence within the previous academic year are given in Table 12.1.

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 Chapter - 12 : National Institute of Securities Markets

Table 12.1: Academic Programmes at NISM

Particulars 2019-20 2020-21

Number of Full-time, Part-time Programmes, Certificate Programmes etc. 3 4
Number of students 157 209
One-month Management Trainee Programme 1 -
Number of Students 40 -

In addition to the above programmes, NISM had security, cyber resilience, etc. Apart from the above,
proposed to launch two new academic programmes a 14-day induction programme was organised for
from the academic year 2021-22. These are the newly joined officers of International Financial
Services Centre Authority. The beneficiaries of the
i. 15-month Post Graduate Programme (portfolio
programme include financial sector regulators,
management/investment advisory/research
government agencies, stock brokers, banks,
analysis); and
insurance and asset management companies.
ii. Six months’ certificate course in Warehouse
12.3 RESEARCH AND PUBLICATIONS
Management.
During the academic year 2020-21, 21 research
12.2 TRAINING PROGRAMMES papers/articles were published by the NISM faculty
in various journals, newspapers and yearbooks. A
NISM conducts training programmes aimed
snapshot of the various research activities is given in
at enhancing the capacity building of securities
Table 12.3.
market participants, both within the country and
outside. Despite the challenges posed by COVID-19, Table 12.3: Research and Publications at NISM
NISM continued to help financial sector regulators Particulars 2019-20 2020-21
to develop and effectively implement regulatory
Research papers presented
policies through conducting specialized training in conferences, seminars 17 21
programmes in online mode. Detailed status of and published
training programmes organized by the School for Research workshops, con-
3 2
Regulatory Studies and Supervision is given in ferences, seminars etc.
Table 12.2. During August 2020, NISM, jointly with the
Indian Econometric Society, organised two-day
Table 12.2: Training Programmes at NISM
research webinar on ‘Current issues and policy
Particulars 2019-20 2020-21
options in financial markets’. Out of 47 papers
Number of Training 27 20 received, 12 papers were presented on various
Programmes, Workshops etc.
themes related to impact of COVID-19 on Indian and
Number of Beneficiaries 1,118 1,241 global economy, different sectors in the economy
The programmes were conducted on various and capital markets.
topics including economic crimes, fund raising, Second SEBI-NISM Research Conference on
mutual funds, securities market operations, “Behavior of Securities Markets – Sighting of Black
commodity derivatives markets, anti-money Swan” was organized in February 2021 in webinar
laundering, block-chain, artificial intelligence, cyber mode.

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Securities and Exchange Board of India Annual Report : 2020-21

A. Faculty Development Programmes at Raigad police headquarters, Maharashtra,

during 2021-22. Further, due to COVID-19 related
During June-July 2020, two-day Faculty
restrictions, several other investor education
Development Programme (FDP) on ‘Introduction to
programmes were conducted in online mode which
equity markets and trading in equity’ was organized
benefited 882 participants.
online in two batches. The programme was attended
by faculties of financial market background from NISM is also developing a few E-Learning
colleges and institutions across the country. modules on various financial courses in collaboration
with various industry organizations/personnel.
During the year, three joint FDPs were also
Presently, the development of these courses is
organized by NISM. These were i) a two-day webinar
at different stages. A brief about the proposed
on ‘equity markets and technical analysis’ organized
e-learning courses is as follows:
jointly with Institute of Public Enterprise Hyderabad,
ii) one-day webinar on Trade and Investment: Table 12.4: Proposed E-learning Courses at NISM

The Post-COVID Scenario with ASBM University, Sl. Name of the Partner

Bhubaneswar and iii) One-day webinar on ‘Impact No E-Learning Module Agency
of COVID-19 on Financial Markets’ conducted in 1 Credit Risk Professional CRISIL
association with Department of Commerce RSMC, Level I and Level II
Berhampur. 2 Wealth Management CRISIL
3 Forensic Accounting & Analysis E&Y
A three-level online certificate course in
investment management was launched in association 4 Technical Analysis CMT

with the Institute of Cost Accountants of India (ICAI) 5 Anti-Money-laundering(AML)/ Kris

Konsulting
during 2020-21. The number of participants in level Combating the Financing of
one and level two were 132 and 47 respectively. Terrorism (CFT)

12.4 INVESTOR EDUCATION AND FINANCIAL 12.5 

CERTIFICATION OF ASSOCIATED
LITERACY PERSONS IN THE SECURITIES MARKETS

Activities relating to investor education NISM is mandated to develop certification

and financial literacy at NISM are undertaken by examinations for various segments of the market
as per powers conferred by Sub-Regulation 3 of
the School for Investor Education and Financial
Regulation 7 of the SEBI (Certification of Associated
Literacy (SIEFL). The school has been instrumental
Persons in Securities Markets) Regulations, 2007.
in designing and implementation of SEBI’s Securities
NISM offered 20 certification examinations that are
Market Trainers (SMARTs) project. The project
mandated by financial market regulators and eight
included process of shortlisting and conducting
non-mandatory certifications through its School
training programs for eligible SMARTs. The initiative
for Certification of Intermediaries. During the year,
resulted in empanelment of 146 individual SMARTs
it revised 12 examinations and launched two new
across the country.
certification examinations, viz.,
SIEFL conducted the financial literacy sessions i. 
Series-XIX-A: AIF (Category I and II)
for Raigad police personnel. The first four sessions Distributors; and
took place at NISM’s campus which benefited 280
ii. Series-XXI-A: Portfolio Management Services
participants. More such programmes are planned
(PMS) Distributors.

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 Chapter - 12 : National Institute of Securities Markets

Details of certification examinations conducted enrolments were for e-CPE programmes, which was
during 2020-21 are given in Table 12.5. around 51 per cent of the total enrolments. Details of
CPE programmes are given in Table 12.6.
Table 12.5: D
 etails of Certification Examinations at
NISM Table 12.6: C
 ontinuing Professional Education
Programmes
Particulars 2019-20 2020-21
Particulars 2019-20 2020-21
Number of Mandatory
20 20
Certification Modules
Number of CPE modules 16 16
Number of Non-Mandatory
6 8 Number of programmes 1900 1,329
Certification Modules

Number of Test Centres 270 186 Number of locations 120 96

Number of Cities 183 163 Number of trainers 303

316
empanelled
Number of Candidates
2,04,838 1,27,934
Enrolled Number of beneficiaries 55,778 74,278

In response to Government of India’s

12.7 OTHER INITIATIVES
COVID-19 related guidelines, NISM had to stop
A. Accreditation of Certification Exams
offering examinations for a brief period during the
year 2020-21. During the year, the examinations As specified in SEBI (Investment Advisers)
were offered by adhering to COVID-19 guidelines. Regulations, 2013, for accreditation of certification
Further, NISM responded to COVID-19 situation for investment advisers, NISM finalized the
by offering examinations from home / office on a Certification Accreditation Policy in consultation
remote proctored platform. This resulted in 38,833 with the NISM Accreditation Committee and
enrolments for remote proctored examinations, out has been granting accreditations of certification
of total 1,27,934 enrolments during the year, which for investment advisors. The NISM granted
was around 30 per cent of the total enrolments. accreditation to following certifications:
12.6 DEVELOPMENT AND ADMINISTRATION a. Chartered Wealth Manager Certification of the
OF THE CONTINUING PROFESSIONAL American Academy of Financial Management
EDUCATION PROGRAMME India Pvt. Ltd.;
Due to the COVID-19 situation, the Continuing b. Wealth Management Certification (Advance
Professional Education Programmes (CPE) were Level) of Centre for Investment Education &
paused for a brief period during the year. However, Learning Pvt. Ltd.;
the programmes recommenced by adhering to the
c. Certified Financial Planner Certification of
COVID-19 related Government directives and also
Financial Planning Standards Board Ltd.;
responded by offering e-CPE programmes from
home / office on a remote proctored platform. During d. Certified International Wealth Manager of
the year 2020-21, NISM revised 13 CPE programmes. Moody’s Analytics Global Education Canada
Out of 74,278 enrolments during the period, 37,626 Inc.

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Securities and Exchange Board of India Annual Report : 2020-21

B. Joint Certifications officers of listed companies, public interest directors

of market infrastructure institutions, fund managers
NISM offers joint certifications in collaboration
of asset management companies, proxy advisors,
with other certification bodies. Prominent among
institutional investors, retail shareholders and
them is Certificate in Derivatives Market and
academicians. These programmes were aimed at
Strategies (CDMS) launched during 2016-17 in
sensitizing and familiarising the participants on
association with Moody’s Analytics. CDMS is an
various securities market regulations, Companies
internationally recognized certification that validates
Act, secretarial standards, cyber security, risk
the knowledge and skills required for a variety of
management, business continuity planning, board
roles that employ financial derivatives. The CDMS
effectiveness and role of technology in governance.
online course covers advanced concepts of both
exchange-traded and over-the-counter derivative The research done by the school in the area of
instruments and their applications and is followed corporate governance is shared with SEBI, presented
by a proctored examination at designated NISM test in various conferences and also placed in public
centres. domain in the form of articles in newspapers,
magazines, web portal, etc. The research studies
For the benefit of the student community,
completed by School of Corporate Governance of
NISM launched two joint certification programmes
NISM during 2020-21 are-
during 2020-21 on capital markets and investment
i. Participation of Mutual Funds in Corporate
advisory modules with Institute of Management
Governance – A Reality Check;
Studies, Gaziabad, for which a total of 57 students
enrolled. ii. Assessment of COVID-19 Disclosure made by
Listed Companies;
C. Corporate Governance
iii. Effectiveness of Virtual Annual General
During 2020-21, the School for Corporate Meetings in COVID-19 times;
Governance of NISM conducted 14 programmes
iv. Trends in Annual General Meetings in India.
for 1,934 professionals. Due to COVID-19, these
programmes were conducted online, which enabled 12.8 SOURCES OF FUNDS AND MAJOR AREAS
OF EXPENDITURE
higher number of participants, as compared to usual
in-person participation. The beneficiaries of these The sources of funds and expenditure of NISM
programmes included directors and compliance during financial year 2020-21 is given in Table 12.7.

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 Chapter - 12 : National Institute of Securities Markets

Table 12.7: Sources of Funds and Expenditure of NISM (Amount in ` crore)

As on
Sources of Funds
March 31, 2021
Income from Certifications & Programmes 40.55
Interest Income 16.17
Income from Rent (including hostel fee) 1.17
Other Income 0.64
Total 58.53
As on
Major Areas of Expenditure
March 31, 2021
Capital Expenses
Capital WIP 3.85
Building (interiors), office equipment, computers, furniture & fixtures, computer software 0.67
Total of Capital Expenses 4.52
Revenue Expenses
Salaries & Allowances 15.83
Expenses towards certifications & programmes 12.21
Expenses in respect of properties:
1.99
(Repairs and maintenance, rent (expense))
Establishment Expenses
Unavailable Cenvat Credit A/c 2.98
Housekeeping expenses, security expenses (taxable), support service charges, maintenance
10.40
charges (buildings), electricity charges, food & beverages and other establishment charges
Total of Revenue Expenses 43.41
Grand Total of Major Areas of Expenditure 47.92

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Securities and Exchange Board of India Annual Report : 2020-21

CHAPTER THIRTEEN :
Organizational Matters

13.1 SEBI BOARD terms of appointment of Shri Ajay Tyagi, Chairman

The composition of SEBI Board as on March 31, for a period of 18 months w.e.f. September 01, 2020
2021 is given in Table 13.1. Government of India vide upto February 28, 2022 or until further orders,
notification dated August 06, 2020, extended the whichever is earlier.

Table 13.1: Composition of SEBI Board (As on March 31, 2021)

Provision of Appointment /
Name Position
Nomination under SEBI Act, 1992
Shri Ajay Tyagi Chairman Appointed under Section 4(1)(a)
Shri G Mahalingam
Ms. Madhabi Puri Buch
Whole-Time Members Appointed under Section 4(1)(d)
Shri Santosh Kumar Mohanty
Shri Ananta Barua
Shri Tarun Bajaj
Part-Time Member Nominated under Section 4(1)(b)
Shri K V R Murty
Shri M Rajeshwar Rao Part-Time Member Nominated under Section 4(1)(c)
Dr. V. Ravi Ashuman Part-Time Member Nominated under Section 4(1)(d)

Further, Government of India vide notification 03, 2020 extended the terms of appointment of
dated April 03, 2020 extended the terms of Ms. Madhabi Puri Buch, Whole-Time Member for
appointment of Ms. Madhabi Puri Buch, Whole- a further period of one year beyond October 04,
Time Member (WTM) for a period of six months 2020 upto October 04, 2021 or until further orders,
beyond April 04, 2020 upto October 04, 2020 or until whichever is earlier.
further orders, whichever is earlier. Subsequently, Shri Tarun Bajaj, Secretary, Department of
Government of India vide notification dated October Economic Affairs, Ministry of Finance, Government of

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India was nominated as one of the Members on the SEBI Deputy Governor, RBI was nominated as one of the
Board in terms of Government of India Notification Members on the SEBI Board in terms of Government
dated May 26, 2020 in place of Shri Atanu Chakraborty. of India notification dated December 31, 2020.
Consequent to demitting of office by Shri N.S. During the year 2020-21, the SEBI Board met on five
Vishwanathan, Deputy Governor, Reserve Bank of occasions. Details of Board meetings held in 2020-21
India (RBI) on March 31, 2020, Shri M Rajeshwar Rao, are given in Table 13.2.

Table 13.2: Board Meetings during 2020-21

Name Number of Meetings Held Number of Meetings Attended

Chairman
Shri Ajay Tyagi 5 5
Whole-Time Member
Shri G. Mahalingam 5 5
Ms. Madhabi Puri Buch 5 5
Shri S.K.Mohanty 5 5
Shri Ananta Barua 5 5
Part -Time Member
Dr.V.Ravi Ashuman 5 5
Shri Tarun Bajaj 5 4
Shri K V R Murty 5 5
Shri M Rajeshwar Rao 2# 2
# Number of meetings held after assuming charge.

13.2 AUDIT COMMITTEE 13.3 SEBI OFFICES

During the year, the Audit Committee has I. 
OPERATIONALIZATION OF REGISTRY
reviewed and discussed the annual statement AT SEBI BHAVAN-II, BANDRA KURLA
of accounts of SEBI for the year 2020-21 with the
COMPLEX, MUMBAI
management of SEBI and internal auditors. Relying
on the review and discussions conducted with  n advanced Documents Management System
A
the management and internal auditors, the Audit (Registry) had been created for safekeeping
Committee believes that SEBI’s Annual Statement of of live enforcement case files at SEBI’s Head
accounts are fairly presented in conformity with the Office. The Registry has a capacity for storing
Generally Accepted Accounting Principles (GAAPs) approximately 45,000 files. The Registry
in all material aspects. The Committee also reviewed has been created on build, own, operate,
the internal control systems put in place and expressed transfer (BOOT) model with automated
its satisfaction with the same. The members of the storage compartments and integration of
Committee discussed among themselves, without the file management software. The Registry will
management or the internal auditors being present, ensure faster access to original documents and
the information disclosed in the Annual Statement of help in expeditious regulatory action by SEBI.
Accounts. The Committee fulfilled its responsibilities
in compliance with its charter.

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Securities and Exchange Board of India Annual Report : 2020-21

II. 
INTERIOR FURNISHING WORKS AT SEBI and all the written exams had been successfully
BHAVAN –II conducted. The interviews of the shortlisted
candidates shall be scheduled shortly with due
Interior furnishing works were taken up by
consideration of the COVID-19 situation.
SEBI for the 2nd and 3rd floors of SEBI Bhavan
–II, BKC, Mumbai. The said floors had been A. Grade-wise Distribution
furnished with data-centre, library, eight
The grade-wise distribution of the staff members
meeting rooms, 62 cabins, 408 workstations
as on March 31, 2021 is provided in Table 13.3.
and other related amenities. This additional
facility will help in easing the operations of Table 13.3: G
 rade-wise Distribution of Staff

SEBI with better infrastructure for the staff. Members

13.4 HUMAN RESOURCE ACTIVITIES Staff Members in Various Grades 2019-20 2020-21

Human Resources Department (HRD) Executive Director (ED) 9* 10*

continued to play an important role during the year Chief General Manager (CGM) 38 42
and assumed even greater importance in the wake of
General Manager (GM) 47 52
COVID-19 pandemic. Through its regular monitoring
and timely interventions, the department struck a Deputy General Manager (DGM) 107 114

fine balance between ensuring employee safety and Assistant General Manager (AGM) 590 556
continuity of discharge of regulatory responsibilities / Manager (MGR) / Assistant
Manager (AM)
of SEBI. In 2020-21 too, HRD continued its focused
efforts towards employee welfare and providing a Secretarial Staff and Accounts 73 72
Assistants
safe working environment.
Junior Assistant 2 2
I. 
STAFF STRENGTH, RECRUITMENT,
RESIGNATION Cook/ Messenger 2 2

As on March 31, 2021, the total number of Total 868 850

employees in various grades were 850 (including Note: *includes Chief Vigilance Officer appointed by
employees on deputation/ contract), out of which 774 Government of India in the rank of Executive
Director
employees were officers and 76 employees comprise
of secretaries and other staff. The male and female Figure 13.1: G
 rade-wise Distribution of Staff
composition was 575 and 275 respectively. Members (2020-21)

Further, manpower assessment is carried

out on regular basis to meet future roles and
responsibilities, especially with respect to regulating
the ever-expanding market place (recently SEBI had
been designated as a regulator for gold exchanges
also), tackling investment frauds, staff requirements
in regional offices and local offices across the country
etc. At the end of 2020-21, exercise to recruit 147
officers in Grade A had reached advanced stages

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During 2020-21, two Executive Directors had exited from the services of the Board either by way
been reappointed on deputation/ contract basis. of retirement/resignations/ death (Table 13.4).
Further, 18 staff members, across various grades

Table 13.4: Grade-wise Staff Members Retired/Resigned/Deceased

Staff Members in Various Grades 2020-21

Chief General Manager (CGM) 1
General Manager (GM) 1
Deputy General Manager (DGM) 1
Assistant General Manager (AGM)/ Manager (MGR)/ Assistant Manager (AM) 14
Secretarial Staff (Secretary/Accounts Assistant, Library Assistant) 1
Total 18

B. Age Profile of Staff Members

With around 37.3 per cent of its staff members the average age of the staff members was around
in the age bracket of 31 - 40 years, SEBI is a young 40 years. The distribution of staff members across
and dynamic organization. As on March 31, 2021, different age brackets is presented in Table 13.5.

Table 13.5: Distribution of Staff Members (Age Brackets)

2019-20 2020-21
Age (Years)
No. of Staff Members Per cent No. of Staff Members Per cent
51 - 60 122 14.06 138 16.24
41 - 50 261 30.07 268 31.53
31 - 40 323 37.21 317 37.29
21 - 30 162 18.66 127 14.94
Total 868 100.00 850 100.00

C. Distribution of Officers by Qualification

SEBI endeavours to strike a balanced the relevant fields. The distribution of officers
composition of generalists and specialists in by qualification is presented in Table 13.6.

Table 13.6: Distribution of Officers by Qualification

2019-20 2020-21
Qualification
No. of Officers Per cent No. of Officers Per cent
BE/BTech/ME/MTech 110 13.91 105 13.57
CA/CS/ICWA/CFA 92 11.63 91 11.76
Law (LLB/LLM) 114 14.41 113 14.60
MA (Eco) 59 7.46 58 7.49
MBA/PGDM/PGDBA 339 42.86 332 42.89
MCA/DCA 8 1.01 8 1.01
M.Com 43 5.44 43 5.56
Others * 26 3.29 24 3.10
Total 791 100.00 774 100.00
* includes MSc, MA, BSc, BCom, etc.

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Securities and Exchange Board of India Annual Report : 2020-21

D. Promotions various levels in the organization was carried

In line with the belief that aspirations of the out. Accordingly, promotion exercises were
organization should be aligned with the carried out at various grades and successfully
ambitions of its work force, an elaborate review completed in a time-bound manner. Details
of the opportunities for career progression at of the promotion exercises conducted during
2020-21 are provided in Table 13.7.
Table 13.7: Promotions of Staff Members in Various Grades

No. of Persons No. of Persons

Promoted from Promoted to Promoted in Promoted in
2019-20 2020-21
Chief General Manager Executive Director 2 1
General Manager Chief General Manager 3 6
Deputy General Manager General Manager - 12
Assistant General Manager Deputy General Manager 62 20
Manager Assistant General Manager 63 48
Assistant Manager Manager 41 5
Secretary and Accounts Assistant Assistant Manager / Manager 9 -
Secretary - Grade B Secretary - Grade C 4 3
Secretary - Grade A Secretary - Grade B 3 -

E. Job Rotation among the Executive Directors was also

undertaken during the year.
In order to fill up the vacancies for meeting
organizational needs and to provide wider F. Region-wise Distribution of Staff Members
exposure to employees for gaining an all- As on March 31, 2021, 89 staff members (around
round experience, officers in various grades 10.5 per cent of total employee strength) in
are posted / transferred as part of inter- various grades were posted at regional and
departmental and inter-office job rotation local offices of SEBI. Distribution of staff at
measure. In all, 65 officers were rotated among Head Office and regional offices, including
different departments/ regional/ local offices local offices under them, is provided in the
during 2020-21. Reallocation of departments Table 13.8.

Table 13.8: Region-wise Distribution of Staff Members

2019-20 2020-21
SEBI Office No. of Staff Percentage No. of Staff Percentage
Members of Total Members of Total
Head Office 747 86 761 89.5
Northern Regional Office 41 5 33 3.9
Eastern Regional Office 25 3 19 2.2
Southern Regional Office 28 3 22 2.6
Western Regional Office 27 3 15 1.8
Total 868 100 850 100

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II. POLICY INITIATIVES official responsibilities, SEBI continuously

endeavours to provide training opportunities
A. Annual Performance Appraisal System
to its employees. Further to this, to expand
With a view to evolve a purposeful, objective
the culture of self-paced trainings amongst
and effective performance appraisal system,
the employees, a policy had been instituted
a revised policy on Annual Performance
on this subject. Employees were permitted to
Appraisal System was instituted in 2017.
undertake one self-paced training in a year
Pursuant to an extensive discussion by
within the subject areas and from the online
Human Resources Advisory Committee,
learning platforms as prescribed by SEBI. These
this policy was modified in March 2021 to
trainings are expected to provide alternative
incorporate, inter alia, the recommendations
avenues to employees to address their learning
of the Committee. These changes are expected
needs at their pace and convenience, and
to further streamline the performance
continue their learning even when in-person
assessment process and bring more fairness
trainings are not feasible for reasons such as
and objectivity in it. To ensure transparency, the COVID-19 pandemic.
the annual performance appraisal reports,
C. Internship Policy for Information Technology
which had been made online from 2018-19, are
Department
disclosed to all the employees on completion.
The annual performance appraisal reports for With a view to provide hands-on training to
students of institutes offering certain courses,
2019-20 had been disclosed to all employees in
SEBI instituted the ‘SEBI ITD Internship
Grade A (i.e. Assistant Managers) to Grade E
Program’ for its Information Technology
(i.e. General Managers). Employees aggrieved
Department (ITD). The details are in Box Item
by the assessment may file grievances before
13.1.
an appropriate competent authority under the
prescribed grievance redressal mechanism. D. SEBI Young Professional Program

During 2020-21, 23 such grievances were With a view to provide an opportunity to

processed. young professionals to get valuable exposure
to the regulation of capital markets while
B. Policy for Self-Paced Training
contributing to the functioning of SEBI,
In order to enhance the skills and widen the ‘Young Professional Program’ (YPP) had
knowledge base of its staff members, so as been instituted by SEBI. The details are in
to better equip them in discharge of their Box Item 13.1

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Box Item 13.1: SEBI Young Professional Program and SEBI ITD Internship Programme

SEBI Young Professional Program

With a view to provide an opportunity to young professionals to get valuable exposure to the regulation of
capital markets while contributing to the functioning of SEBI, a program named ‘SEBI Young Professional
Program’ (SEBI YPP) had been instituted by SEBI. This program is intended to provide an exceptional
opportunity to qualified and motivated young professionals to learn the nuances of Indian capital markets
and functioning of a regulatory organization by working on different projects in SEBI. The program offers
opportunities to candidates of various educational backgrounds to assist SEBI in four domains, namely,
Securities Market Operations, Legal, Information Technology and Research. The selection process for the
first cohort under SEBI YPP is expected to commence in 2021-22. Young Professionals selected under this
program will be engaged for an initial period of one year.

SEBI ITD Internship Program

With a view to provide hands-on training to the students of institutes which offer an All India Council for
Technical Education (AICTE) recognized full-time Master of Business Administration (MBA) / Master of
Computer Application(MCA) or equivalent degree or diploma of a duration of two years, SEBI instituted
‘SEBI ITD Internship Program’ for its Information Technology Department (ITD). The program has been
designed to give an opportunity to the selected interns to work on different information technology (IT)
projects including data analytics, regulatory business processes and reporting, and FinTech at SEBI, while
gaining valuable exposure to the functioning of the Indian capital markets.

The first cohort of students, identified pursuant to a selection process, comprising of shortlisting of institutes
and candidates, followed by interview of shortlisted candidates, has completed their internship with SEBI.
The process to select the second cohort under this internship program has commenced in March 2021.

E. 
Preventive Measures against Novel a SOP was prescribed for employees working from
Coronavirus home. Further, several preventive measures were
taken during the year to safeguard the employees
With a view to safeguard the employees
and ensure seamless discharge of the regulatory
from the COVID-19 outbreak, staff members were
functions of SEBI.
apprised of the relevant notifications, standard
operating protocol (SOP), travel advisories, etc., F. Annual Returns and Investment Intimation
issued by the Government authorities from time to System
time. While the physical attendance of the employees
Till calendar year 2019, the filing of annual
was constrained due to lockdown restrictions
returns on assets and liabilities and investment
imposed by the Government authorities and in
intimations was in physical mode. However, from
compliance with the social distancing norms, a swift
calendar year 2020, SEBI moved from physical
transition was made to the ‘work from home’ model.
annual returns and investment intimations to an
In order to ensure continuous discharge of official
online system.
responsibilities in an effective and efficient manner,

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G. Creation of New Department/ Division/Cell in conformity with Indian Evidence Act, 1872
and adoption of data analytics to identify
a. 
Corporation Finance Investigation
the pattern of relationships for unearthing
Department - A new department, namely
sophisticated connections while investigating
‘Corporation Finance Investigation
complex cases, a new cell namely ‘Connection
Department’ (CFID) was created in December
Research and Analysis Cell’ (CRAC) under
2020. The details are in Box Item 13.2.
Integrated Surveillance Department was
b. 
Financial Sector and Economic Analysis created in December 2020.
Cell - With a view to carry out research related
d. 
Human Resource Policy Implementation
work with reference to overall financial sector
and System Development Division -
and economic analysis at a macro level, a new
With a view to implement HR policies in
cell ‘Financial Sector and Economic Analysis
Systems, Applications & Products in Data
Cell’ (FSEAC) under Department of Economic
Processing (SAP) with respect to fixation of
and Policy Analysis (DEPA) was created in
pay/ perquisites/ allowances, promotions,
February 2021.
transfer/ postings, change in reporting, etc., a
c. 
Connection Research and Analysis Cell - new division was created namely ‘HR Policy
With a view to analyze complex bank Implementation and System Development
statements, call data records, internal protocol Division’ under General Services Department
detail records, hash functions to ensure the in December 2020.
sanctity of data, handling of IT digital devices

Box Item 13.2: Creation of New Department- Corporation Finance Investigation Department

A new department, namely, Corporation Finance Investigation Department (CFID), was created in
December 2020 by renaming the Forensic Accounting Cell (FAC) which was a part of the Investigations
Department. Further, certain functions of the Corporation Finance Department (CFD) were also transferred
to the newly created CFID.

CFID handles work related to following matters, covering both preliminary and detailed investigation: -
a. 
Fraud, diversion / siphoning or misappropriation of funds.
b. 
Material mis-statement in financial statements.
c. 
Complex transactions involving resources of the listed entity, undertaken for the ultimate benefit of
promoter / promoter group.
d. 
Fraudulent related party transactions.
e. 
Where financial and governance issues are inter-linked and holistic examination is required.
f. 
Where a forensic audit has been initiated by lenders / management / other regulators.
g. 
Where allegations have been made against auditors.
h. 
Non-compliance with Objects of the Issue of IPO and suspected diversion of funds.
i. 
Any other matter referred by CFD.

CFID is majorly manned by Officers who are Chartered Accountants.

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III. TRAINING AND DEVELOPMENT training program on preventive vigilance

conducted by outside agencies.
Training and development is critical for
helping staff members to develop their personal e. SEBI also participated in, and nominated
and professional skills, knowledge, and abilities. officers for ‘Training on Insider Trading,
Recognising the challenges emergent from Market Abuse Surveillance’ carried out under
COVID-19 pandemic in holding in-person training aegis of Foreign and Commonwealth Office,
sessions, and to ensure continued focus on employee United Kingdom under Technical Assistance
learning and development, a quick transition Programme on financial services in India.
was made to virtual mode of trainings. Further,
f. Officers were nominated for training
employees were also empowered to cater to their
programs/ workshops conducted virtually by
learning needs by enrolling for self-paced trainings
reputed organizations like The International
which are contextual to the functioning of SEBI. Brief
details of the training programs organized in 2020-21 Organization of Securities Commissions

are provided below - (IOSCO), US Commodity Futures Trading

Commission (US CFTC), Monetary Authority
A. Domestic Trainings/ Workshops
of Singapore (MAS), Autorité des Marchés
a. During 2020-21, around 209 nominations were Financiers (AMF), France etc.
made for various domestic training programs.
g. Eleven employees were nominated for various
b. In order to utilize in-house expertise and self-paced training programs, largely oriented
experience, and provide an avenue for inter- towards the emerging fields of data science
departmental sharing of knowledge amongst and data analytics.
the employees, the Human Resources
B. Fellowships / Scholarships / Collaboration
Department organized in-house training
sessions. In 2020-21, owing to the pandemic, In its continuous endeavour to encourage the
four virtual sessions were conducted employees to pursue higher studies and upgrade
on contemporary topics which were their skills, SEBI participated in Chevening Gurukul
enthusiastically attended by employees across Fellowship for leadership and excellence hosted by
the organization. the University of Oxford, London. The fellowship
c. In order to familiarize officers with various is fully funded by the Foreign and Commonwealth
facets of securities markets, online training Office of the UK Government. One SEBI employee
programs inter-alia on broking, derivatives was selected for the fellowship program. The
market, were conducted in co-ordination fellowship, which was due to take place in March
with National Institute of Securities Markets 2021, had been postponed for time being due to
(NISM). COVID-19 related constraints.

d. As per the directions of Central Vigilance SEBI was also invited for Global Financial
Commission, training program on preventive Partnership Center (GLOPAC) Virtual Fellowship
vigilance was conducted for Assistant Program 2021 of Japan Financial Services Agency. The
Managers, which was attended by 30 officers. objectives of the GLOPAC are to address the issues
Further, officers were also nominated for related to the global financial markets, effectively

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conduct financial sector technical assistance for C. Review under Regulation 13 (1) of Employees’
infrastructure development and further strengthen Service Regulations to Strengthen the
the cooperative relationships with financial Administration of SEBI
authorities around the world. In pursuance to these With a view to strengthen the administration
objectives, GLOPAC offers a fellowship program and of SEBI, a committee consisting of Chairman and
invites financial regulators and supervisors around all WTMs met twice during the year and reviewed
the world as “visiting fellows”. One SEBI employee the service records, effectiveness, performance and
was selected for the fellowship program. integrity of 13 employees who have completed 55
years of age or 30 years of service.
IV. COMMITTEES FACILITATED BY HUMAN
RESOURCE DEPARTMENT V. REWARDING THE WARDS OF EMPLOYEES

A. Internal Complaints Committee During the financial year, 28 children of

employees were rewarded for academic excellence in
In accordance with its mandate to provide a
10th / 12th standard under the scheme for recognizing
safe working environment and in compliance and rewarding academic excellence of children of
with ‘The Sexual Harassment of Women employees.
at Workplace (Prevention, Prohibition and
VI. DISCIPLINARY MATTERS
Redressal) Act, 2013’, an internal committee at
Head Office and separate committees for each During the year, disciplinary proceedings
of the four regional offices (and local offices were initiated under SEBI (Employees’ Service)
under their purview) are in place. During Regulations, 2001 (ESR) against four employees, out

2020-21, the Internal Complaints Committee of which proceedings against two employees had
been completed and a minor penalty of ‘censure’
had not received any complaints.
had been imposed on them. Further, the remaining
B. Internal Committee for Identification of Posts two proceedings are ongoing. In one such case,
Suitable for All Categories of Persons with which was initiated in 2019-20, where the competent
Benchmark Disabilities authority had imposed a major penalty under ESR,
An internal committee was constituted in the aggrieved employee appealed the decision.

November 2020 under the chairmanship of Subsequently, the appellate authority disposed of
the appeal by modifying the penalty. In another such
Chief Liaison Officer to identify posts suitable
case, which was initiated in 2019-20, a minor penalty
for persons with benchmark disabilities
of withholding of one increment from future service
(PwBD) on the basis of functional classification
was imposed under ESR.
of the disability and physical requirement of
the post. The committee recommended that 13.5 RESEARCH ACTIVITIES
categories ‘a’ to ‘e’ as mentioned in the Rights The functions of policy-oriented research, data
of Persons with Disabilities Act, 2016 are analysis, data management, data democratisation,
suitable for various posts across grades in SEBI financial stability, regulatory co-ordination and
provided the candidates are selected on their reporting, publications and organising international
own merit as per the standards of merit set for conferences are discharged through the Department
PwBD category and subject to suitability. of Economic and Policy Analysis (DEPA). During

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Securities and Exchange Board of India Annual Report : 2020-21

2020-21, the major activities undertaken by SEBI are information/data dissemination on commodity
enlisted below - markets were provided, in addition to various other
issues as assigned.
I. REGULATORY RESEARCH
III. REGULATORY REPORTING,
A. Scenario Analysis: As the first wave of the
INFORMATION AND PUBLICATIONS
COVID-19 spread across the world, the
financial sector regulators and government A. In accordance with Section 18 (2) of SEBI
agencies across the world reacted to stabilize Act, 1992, the Annual Report for 2019-20 was
the financial system on a priority basis. DEPA prepared and submitted to the Ministry of
did a comparative study to take a stock of Finance within the specified timelines. The
all the important measures being taken by same has been uploaded under the publication
Governments and financial sector regulators section on SEBI website, which is available at
of the major countries across the world. These https://www.sebi.gov.in/sebiweb/home/Home
measures were primarily aimed at infusing Action.do?doListing=yes&sid=4&ssid=80&sm
the liquidity in the system, reducing volatility id=101
in the markets and improving the overall
B. As required by Department for Promotion
financial stability.
of Industry and Internal Trade (DPIIT),
B. 
Concentration Risk: During the year, SEBI Ministry of Commerce, SEBI computes the
undertook research on the concentration risk in service price index for securities market, the
various segments like in index constituents, in Securities Transaction Service Price Index
the fund-raising activity and in the derivatives (STSPI) every quarter. This index measures the
segment, to understand the risk built up in inflation or average change in cost (brokerage,
those segments post COVID-19. commissions, fees etc.) of the financial services
in the securities market. It covers the cost
II. RESEARCH SPECIFIC TO COMMODITY

of services in primary market, secondary
DERIVATIVES MARKET
markets (cash and derivative segments), asset
The research-wing on commodities at SEBI management segment (mutual funds, portfolio
works in close collaboration with the respective management service, alternative investment
operational departments by providing research fund) and private placement of corporate debt.
inputs for policy formulation. During 2020-21, At present, STSPI is disseminated through the
inputs were provided on various policy issues website of Office of Economic Adviser, Ministry
including proposals of launch/ re-launch of contracts, of Commerce, along with service price indices
proposed commodities to be notified, utilisation of for other sectors like banking, insurance,
investor protection funds at Market Infrastructure telecom, postal, railways and airways.
Institutions (MIIs), effectiveness of hedging by
C. SEBI provides regular inputs and as required
oil market companies, reporting of open interest
to the Ministry of Finance (MoF) for its
positions by hedgers/other traders, etc. Regular
publications like Economic Survey (GoI)
reports were prepared for management information
and MoF Annual Report. Comments were
on developments in commodity markets and review
given on the World Bank India Development
of macro-economic developments. Besides, all
Update July 2020 Edition and OMFIF Survey
internal and external requirements for regulatory
on Financial Inclusion and information was

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submitted to RBI - 2021 IFC membership survey Macro Financial Monitoring Group (MFMG), etc.
on sustainable finance and IFC governance. Additionally, SSU has also been taking various steps
SEBI is working in co-ordination with MoF in to enhance research and data democratization in
improving the position of India in Financial Indian securities markets.
Development Index. Feedback was submitted
A. Systemic Risk Monitoring: Given the
to MoF, World Bank (WB) and International
heightened volatility following the outbreak of
Monetary Fund (IMF) on the existing data and
COVID-19, SSU undertook various impact and
methodology used for constructing Financial
scenario studies from time to time during 2020
Development Index. Proposed indicators
-21 to assess the evolution of securities market
which can be used were shared. Various
post the outbreak and made suggestions on
meetings were conducted with WB and IMF
response plan. During 2020-21, SEBI’s inputs
on the topic and feedback was submitted.
were provided for two editions of Financial
D. SEBI publishes Handbook of Statistics Stability Report (FSR), published in July 2020
on Indian Securities Market by collecting and January 2021. Such inputs provided for
data from various sources, viz. SEBI, RBI, FSR, inter alia, included those on potential
recognised stock exchanges, credit rating systemic risk issues, if any, as well as key
agencies, depositories, World Federation of measures taken by SEBI to further strengthen
Exchanges, etc. As part of its green initiative, the systemic stability of the Indian securities
SEBI had digitized the Handbook from market. FSR, published by RBI, reflects the
2019. The latest edition of Handbook 2020 is collective assessment of the members of FSDC-
available at https://www.sebi.gov.in/sebiweb/ SC on risks to financial stability, as also the
home/HomeAction.do?doListing=yes&sid=4& resilience of the financial system. The report
ssid=32&smid=0 also discusses issues relating to development
and regulation of the financial sector.
E. On account of limitations related to printing
and circulation of hard copies during RBI as part of the macro-prudential
pandemic, SEBI monthly bulletin is being framework for assessment of systemic
published only as e-bulletin format from April risks, conducts Network Analysis to map
2020 issue. the interconnectedness between financial
institutions. SSU provided inputs for the
IV. SYSTEMATIC STABILITY UNIT
Network Analysis by RBI on periodic basis.
Systemic Stability Unit (SSU) of SEBI keeps a Inputs were also provided to RBI for the
watch on systemic risks, if any, emanating from the IMF Data Gap Analysis on Financial Stability
securities market to coordinate, research and provide Indicators (FSI), the BIS Red Book on Indian
inputs on systemic risk issues and developments Payment system, the Fifth Global Payment
pertaining to securities markets. SSU also acts as Systems Survey managed by the World Bank
the interface from SEBI to engage and contribute Payment Systems Development Group (PSDG),
to various fora under the Financial Stability and etc. Inputs were also provided on economic
Development Council (FSDC) such as FSDC Sub- and systemic risks related issues discussed
Committee (FSDC-SC), Inter-Regulatory Technical in various international forums like IOSCO
Group (IRTG), Early Warning Group (EWG), meetings, FSB meetings, securities market

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regulators of various countries, as sought by perimeters, data needs and gaps, recommend
the SEBI Office of International Affairs, from data privacy and data access regulations
time to time. applicable to market data, etc. Thus, MDAC is
part of SEBI’s initiatives to make shareable data
B. 
Inter-Regulatory Coordination: SSU
on the Indian securities market available for
coordinated and provided agenda/ inputs
researchers, policy makers, and general public
from SEBI to the inter-regulatory meetings
alike and to enhance the quality of such data.
of FSDC, FSDC Sub Committee and other
In this direction, SSU put forth several issues
technical groups / taskforces/ working groups,
before the MDAC and its Working Groups
including Early Warning Group, Inter-
for expert guidance and recommendations for
Regulatory Technical Group, etc. set up under
their suitable resolutions.
the FSDC umbrella. Pursuant to the decision
of the FSDC-Sub Committee to rotate the V. 
SECOND SEBI-NISM RESEARCH
Chair of the Inter-Regulatory Early Warning CONFERENCE ON ‘BEHAVIOR OF
Group (EWG) of FSDC Sub Committee among SECURITIES MARKETS – SIGHTING OF
member regulators, SEBI chaired the EWG BLACK SWAN EVENT’
during calender year 2020 and conducted six
SEBI and NISM had jointly organised the
meetings during the year.
Second SEBI-NISM Research Conference on
C. Data Democratization in Indian Securities ‘Behavior of Securities Markets – Sighting of Black
Markets: In order to promote democratization Swan’. The conference was held in the webinar
of data in Indian securities market, SSU mode during February 25-26, 2021. Research papers
undertook several steps during 2020-21, which, were invited from academicians, research students
inter-alia, included implementation of SEBI’s and industry participants on various themes like
data sharing policy, working with MIIs to Securities Market Response to Black Swan Events,
further enrich the quantity and quality of data Corporate Finance Response to COVID-19, Impact
made available by them, provision of curated of Technology on Economy and Markets during
links of publicly available data on various COVID-19, Investor Response to Black Swan Events,
segments of the Indian securities market in one Impact of Black Swan Events on Asset Classes and
place on SEBI website etc. Market Structure and Market Dynamics.

Importantly, in order to foster market There was an overwhelming response to ‘call

transparency, operational efficiency and for papers’. In all, about 151 abstracts were received.
innovations in Indian securities market, SEBI In total, 98 full papers were received from researchers
constituted a Market Data Advisory Committee from universities in India and abroad. All the papers
(MDAC) – a Standing Committee - chaired by were reviewed by independent academic reviewers
Ms. Madhabi Puri Buch, WTM, SEBI. MDAC on various parameters as relevance of the paper
has CEOs of stock exchanges and depositories, to the conference theme, robustness of research
representatives of various stakeholders and methodology applied, etc. Finally, 16 papers were
senior officials of SEBI as members. MDAC accepted for presentation at the conference, of
was constituted to, inter-alia, recommend which, 15 papers were presented at the conference.
appropriate policy for access to securities A compendium will be released after taking consent
market data, identify segment wise data from authors.

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The conference was inaugurated by Shri. Ajay and SEBI Digital Survey of Investors 2020 (SDSI
Tyagi, Chairman SEBI on 25 of February, 2021. The
th
2020). Objectives of these proposed survey are -
galaxy of speakers at the conference included Shri. • To study the financial savings/investment
S.K. Mohanty, Director, NISM and WTM, SEBI, Smt. behavior of investors;
Madhabi Puri Buch, WTM, SEBI, Shri. Siddharth
• To gauge the awareness of investors about
Tiwari, Chief Representative for Asia and Pacific,
financial planning, financial markets, financial
Bank for International Settlements, Dr. S. P. Kothari,
products and risk-returns profile of the
Former Chief Economist and Director, Division of
different investment products;
Economic and Risk Analysis, Securities and Exchange
• To study perception of investors about market
Commission, USA, Mr. Ashley Ian Alder, CEO of
integrity/transparency;
Securities and Futures Commission, Hong Kong
and also the Chairman of the Board of International • To find out issues and challenges faced by
Organization of Securities Commissions and Dr. investors in making right investment;
Suraj Srinivasan from Harvard Business School. • To ascertain the impact of investors awareness
programme organized by stock exchanges;
A five-member jury (consisting of eminent
and
academicians, regulators and practitioners) judged
the papers and presentations at the conference. • To find out the demands of investors and ways
The best three papers were awarded cash prizes of to improve their participation in the securities
`30,000, `25,000 and `20,000. market;

All the paper presenters and participants were The SSHI 2020 will have a pan India coverage,
awarded certificate of presentation and participation i.e. 28 states and nine union territories. The coverage
respectively. Valedictory speech for the conference shall be further divided into sub-categories-rural,
was delivered by Shri. Amarjeet Singh, Executive semi-urban and urban (or similar categorization),
Director, SEBI. covering all districts. The sample size for SSHI
2020 would be approximately 50,000 households
VI. SEBI DISCUSSION FORUM
and 5,000 market participants. The SSHI 2020 will
Under SEBI Discussion Forum (SDF), SEBI be face to face, i.e. visiting the house of respondent
invites renowned scholars and financial market household and conducting an interview on-the-spot
practitioners to deliver lectures/talks on topics or at a scheduled date.
related to the securities market, economics and
SDSI 2020 will be conducted online and will
finance to facilitate SEBI staff members in gaining
have pan India coverage. The sample size would be
insights and enhancing the knowledge base. During
approximately 50,000 individuals.
2020-21, SEBI conducted a virtual talk on “ Has Risk-
O-Meter Increased Investor’s awareness towards SEBI issued Expression of Interest (EOI) on
fund risk” under SDF. February 11, 2020 seeking applications for conducting
the SSHI 2020 and received 11 applications for
VII. 
SEBI SURVEY OF HOUSEHOLDS
SSHI 2020 and eight applications for SDSI 2020.
INVESTORS AND SEBI DIGITAL SURVEY
Request for Proposal (RFP) documents were issued
OF INVESTORS
in January 2021 to seven and four shortlisted
During 2020-21, SEBI initiated work on SEBI agencies for SSHI 2020 and SDSI 2020 respectively.
Survey of Households Investors 2020 (SSHI 2020) In order to bring uniformity and clarity among

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the prospective bidders for the various terms and SEBI’s Share Portal during 2017-18, was developed
conditions mentioned in the RFP document, a pre- exclusively for the staff members. Rajbhasha Portal
bid conference was also conducted in February 2021. aimed at providing single point of access to all the
SEBI had received technical bids and financial bids relevant information pertaining to official language
from two survey agencies for SSHI 2020 in March Hindi for the staff members of SEBI, which acts as a
2021, however, no tender was received for SDSI 2020. learning hub for the staff members for using Hindi
The final selection process is underway. while working on computers. Rajbhasha Portal not
only facilitates the timely compliance with various
13.6 PROMOTION OF OFFICIAL LANGUAGE
requirements of the Official Language Policy of the
During 2020-21, various initiatives were taken Government of India, but also serves as a source of
for implementation of the official language, Hindi encouragement for the staff members to use official
in SEBI’s Offices to ensure compliance with various language Hindi in their day-to-day official work.
requirements of the Official Language Policy of the During 2020-21, a brief introduction of the Rajbhasha
Government of India. A summary of such initiatives Portal was given to the senior officials of SEBI.
is given below -
III. MODIFICATION IN THE PROFORMA OF
I. BILINGUALIZATION THE QUARTERLY PROGRESS REPORT
During 2020-21, all regulations, notifications, Certain additions / modifications were made
public notices and registration certificates granted to to the extant proforma of the quarterly progress
various market participants, intermediaries, etc. were report in view of the functioning of SEBI and the
issued in both Hindi and English. All the papers were requirements of the Official Language Policy of the
submitted before various Parliamentary Committees Government of India. The objective behind such
in diglot form. In addition, all the Memorandum additions / modifications in the said proforma was to
of Understandings (MoUs) signed between SEBI capture the data of all the works being carried out in
and regulators etc., of other jurisdictions were also Hindi, as well as to reflect all the efforts being made
prepared in diglot form. Further, statutory reports by SEBI towards the implementation of the Official
such as Annual Report and Audit Report were also Language Policy of the Government of India.
brought out both in Hindi and English. Regional IV. HINDI WEBSITE
offices and local offices of SEBI also issued public
Towards the implementation of the Official
notices in diglot form. In order to encourage more
Language Policy of the Government of India, SEBI
and more usage of Hindi in day-to-day official work,
continued its efforts in uploading the information in
standard documents frequently used by various
Hindi on its websites on a regular basis. During 2017-
departments / divisions / cells were made available
18, Hindi replica of the then launched SEBI website was
in diglot form, so that the staff members may use the
made available, and continuous efforts are being made
standard documents while carrying out their day-
to upload all other information in Hindi. During 2020-
to-day official work, contributing thereby towards
21, efforts continued to make relevant information /
implementation of the Official Language Policy of
material available in Hindi for the investors also, such
the Government of India.
as frequently asked questions, caution notices for the
II. RAJBHASHA PORTAL OF THE OFFICIAL investors, orders passed by the Appellate Authority
LANGUAGE DIVISION in Hindi in respect of the appeals filed in Hindi under
Rajbhasha Portal which was made live on the Right to Information Act, 2005, press releases and

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 Chapter - 13 :  Organizational Matters

other important notices, information pertaining to VI. INCENTIVE SCHEMES

SEBI Committees, organisation structure, directory of
With a view to ensure timely compliance with
SEBI employees, etc., on priority basis. Besides, Hindi
various requirements of the Official Language Policy
version of various regulations, amendments and
of the Government of India as well as to encourage
other notifications notified in the Official Gazette were
usage of Hindi while carrying out day-to-day
also made available on SEBI’s Hindi website. Even,
updation of regulations in Hindi is also in progress. official work, Rajbhasha Hindi incentive schemes of
SEBI were revised during the year 2019-20. Under
Moving a step forward towards the complete
one of these incentive schemes, namely Hindi Kaa
bilingualization of the investor website, relevant
Karyasadhak Gyan - Puraskar Yojana, staff members
material related to investor education was also
were awarded with cash incentives upon passing the
uploaded on the investor website. During 2020-21,
relevant examination during the year.
various other materials in Hindi, including financial
education booklet, published by SEBI as part of VII. SESSIONS IN HINDI
its financial education initiatives, were also made
Session, namely “Corona ke saath – Corona ke
available on the investor website, in order to enhance
baad” was organized online on the topic “How to
the knowledge base of investors on securities market.
take care of Mental Health during uncertain times
V. RAJBHASHA MEETINGS and beyond in view of circumstances like COVID-19
pandemic” during the year 2020-21. The session
A. For Head Office:
received an overwhelming response from the staff
During 2020-21, meetings of the Official
members. The aim of organizing such sessions is to
Language Implementation Committee were
build a pro-Hindi environment as well as to stimulate
conducted to ensure compliance with the
the interest of the staff members in usage of Hindi.
Official Language Policy of the Government
of India in the offices of the Board. During VIII. 
PARTICIPATION IN THE PROGRAMME
2020-21, several important decisions were ORGANIZED BY THE GOVERNMENT OF
taken towards implementation of the Official INDIA
Language Policy of the Government of India. A weekly orientation programme was
B. For Regional Offices: organized online during the year 2020-21 by the
Central Hindi Training Institute, Ministry of Home
Furthermore, Official Language
Affairs, Government of India. The said programme
Implementation Committees of three Regional
was especially designed for the officers from the
Offices were also reconstituted during the
field of implementation of Official Language Policy
year. Meetings of the Official Language
of the Government of India, with a view to provide
Implementation Committees were conducted
up to date information on official language Hindi
in all the Regional Offices. During the
meetings, several important decisions were and to get them acquainted with the responsibilities

taken towards implementation of the Official towards official language Hindi for successful

Language Policy of the Government of India implementation of the Official Language Policy.

in the Regional Offices and the Local Offices Accordingly, one officer from the field of official

under their jurisdiction. language took part in the said programme.

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Securities and Exchange Board of India Annual Report : 2020-21

IX. MEMBERSHIP OF THE TOWN OFFICIAL members during the year, viz. Main Boloon Tasveer
LANGUAGE IMPLEMENTATION Kya Bole Pratiyogita, Kavita Paath Pratiyogita and
COMMITTEE Hindi Vaktritva Pratiyogita.

In order to overcome the difficulties being XII. HINDI WORKSHOPS

faced in promoting the progressive use of Rajbhasha
A. For Head Office
Hindi and implementation of the Official Language
Policy of the Government of India in the government 
During the year, two Hindi workshops were

offices across the country, Town Official Language organized online for the senior officials posted

Implementation Committees (TOLICs) had been at SEBI’s Head Office to make them aware of

constituted in various towns of the country. The various requirements of the Official Language

main objective behind constituting these committees Policy of the Government of India. This would

was to review the implementation of the Official enable them to ensure timely implementation

Language Policy and to promote the usage of Hindi of various requirements of the Official

as well as to overcome the difficulties being faced Language Policy of the Government of India

in its implementation. During 2020-21, SEBI had in their day-to-day official work. Apart from

acquired the membership of TOLIC for its Head this, they were also apprised of the salient

Office. SEBI is also in the process of acquiring the features of the Rajbhasha Portal as well as the

membership of TOLIC for all of its Regional Offices. mandatory requirements of timely submission
of the quarterly progress report and the
X. RAJBHASHA INSPECTIONS
relevant provisions.
In accordance with the requirements of
B. For Regional Offices:
the Official Language Policy of the Government
of India and in view of the targets set out in the One Hindi workshop was also organized in the

annual programme issued by the Department of Northern Regional Office of SEBI. During the

Official Language of the Ministry of Home Affairs, workshop, staff members were briefed about the

Government of India, Rajbhasha inspections of the Official Language rules and provisions as well

Regional Offices and the departments of the Head as the targets set out in the Annual Programme

Office are conducted by the Official Language issued by the Department of Official Language

Division of the Head Office. During the year, of the Ministry of Home Affairs. Furthermore,

inspection of the Northern Regional Office of SEBI queries of the participants were also addressed

and inspection of one of the departments of the Head during the said workshop, and the staff

Office were conducted. Furthermore, inspection of members were also encouraged for more and

the Western Regional Office was conducted online more usage of Hindi while carrying out their

during the year, as physical inspection of the said day-to-day official work.

Regional Office was not feasible in view of the XIII. REGIONAL AND LOCAL OFFICES
COVID-19 pandemic circumstances.
Efforts were also made in regional and local
XI. RAJBHASHA COMPETITIONS offices towards implementation of the Official
In order to encourage the staff members to Language Policy of the Government of India, which
use Hindi in their day-to-day official work, various include bilingualization, correspondence in Hindi,
Hindi competitions were organized for the staff Rajbhasha competitions, etc. Thus, during the year,

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besides compliance with the Official Language and annual report on vigilance activities were
Policy in all SEBI offices, efforts continued towards regularly submitted to CVC/ DoPT.
increasing the usage of Hindi in day-to-day official
III. As preventive vigilance is a key tool of
work. good governance for any organisation,
13.7 INTERNAL INSPECTION DEPARTMENT Vigilance Department co-ordinated with
other departments in SEBI for implementing
The Internal Inspection Department (IID)
preventive measures such as updation of
provides for an internal mechanism to review the
Procurement Manual, adoption of Integrity
functioning of various departments of SEBI with
Pact, rotational transfers, review of officers
respect to whether they are adhering to internal
under Fundamental Rule no. 56(j), timely
benchmarks/procedures and to suggest measures for
payments of bills and scrutiny of audit reports.
improving their productivity.
Also, as enjoined by CVC, all officers in SEBI
During 2020-21, IID inspected various have taken the integrity pledge. Whistle-
departments of SEBI to inter alia check the blower mechanism set up by means of the
effectiveness of systems and procedures and made Public Interest Disclosure and Protection of
recommendations to improve their functioning. Informers (PIDPI)  Resolution, 2004 of DoPT
Some of these inspections were comprehensive had been brought to the notice of all SEBI
while others were thematic i.e. focused on specific employees.
aspects. IID also conducted off-site monitoring to IV. In order to bring about greater transparency
review implementation of its recommendations and accountability, Vigilance Department made
made pursuant to previous inspections. suggestions to various operational departments
13.8 VIGILANCE CELL of SEBI for systemic improvements to make
decision-making more effective, timely and
I. The Vigilance Department of SEBI is engaged
consistent.
in guiding and facilitating impartial, fair
and transparent decision-making in the V. Initiatives taken by the Vigilance Department
organisation. It performs its functions in that focus on leveraging technology include
accordance with guidelines issued by the all notices inviting tenders being hosted
Central Vigilance Commission (CVC) from on Central Public Procurement Portal and
time to time. The functions of Vigilance SEBI website, hosting of details of awarded
Department can be categorised into punitive, tenders/ contracts along with status of their

preventive, surveillance and detection. implementation on SEBI website, e-payment,

e-procurement and online filing of annual
II. During the year, complaints received from
declaration of assets and liabilities, and details
various sources such as CVC, Ministry of
of purchases and sales of assets. Also, after
Finance (MoF) etc. were investigated and enabling vendor bill payment and lawyer bill
reports forwarded to the concerned authorities. payment systems for online submission of
Also, information on Probity Portal of bills of vendors / lawyers, reports for pending
Department of Personnel and Training (DoPT), bills / invoices of all departments have been
quarterly progress report of works/ purchase/ developed and made available to staff in real-
consultancy, quarterly performance report time on the SEBI employees’ portal.

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Securities and Exchange Board of India Annual Report : 2020-21

VI. 
As part of capacity building, the Vigilance members during October 2020 saw wide
Department organised an online session on and enthusiastic participation by the staff
February 03, 2021 by a subject expert on the members. The slogans by staff members were
theme of ‘Outsourcing of Labour’. Further, a also displayed on digital screen near reception
two-day training programme was organised area of offices of SEBI during VAW.
during March 2021 on ‘Preventive Vigilance’
IX. In order to publicise the integrity pledge
for sensitising the young officers of SEBI and
concept, a hyperlink to CVC integrity
creating awareness among them on the need for
pledge was placed on the SEBI website, SEBI
maintaining probity, integrity and honesty in
Intermediary portal, SEBI Complaint Redress
public life. Three dignitaries from other Public
System (SCORES) portal and NISM website.
Sector Units (PSUs) / government organisations
The integrity pledge was also circulated to stock
constituted an expert panel which evaluated the
exchanges, clearing corporations, depositories
presentations on various aspects of preventive
and SEBI registered intermediaries.
vigilance made by the participants.
X. Vigilance Department in SEBI, as a nodal office,
VII. Vigilance Awareness Week for the year
had effectively liaised with Central Bureau
2020 (VAW 2020) was observed in SEBI in a
of Investigation (CBI) in various matters. It
befitting manner during October 27, 2020 to
has also actively participated in all activities
November 02, 2020 on the theme of “Vigilant
of Vigilance Study Circle (VSC), Mumbai. A
India, Prosperous India”. VAW 2020 was
webinar on ‘Vigilant India - Prosperous India’,
inaugurated with administration of integrity
organised by VSC, Mumbai in October 2020,
pledge by Shri S. K. Mohanty, WTM, SEBI and
was attended by CVOs of various organisations
Shri Ananta Barua, WTM, SEBI in English and
including CVO, SEBI.
Hindi respectively to all SEBI employees. After
administering the pledge, Shri S. K. Mohanty 13.9 RTI ACTIVITIES
gave a keynote address on the theme ‘Vigilant
SEBI, as a public authority, has been
India, Prosperous India’. Shri Ananta Barua
implementing the various provisions of the
also shared his thoughts on the said theme.
Right to Information Act, 2005 (RTI Act) in true
This was followed by a talk by an eminent
spirit. As per the provisions of the RTI Act, SEBI
speaker Shri Jayant Kumar Banthia, IAS (Retd.)
has designated Shri Santosh Kumar Sharma as
- presently appointed as Independent External
a Central Public Information Officer (CPIO) at
Monitor (IEM) for RBI and City and Industrial
its Head Office in Mumbai. SEBI has appointed
Development Corporation of Maharashtra
two officials in the rank of Executive Director
(CIDCO) on the theme of VAW 2020. Ms. Arti
as the First Appellate Authority (FAA) to whom
C Srivastava, Chief Vigilance Officer (CVO),
an appeal can be made against the Order of the
SEBI also shared her thoughts on the theme
CPIO. The two FAAs as on March 31, 2021 were
for the year. The VAW was observed keeping
Shri Anand Rajeshwar Baiwar and Shri Amarjeet
in view the social distancing norms due to
Singh. In compliance with the direction of the
COVID-19 situation.
Central Information Commission (CIC), SEBI had
VIII. Contests on slogan writing and essay writing designated Shri Nagendraa Parakh, Executive
on the theme of VAW 2020 held for SEBI staff Director, as the Transparency Officer.

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All applications for information and appeals filed Table 13.9: 

Trends in RTI Applications and First
at the various regional offices are referred to the Appeal
CPIO-HO by the respective Central Assistant Public
Particulars (in Numbers) 2019-20 2020-21
Information Officer (CAPIO).

SEBI has endeavoured to provide the Applications Received (including 2,268 2,397
disclosable information within the stipulated applications transferred from
time, although the information sought, may be other public authorities)

voluminous and pertaining to number of issues Issues Raised in Applications 6,942 7,421
handled by various departments of SEBI, in a
single application. Wherever felt appropriate, SEBI Appeals Received by the 337 386
had provided additional information / guidance Appellate Authority, SEBI
voluntarily to the information seeker about the Orders Passed by the Appellate 334 381
securities market. Applications are received in Authority, SEBI*
various regional languages, which are internally
translated and replied to. Applications are replied in Appeals Rejected / Dismissed by 292 347
bi-lingual whenever received in Hindi. the Appellate Authority, SEBI*

Where applications received by SEBI are Appeals Allowed / Partially 42 34*

in the nature of complaints / seeking redressal Allowed
of complaints, SEBI provides reply accordingly * Includes Orders passed on Appeals received prior to
informing the applicants of a separate designated April 01, 2020
website viz. investor.sebi.gov.in that had been set
The details of appeals before CIC against
up, or about the web-based, centralized grievance
orders passed by SEBI FAA for 2020-21 is given in
redressal system, SCORES (http://scores.gov.in) or
Table 13.10.
SCORES Mobile App which is available on both
Apple App Store and Google Play Store for the Table 13.10: 
Trends in Appeals before Central
investors of the securities market . Information Commission

Around 70 per cent of the RTI applications Particulars (in Numbers) 2019-20 2020-21
received by SEBI in 2020-21 were through the RTI
Hearings held before CIC in 30 24
MIS Portal (web portal). For applications received SEBI matters
in the physical mode, in its reply to the information
Appeals Rejected / Dismissed by 21 20
seeker, the office of CPIO requested them to file their
CIC
application/appeal online at https://rtionline.gov.in,
which enables them to receive the reply faster online, Appeals with Directions by CIC 9 4
thus encouraging the use of the paperless option. to furnish part of information

Further, suo-moto disclosure of information As a public authority, it is SEBI’s continuous

u/s 4(1) (b) of the RTI Act, 2005 has been made on the endeavour to fulfil all the obligations cast upon it, in
SEBI website www.sebi.gov.in . terms of Section 4 of the RTI Act, to make disclosures
on a proactive basis and ensuring transparency and
The details of RTI applications and First Appeal
accountability in its functioning.
to SEBI FAA for 2020-21 are given in Table 13.9.

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Securities and Exchange Board of India Annual Report : 2020-21

13.10 PARLIAMENT QUESTIONS CELL received 70 Parliament Questions, referred by the

The Parliament Questions Cell of SEBI interfaces Government of India, mainly from Ministry of
with the various Departments in Government of India, Finance and Ministry of Corporate Affairs. Of the
for addressing issues relating to Parliament Questions 70 questions referred/taken-up, 52 questions were
(PQs), Assurances thereof, visits of Parliamentary admitted, to which SEBI furnished information and
Committees, references from Honourable Members material for replies. The winter session of Parliament
of Parliament and other references received through was not held in 2020-21 and both monsoon and
various Ministries of the Government of India. budget sessions were prorogued.
I. PARLIAMENT QUESTIONS The number of parliamentary questions received
During the financial year 2020-21, SEBI session-wise is tabulated below in Table 13.11.

Table 13.11: Session-wise details of Parliament Questions

No. of Questions Received/

Parliament Admitted Questions
Period Taken-Up
Session
Starred Un-starred Starred Un-starred
Monsoon Session September 14, 2020
Nil 12 Nil 10
to October 1, 2020
Budget Session January 29, 2021 –
6 8 4 5
(Session I) February 15, 2021
Budget Session March 8, 2021 to
14 30 10 23
(Session II) April 8, 2021
Total 20 50 14 38

II. 
RESPONSES/ MATERIALS TO Development of Capital Market’ sent to
PARLIAMENTARY COMMITTEES AND Department of Economic Affairs (November
MINISTRY OF FINANCE 2020)
During the year 2020-21, SEBI interacted C. Background note on each of the subjects
with and provided the required information and recommended by the Standing Committee of
clarifications desired by the following Parliamentary Finance - selection of subjects for examination
Committees and Ministry of Finance in a time bound during 2020-21 (December 2020)
manner-
D. Action taken on the recommendations of the
A. Action taken on the recommendations of 12 th
72nd Report of the Parliamentary Standing
Report of  Standing Committee on Finance Committee on Finance on the subject
(2019-2020) 17 Lok Sabha on ‘Financing the
th
‘Strengthening of the credit rating framework
Startup Ecosystem’ (October 2020) in the country’ (October 2020 and March 2021)
B. Inputs on the topic of ‘Investors’ Protection, E. Action taken notes on the observations/
Awareness and Recent Measures for recommendations contained in the 61st report

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 Chapter - 13 :  Organizational Matters

of the Public Accounts Committee on unfruitful basis is provided in Table 13.12. During 2020-21, the
expenditure of investors’ money-SEBI (March total amount of fees and other charges received was
2021) `610.1 crore as against `608.3 crore in 2019-20. The
F. Background notes for examination by the recurring fee was 55.3 per cent in 2020-21 as compared
Standing Committee on Finance on the to 56.5 per cent in 2019-20 of the total fee collected.
topics – ‘Strengthening SEBI’s Regulatory and During the year 2020-21, the largest recurring fee of
Operational Capabilities’ and ‘Deepening the `84.1 crore was collected as regulatory fee from stock
Market for Infrastructure Financing’ (March exchanges, followed by `62.8 crore collected from
2021) custodian of securities and `48.8 crore as registration
13.11 
FEES AND OTHER CHARGES (SPECIFIC fee from members (equity and derivatives segment).
CASES OF INCREASE/DECREASE DURING In non-recurring fee category, the highest fee was
THE YEAR) collected from buy-back of shares (`84.3 crore)
followed by offer documents and prospectus filed
Details of the amount of fees and other
charges (2020-21) collected by SEBI from market (primary markets – equity) (`65.4 crore), and take

intermediaries on both recurring and non-recurring over (`42 crore).

Table 13.12: Fees and other Charges (Amount in ` crore)

2019-20 2020-21
Non- Non-
Recurring Total Fees Recurring Total Fees
Particulars Recurring Recurring
fees # Received fees # Received
fees ## fees ##
1 2 (1+2) 3 4 (3+4)
Offer Documents and Prospectus - 36.93 36.93 - 65.35 65.35
filed (Primary Market – Equity)
Merchant Bankers 4.44 2.86 7.30 5.22 1.65 6.87
Underwriters - - - - - -
Portfolio Managers 2.90 4.12 7.02 3.80 2.33 6.13
Registrars to an Issue and Share 0.33 0.25 0.58 0.30 0.13 0.43
Transfer Agents
Bankers to an Issue 0.54 0.01 0.55 0.99 0.01 1.00
Debenture Trustees 0.54 0.21 0.75 0.45 0.42 0.87
Takeover fees - 70.28 70.28 - 42.00 42.00
Buy Back of Shares - 58.37 58.37 - 84.33 84.33
Mutual Funds 15.78 10.29 26.07 15.46 5.35 20.81
Stock Brokers and Sub-Brokers 26.26 - 26.26 21.41 - 21.41
(Cash Market Segment)

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Securities and Exchange Board of India Annual Report : 2020-21

2019-20 2020-21
Non- Non-
Recurring Total Fees Recurring Total Fees
Particulars Recurring Recurring
fees # Received fees # Received
fees ## fees ##
1 2 (1+2) 3 4 (3+4)
Foreign Portfolio Investors 60.84 20.07 80.92 39.00 15.45 54.45
Foreign Venture Capital Investors - 1.10 1.10 - 6.62 6.62
Depositories 0.54 - 0.54 1.00 - 1.00
Custody Charges – Depositories 3.53 - 3.53 4.30 - 4.30
Depository Participants 2.96 0.92 3.88 4.08 0.70 4.78
Custodian of Securities 54.42 0.55 54.97 62.77 0.55 63.32
Approved Intermediaries under 0.05 - 0.05 0.02 - 0.02
Securities Lending Scheme
Credit Rating Agencies 0.45 0.20 0.65 0.30 0.56 0.86
Listing Fees contribution from 23.84 - 23.84 23.93 - 23.93
Stock Exchanges
Alternative Investment Schemes - 12.41 12.41 - 10.16 10.16
KYC Registration Fees 0.04 - 0.04 0.07 - 0.07
Registration Fee from Members 70.54 - 70.54 48.84 - 48.84
(Equity and Derivatives Segment)
Registration Fee from Members 20.70 0.04 20.74 12.25 0.02 12.27
(Commodity Derivatives Segment)
Investment Advisers 1.65 3.65 5.30 1.21 3.20 4.41
Infrastructure Investment Trusts - 4.03 4.03 - 24.80 24.80
Informal Guidance Scheme - 0.25 0.25 - 0.11 0.11
Share Based Employee Benefits - - - - - -
Regulatory Fees-Stock Exchanges 52.60 - 52.60 84.05 - 84.05
Regulatory Fees-Stock Exchanges - - - 1.88 - 1.88
Commodity Derivatives
Public Issue of Debt - 1.99 1.99 - 4.56 4.56
Private Issue of Debt - 27.74 27.74 - 0.37 0.37
Delisting of Shares - 0.03 0.03 - 0.07 0.07
Research Analyst - 0.88 0.88 - 0.92 0.92
ICDR Exemption Fees - 0.59 0.59 - 0.87 0.87
Gift City IFSC 0.04 0.01 0.05 - 0.01 0.01

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 Chapter - 13 :  Organizational Matters

2019-20 2020-21
Non- Non-
Recurring Total Fees Recurring Total Fees
Particulars Recurring Recurring
fees # Received fees # Received
fees ## fees ##
1 2 (1+2) 3 4 (3+4)
FPI Regulatory fees for ODI 0.85 - 0.85 5.53 - 5.53
Subscription
Scheme of Arrangement fees - 2.71 2.71 - 2.55 2.55
Real Estate Investment Trusts - 3.87 3.87 - 0.10 0.10
Collective Investment Schemes - - - - - -
Designated Depository Participants - 0.05 0.05 - 0.05 0.05
Total 343.84 264.41 608.26 336.86 273.24 610.10
* As reviewed by Internal Auditors M/s. Chokshi & Chokshi LLP
# Recurring fees: Fees which is received on annual/3-yearly/5-yearly basis (includes Fee/ Service Fee/ Annual Fee/
Listing Fees from exchanges/ Regulatory Fees from stock exchanges).
## Non-recurring fees: Fees which is received on one-time basis. Includes fee for Offer Documents Filed/ Registration
Fee/ Application Fee/ Takeover Fees/ Informal Guidance Scheme/ FPI Registration/Conversion
Notes:
 Since the amount realized by way of penalties on or after October 29, 2002 had been credited to the Consolidated
Fund of India, therefore, the same has not been included in the fees income of SEBI since 2003-04.
 Stock brokers and sub-brokers fee includes annual fees and turnover fees.
 Stock brokers and derivatives fees are of recurring nature and depend on the trading turnover of the stock brokers
and members of derivatives segment.

13.12 CHANGES MADE TO THE DELEGATION to various officials for administrative convenience.
ORDER Further, the delegation of powers to be exercised
The SEBI (Delegation of Statutory and Financial by the SEBI under the recent enactments, viz., the
Powers) Order, 2019 (DoP Order) provides for the Bilateral Netting of Qualified Financial Contracts
delegation of the statutory and financial powers of Act, 2020, the Indian Stamp Act, 1899 as amended
the SEBI Board to its various officials. by the Finance Act, 2020, the International Financial

In 2020-21, the delegation of certain functions Services Centres Authority Act, 2019, the Banning

under the SEBI Act, 1992, the  Securities Contracts of Unregulated Deposit Schemes Act, 2019 and the

(Regulation) Act,  1956, the Depositories Act,  1996 Companies Act, 2013 were suitably incorporated.

and the rules, regulations and laws made thereunder, 13.13 SOURCES OF FUNDS AND MAJOR AREAS
which were to be appropriately provided for in OF EXPENDITURE
the DoP Order were suitably incorporated. The Details of the sources of fund and major
delegation of functions which are routine or incidental areas of expenditure for 2020-21 is provided in
or consequential in nature were effectively delegated Table 13.13 and Table 13.14.

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Securities and Exchange Board of India Annual Report : 2020-21

Table 13.13: Sources of Funds for 2020-21 (Amount in ` crore)

Sources of Fund - Receipts Amount

Interest earned on Deposits 206.32
Interest on Loans, Advances etc. 2.63
Other Interest 5.03
Registration Fees 127.83
Annual Fees 130.81
Application Fees 3.13
Renewal Fees 60.48
Filing Fees for Offer Documents 218.68
Fees for Takeover Regulations 10.2
Listing Fees Contributions 22.87
Fees under Informal Guidance Scheme 0.12
Miscellaneous Income 12.53
Lease Rentals 10.05
Sale of Assets 0.66
Total 811.34

Table: 13.14 Major Areas of Expenditure for 2020-21 (Amount in ` crore)

Major Areas of Expenditure - Payments Amount

Establishment Expenses 325.06

Administrative Expenses 148.75

Gratuity and Leave Encashment 64.98

Purchase of Fixed Assets 37.25

Expenditure on Capital Work in Progress 48.84

Total 624.88

278
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