Strengthening of the Securities and Exchange Board of India and enhancing the penalty would deter evaders and improve confidence of investors in the capital market, which has been a major contributor to the growth in economy, Finance Minister Jaswant Singh said on Friday.
"The Sebi Act has been amended to further strengthen the capital market regulator. It is our expectation that a strong regulator and enhancing the penalty limits would deter evaders and bolster confidence of investors," Singh said at Securities Market Awareness Campaign of Sebi.
India has an 'effective and dynamic' capital market which is contributing to the economy, he said.
"To grow further, investor awareness is an essential requirement," he said.
"The capital market is not only an integral part of the growing economy, but also provides an alternate source of funds," he said.
Since its inception in 1992, Singh said, Sebi had been promoting and developing the capital market. The country has witnessed a major shift from mandate-based regulations before the 1990s to disclosure-based regulations in recent times.
"Automated trading has increased the transparency and reduced the cost of transaction. It also increased the level of safety," Singh said, adding the reduction in settlement time, setting up of trade guarantee funds and clearing corporation trade has also reduced the risks in the market.
Singh said the government was committed to building investor-awareness as small investors were the key players in the system.
"For informed decision-making, investor-education was a must," he said, referring to the 'pioneering effort and worthwhile programme' of the Sebi.
Referring to the 'clarion call' of the prime minister for 8 per cent growth, Sebi Chairman G N Bajpai said a number of initiatives have been taken including setting up of a Central Listing Authority within a few weeks.
He said ratings agency Crisil would shortly announce a rating mechanism whereby the extent of wealth creation, management and sharing could be assessed on a scale of eight points.
HDFC, HDFC Bank and Hero Honda are set to get category I rating, while Dabur is slated to get category II, he said.
Moreover, the Asia Pacific division of International Organisation of Securities Exchange commissions has asked the Sebi to come up with corporate governance codes.
"Although Indian stock exchanges rub shoulders with the best international bourses, Indian investors continue to remain disenchanted," he admitted.
In this context, investor education was the most potent and effective instrument for ensuring investor protection, he said.
"Our objective is not to fix a benchmark but to be the benchmark in the global arena," he said.
