Regulatory Roundup

A few regulatory changes in May 2024, and how they will impact you

Capital Markets

Change: The Securities and Exchange Board of India (Sebi) issues a draft circular to stock exchanges, clearing corporations, and depositories to enhance efficiency and protect investors’ interests, such as crediting securities’ payouts directly to the demat accounts of clients.

Impact: It will ensure stockbrokers segregate their clients’ securities to directly disburse the payouts into their demat accounts, helping reduce risks and prevent their assets’ misuse.

Change: Sebi issues guidelines to minimise the impact of market rumours on stock price movements. From June 1, the top 100 listed companies must verify the rumours within 24 hours of the price trigger, and the next 150 entities will follow suit in December 2024.
Impact: This action will help exclude the sudden changes in stock prices due to disruptions triggered by market rumours.

Change: Sebi issues a master circular compiling all its past notifications regarding rules governing the credit rating agencies’ criteria for judging the credibility of investment instruments, when rating a particular asset.

Impact: This move will ensure that all the applicable directions are available in one place and rating credibility goes up for investments.

Change: Sebi eases know-your-customer (KYC) rules for mutual fund investors by allowing them to redeem their investments if their KYC is on hold status or verify it with Aadhaar, PAN, and either of the registered email or phone number, instead of both. NRIs were also given a one-year extension to validate KYCs.

Impact: The changes will allow MF investors to carry out seamless transactions and NRIs will get a year to verify their details.

Change: Sebi mulls facilitating investments by Indian MFs in overseas funds, indices, and exchange-traded funds that invest a portion of their assets in Indian securities.

Impact: It will enable Indian MFs to diversify, providing more options for domestic MF investors.

Banking

Change: The Reserve Bank of India (RBI) directs all recognised banks, excluding payments banks, to review their lending rates to borrowers after it was found that some lenders were charging interest from the date of loan sanction or loan agreement instead of the date of funds’ disbursal.

Impact: The review will help ensure transparency in their lending practices and require them to refund the excess interest and other charges to borrowers. It is also pertinent for loans given via cheques, where the cheque receiving date should be considered.

Insurance

Change: The Insurance Regulatory and Development Authority of India (Irdai) asks life insurers to state the objectives of the commission structure for insurance agents and intermediaries in board policies, aligning with customer needs and cost-effective distribution of insurance policies.

Impact: It will compel them to review their commission structure for efficiency and its impact on premium rates and benefit payouts, promote fair and transparent practices that protect policyholders’ interests and boost insurance penetration.

Change: Irdai issues a master circular on corporate governance for life insurers, with a slew of provisions for implementation by June 30, 2024, including disclosure of claims intimated, disposed of and pending, commission and expense ratios, financial performance, etc.

Impact: These measures will boost transparency, accountability, and governance in the insurance sector, allowing policyholders to make informed decisions.

Pension

Change: EPFO extends the scope of auto claims, which automatically processes claims by an IT-enabled system, to children’s higher education, marriage of self, children, and siblings, and house purchase or construction, while doubling the limit from Rs 50,000 to Rs 1,00,000.

Impact: This move is expected to facilitate ease of living and benefit lakhs of EPFO members.

*List is not exhaustive | Compiled by Sanjeeb Baruah