How SEBI Chief, Tyagi Plans To Make Stock Market More Accessible    Apr 25, 2017


Soon after taking charge as the ninth Chairman of the Securities and Exchange Board of India (SEBI) on March 1, 2017, Ajay Tyagi, a ’84 batch IAS officer of Himachal Pradesh cadre who has handled capital market division in the finance ministry has hit the ground running

Recently, at the felicitation ceremony of the National Financial Literacy Assessment Test (NFLAT) at the National Institute of Securities Market he said, “Some say to get people into capital market, there should be some support in terms of tax. I am not in favour of any tax concession. People should come into the market through awareness.”

So, the objective is clear: Make stock market accessible to everyone by creating financial awareness, and not through tax incentives.

Facts and findings …

According to the SEBI-Nielsen survey, 90% of the household still prefer bank deposits, while only 10% prefer investing in stocks and mutual funds. In rural areas, this data point looks even worse as less than 2% invest in stock market related instruments. This is despite the fact interest rates over the years have gone downhill.

Further, only metro and tier-I cities are actively investing in equity and equity related instruments, and ideally inclusive participation is a must for the development of the capital markets. This is precisely even Mr Tyagi’s standpoint. “India is huge country and if there is participation from only some areas, something is not correct. People across the country should invest in equity market, and not just those from Mumbai and Ahmedabad. Every segment should have opportunity to participate in financial sector,” new chief of SEBI said.

Shockingly, people also perceive trading in derivatives is safer than investing in a bond — which is totally untrue, indicating that financial awareness is seriously lacking.

How does Tyagi plan to correct this?

The capital market regulator is planning more investor education programmes. A discussion with the Government is pursued to make financial education a part of the school curriculum, so that a correct approach to investing is seeded at an early age, where children can deftly and responsibly manage their personal finances as they get financially independent.

However, PersonalFN is of the view that imparting financial education should not just be limited to schools and colleges. If you’re a parent reading this, make an effort to create financial awareness among your children from an early age, so that they value money and make lesser mistakes when they grow up. You can do simple things such as: inculcate the habit of saving, budgeting, introduce them to piggy bank, open a bank account for them as they grow up and encourage them to banking transactions, ask them to set goals – short-term and long-term financial goals – and enlighten why one should invest in wealth creating investment avenues to accomplish goals. As parents, you must also keep in mind that you are your child's biggest role models. They learn from what they see. If you have big debts, loans and unclear financial plans, your children are bound to perceive that as normal and repeat the mistakes you did. Hence, it is imperative that they see you saving and working towards your financial goals in a systematic manner. In other words, you must practice what you preach to your children.

Back to Mr Tyagi, he opined that financial education and awareness help individuals plan and achieve their financial goals, while they understand the risks involved in various financial products, ultimately contributing to their financial well-being. Thus, as a strategy, the regulator and the Government will closely engage with stakeholders to increase financial literacy.

PersonalFN believes that while millions of rupees may be spent in this endeavour, unless it’s done right for the very cause, it’ll not achieve the desired objective. Splurging money on image-building campaigns and using celebrities to endorse financial is not necessarily prudent. The Association of Mutual Funds in India (AMFI) launched a campaign “SahiHai”, the Hindi slang for “that’s cool”, to create awareness among investors and bust the misconceptions about mutual fund investing; but it is unfortunate that they’ve still not holistically and prudently been able to educate investors as to why mutual funds are good for long-term wealth creation (Kyu sahi hain) and how they should go about picking the best mutual fund schemes for their portfolio. At best they’re just rolling advertisements, and NOT educating investors.

Hopefully under Mr Tyagi, SEBI will turn down ads and provide a diktat for thorough investor education in times to come.

PersonalFN, through its unbiased and independent views, has been relentlessly educating investor though a series of educative articles,‘Money Simplified’ guides, and Money Simplified webinars for over decades. To help investors become their own financial planner, PersonalFN launched a comprehensive A to Z e-course: How To Become Your Own Financial Planner. This video e-course guides you through the most serious personal finance decisions and matters. Besides, you have access to a host of downloadable calculators, viz. Cash Flow Calculator, Retirement Calculator, etc, absolutely free! We highly recommend that you subscribe to this e-course in the interest of your long-term financial wellbeing!

Remember this famous quote: “The greater our knowledge increases, the more our ignorance unfolds” - John F. Kennedy



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