Three key projects show how far India’s financial sector has come
Nirmala Sitharaman announced that the government would soon unveil rules on allowing Indian firms to list directly on overseas exchanges and at the International Gift City exchange in Gujarat. Next, the securities market regulator Sebi said it was working on introducing a T+zero settlement cycle, meaning instantaneous settlement of stock market transactions. There was also a media report that the government and the RBI are working on an alternative to the global payment messaging system Swift.
The proposal to allow Indian companies to directly list overseas without a public offering in India has been in the works since the glory days of the Indian software services industry, but the argument for it remains valid even now. It’s thought that Indian firms will fetch better valuations in overseas markets, thanks to a broader set of investors and greater pools of capital at lower costs. This time around, Indian unicorns are leading the charge for this change.
These companies are in the midst of a funding winter with venture-capital and private-equity funding scarce, and allowing them to list overseas could benefit them greatly. An expert committee formed by Sebi had recommended this four years ago. The plan to move towards a T+zero trade-settlement is truly ambitious, and a reflection of the strides made by India’s financial market.
India is now one of the few countries with a stock market that operates on the T+1 system, in which transactions are settled within 24 hours. Just over two decades ago, settlement took place once a fortnight and was patchy. But successive governments worked with the regulator to bring forward the settlement cycle from T+3 to T+2 and now T+1.
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