SEBI’s Madhabi Puri Buch in conversation with SBI Team, on the occasion marking SBI MF reaching 10 lakh crores.
“I have very often said that the driver of financial inclusion is technology. Without technology, we could never have achieved where we are and we can never hope to reach where we will reach. But I think one of the things which we fail to sometimes recognize and celebrate is that in deploying this technology, what is it that we as a market ecosystem have achieved in terms of cost reduction and therefore making financial inclusion viable and profitable?
This cost reduction, thanks to technology is not coming at the cost of quality. We are giving investors and our customers a brilliant experience along with the cost benefit and risk reduction.
So, take a peer review of IT spends across various regulators globally. SEBI has invested a fraction of the kind of monies that our fellow regulators across the globe have invested, and yet we have some of the most superior technology in the world today.
You look at our stock exchanges and clearing corporations, just look at the comparison. And if you particularly look at some of the larger markets, because our markets are amongst the largest in the world, whether it is in terms of number of listed companies or whether in terms of number of transactions, we are amongst the largest, and yet look at the comparison, we have in terms of IT spend there. How does NSC compare with its peer group? Similarly, how does NSC clearing compare with its own peer group? So, as you can see in India, this is not surprising industry after industry, we are not only able to deploy technology quickly but we are able to deploy technology at an amazing cost compared to anywhere else on this planet, not just in the markets.
Therefore, I have the confidence that the 250-rupee SIP will not only be real, it’ll actually be hugely profitable for our industry, and therefore we will see financial inclusion along with profitability of the industry. And that is my belief because that’s what we do in India.
How does this work for us? The operating leverage that we have in the mutual fund industry is just amazing. So, once you have your product set up, once you have your technology set up, once you have your compliance set up, when you scale, you can scale so amazingly. And the only real incremental cost is that of distribution and a small extent of servicing. And therefore, given the huge scale that we have in India and the whole bottom of the pyramid that we keep referring to, it’s just a perfect recipe. So, if someone says, what do you expect will happen in the next three years? Well, to me, it’ll not be surprising if SBI gets to 20 lakh crores in the next three years.
Finally, what is the objective? The objective is that our country, which is now having this huge momentum, two things need to happen. The citizens need to participate in wealth creation of the country, and secondly, capital formation needs to happen.
Is this a time to keep attracting more money into the markets? Of course it is. For the simple reason that not just, the best time to have planted a tree was 20 years ago. The next best time is today. But also, because it’s not just the secondary market. If you see the way our primary market is growing, it’s just amazing. Many of our global counterparts cannot believe when we talk about the number of IPOs we have month after month after month. And we have almost about, I think 40,000 crores of IPOs which have been approved and are waiting to be launched. We have another 80,000 crores worth of applications with us and we are working very hard night and day to clear them as soon as possible.
I would want to emphasize that whenever people say, oh, but a large part of that is offer for sale and it’s not really capital formation going into the economy, I would beg to differ because when that offer for sale happens, it is people getting exit. And those people are the ones who brought capital into the country and into those companies in the first place. If they didn’t have exit, they wouldn’t have done entry. So, it’s just that there is a time lag between the two and money came in originally and is now finding an exit. But all of this vibrancy of our markets and the vibrancy of the mutual fund industry is what is supporting and adding and fueling the growth of the economy.“
ABOUT THE AUTHOR
Madhabi Puri Buch is Chairperson, Securities and Exchange Board (SEBI)
