On Wednesday, the Securities and Exchange Board of India (Sebi) proposed significant changes to the methodology used for computing household savings through the securities market. This initiative aims to refine how data is captured and reported, addressing gaps in the existing system.
Currently, the Reserve Bank of India (RBI) and the Ministry of Statistics and Programme Implementation (MoSPI) provide data on household savings through various financial segments. However, Sebi has identified that the current approach does not fully capture the extent of household savings in the Indian securities market.
The proposed changes include three key adjustments: revising investor categories, updating the types of investment instruments included, and incorporating additional components that are currently missing from the methodology. These changes are based on a working paper titled ‘Household Savings through Indian Securities Market.’
The existing methodology relies on actual data for mutual fund investments provided by Sebi and the Association of Mutual Funds in India (AMFI). However, data for equity and debt segments is based on estimations, which may not accurately reflect the true extent of savings in these areas.
Under the new proposal, investors would be categorized into two main groups: individuals (including all domestic individual investors and Hindu Undivided Families) and non-individuals (such as Non-Profit Institutions Serving Households, including NGOs, charities, and trusts). This new classification aims to provide a more comprehensive view compared to the current retail, high net worth individuals (HNIs), and HUFs categories.
For investment instruments, Sebi suggests using actual amounts from both primary and secondary markets for equity and debt investments. This contrasts with the current method, which considers only primary market data. The proposal also aims to address current limitations, where only 35% of total equity investments and 40% of debt investments are considered.
The working paper further proposes including net flows into mutual funds and exchange-traded funds (ETFs) in the secondary market, rather than just net flows into mutual funds. Additionally, it recommends accounting for funds mobilized through Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), and Alternative Investment Funds (AIFs).
In the equity segment, the proposal includes resources mobilized through primary market transactions such as preferential issuances and offers for sale. For the debt segment, it suggests incorporating private placements, municipal debt securities, securitized debt instruments (SDIs), and listed security receipts (SRs).
These proposed changes by Sebi are aimed at enhancing the accuracy of household savings data and ensuring that the calculations reflect the true state of investment in the securities market.
