Finance Minister Nirmala Sitharaman said on Friday that it is incumbent upon the Securities and Exchange Board of India to regulate the futures and options markets amid concerns over exuberance and excess volatility in the derivatives segment.
"We believe it is for SEBI to do that regulation in the market, just like they have been voicing concerns about the speculative activity happening in the F&O market and the valuation commentary," Sitharaman told NDTV's Editor-in-Chief Sanjay Pugalia in an exclusive interview.
The budget proposal to increase the securities transaction tax on futures and options is to show the government's intent to indicate to people the high-risk nature of such markets, and not to raise revenue, she said.
"We leave it to the SEBI to give a soft-touch regulatory approach to F&O and cash markets," the minister said.
In the Union budget presented on Tuesday, Sitharaman announced that the STT on futures has been increased from 0.01% to 0.02%, and the STT on options has been raised from 0.062% to 0.1%.
Recently, SEBI Chairperson Madhabi Puri Buch expressed concerns over the rapid growth in derivatives trading, highlighting potential broader economic implications. The 2024 Economic Survey underscored this issue, revealing that derivatives, originally intended for hedging, are predominantly used for speculation globally, with India likely being no exception. The survey emphasised that derivatives trading can lead to significant gains, appealing to speculative instincts.
Further, RBI Governor Shaktikanta Das, in a recent address in Mumbai, highlighted the increasing gap between credit and deposit growth. He warned that this disparity could expose the financial system to liquidity challenges as household savings shift from traditional bank deposits to capital markets.
Watch the full conversation here:
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