The Government’s efforts to attract more foreign investment to stave off any negative impact of the US decision to taper quantitative easing will get a boost if there is early clarity on taxation, Managing Director and CEO of SBI-SG, Vasudha Sundaraman, said. SBI-SG is a joint venture between State Bank of India and Societe Generale Securities Services (SGSS).
Excerpts from an interview:
I assumed charge as MD three months ago. We aim to double the assets in the current year. We are a niche player and would like to maintain the quality of our offerings. Heightened marketing efforts are on, both directly by our business development team and through the help of our partner SGSS.
The plans for SBI-SG are simple — growth in assets and income. Further, we are gunning for seamless synergies within the SBI group, with other subsidiaries, such as SBI Capital Markets and SBICap Securities, among others. This cohesive approach will increase the Group’s offerings to clients in the FII space.
What is the venture’s current asset size?
Today, we service about $20 billion in assets across custody and fund accounting. Our clientele is diversified, it’s a mix of domestic entities and FIIs.
How will SEBI’s regulation dated July 25 help you get new business?
SEBI’s July 25 regulation was a landmark one for enterprises like us, who can now bring their subsidiary businesses on board. We have been fund accountants to SBI Mutual Fund for over two years now.
When we market to mutual funds for custody business, one question that often comes up is that your own group company is not with you, although people knew that it was not permissible. Now we have been permitted to service our group company's assets for custody and are in the process of getting the necessary approvals. This will help us virtually double the assets under custody.
We are confident of being able to demonstrate to the mutual fund industry that we are capable of servicing this huge asset base very comfortably. This will set an example for other MFs. Our entire infrastructure is getting enhanced to a level that will set a very high standard of servicing the assets with technology, which is among the best in the world. It is action time at SBISG at the moment.
Coming to reclassification of categories called foreign portfolio investor or FPI, what are the issues you face when you meet such investors?
We were part of the K.M. Chandrasekhar Committee for bringing forth the recommendations for the FPI regime. It is indeed a regime which, when implemented, will see heightened investments from foreign players and substantially increased flows to our capital markets.
As far as FPI is concerned, there are two main issues where clarity is needed. One is taxation and the other is KYC (Know-Your-Customer) responsibility on custodians. Taxation is the most important trigger for FIIs to shift money from one country to another. Hence, the FPI regime should get the same taxation benefits as FIIs. Clarity in this regard will help this regime to take off. On KYC, while risk-based KYC is a welcome step, we need clarity on the acceptance of these norms by banks, which will actually open FPI accounts.
Do you think any delay in bringing clarity on taxation will send wrong signals to foreign investors?
As taxation is a key issue, clarity on this will help the new regime to take off with wings.
Another issue related to FPIs is Qualified Depository Participants (QDPs). They complain that there is no level-playing field. What do you have to say?
In the QFI (qualified foreign investor) regime, QDP was introduced. And QDPs got registered in large numbers because the eligibility criteria were such.
In the FPI regime, SEBI is unloading an onerous job of KYC compliance, registration, etc, to designated depository participants (DDPs). This role was hitherto handled by SEBI. DDPs now have a much larger and deeper role to play. Hence, the bar of eligibility has been raised for all the right reasons.
Is India prepared to face the EU’s diktat on the Clearing Corporation?
What we gather is that the process is under way and both the NSE and the BSE have sought European Securities and Markets Authority (ESMA) registration. SEBI recently finalised information sharing and regulatory cooperation MoUs with 31 EU regulators.
We are certainly moving toward making ourselves impact-free with the new diktat of EU.