Sebi Suggests Methodology Overhaul for Accurate Household Savings Data

The Securities and Exchange Board of India (Sebi) has proposed changes to how household savings are measured in the Indian securities market. This aims to improve data accuracy by capturing actual values and including currently excluded segments and financial instruments. The working paper suggests redefining investor categories, broadening the types of instruments used, and adding new components.

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Proposed Changes in Investor Categories

The working paper recommends including all domestic individual investors and Hindu Undivided Families (HUFs), regardless of income or investment size. It also proposes adding Non-Profit Institutions Serving Households (NPISHs), such as NGOs, trusts, and charities. Currently, only retail investors, High Net-worth Individuals (HNIs), HUFs, and individuals are included.

Inclusion of New Financial Instruments

For financial instruments, the proposal includes data from real estate investment trusts (REITs), infrastructure investment trusts (InvITs), and alternative investment funds (AIFs). These are not considered in the current methodology. For equity and debt instruments, it suggests using actual amounts from both primary and secondary markets. Presently, only primary market data is considered.

Changes in Mutual Funds and ETFs Data

The paper also recommends including net flows into mutual funds and exchange-traded fund (ETF) transactions in the secondary market. Currently, only net flows into mutual funds are considered. Additionally, it suggests adding more components for both primary and secondary markets to provide a comprehensive view of household savings.

Current Methodology Limitations

The existing methodology by the Reserve Bank of India (RBI) uses actual data for mutual fund investments sourced from Sebi and AMFI. However, data for equity and debt segments are based on estimations or formulas. Some segments and products in the Indian securities market are not considered in the current computation.

Detailed Market Data Inclusion

For the primary market, the paper recommends adding preferential issuances, offer-for-sale (OFS), private placements, municipal debt, securitised debt instruments, and listed SRs. For the secondary market, it suggests including equities, debt capital market, RFQ, OTC, REITs, InvITs, mutual funds, and ETFs.

Granular Data Availability

According to the working paper, Sebi can provide granular data to RBI. This data can then be made available to the Ministry of Statistics and Programme Implementation (MoSPI) for accurately reckoning household savings through the Indian securities market.

RBI's Existing Methodology

The RBI's current methodology involves two main components: resource mobilisation flow data and holding data stock data. For resource mobilisation, equity, debt, and mutual funds are considered. Data on equity and debt come from Sebi's monthly bulletin. For mutual funds, actual household investments from Sebi have been used since FY 2018-19.

The proposed changes aim to offer a more detailed view of household savings by including a wider range of instruments and more accurate investor categorisation. This will help in capturing a more comprehensive picture of household savings through the Indian securities market.

The revisions will enhance the quality of data by covering segments currently not included. This will ensure that household savings through various financial instruments are accurately captured.