JOIN USDivestment secy wants demat for all
There could soon be a demat account for each bank account holder. A serious churning is going on in the government to start a drive to open demat accounts on the lines of the Jan Dhan Yojana.
This will be done to encourage more participation from retail investors in the government’s share sale programmes whose success is largely driven by domestic institutions such as LIC.
India’s largest public sector lender State Bank of India has already initiated steps to open a demat account each for all its account holders. Demat account is a must to buy, transfer, or sell shares or other securities held in electronic format.
Divestment in Coal India fetched Rs 22,577 crore to the exchequer but it was largely bought by Life Insurance Corporation and some foreign institutional investors while the retail quota remained undersubscribed.
Wealth should be shared
The government’s rationale behind disinvestment, however, is that public sector undertakings are the wealth of the nation and part of this wealth should rest in the hands of the people. There are over 2.30 crore demat accounts in the country but half of them are lying dormant.
“I have written to the Department of Economic Affairs that unless there are demat accounts, retail participation will not come. Non-operating demat accounts must be made operational. There must be schemes which make it worthwhile to keep operating demat accounts. A drive like Jan Dhan in demat,” Disinvestment Secretary Aradhana Johri told Deccan Herald. An incentive could be to open demat account free of cost, she said.
“I have also written to them about creating market literacy among people,” Johri said. To encourage retail participation in disinvestment, the government has already doubled the quota for such investors in stake sales to 20 per cent of the issue size. Retail investors are those who can invest up to Rs 2 lakh in a public issue.
High target set
In fiscal 2015-16, the government is targeting Rs 69,500 crore from disinvestment proceeds. This is the highest ever budgeted target. To achieve this in a volatile market like India, the government needs to enhance retail participation.
The Department of Disinvestment has also sought suggestions from ICICI Bank and brokerage house Edelweiss on improving retail demand and capability in the divestment programme and widening the depth of the retail market.
Besides, the department has also asked Securities and Exchange Board of India (Sebi) to suggest ways to reduce the time involved in opening a demat account and making the process simpler.
SBI has already initiated steps to open a demat account each for all its account holders
There are over 2.30 crore demat accounts in the country, but half of them are lying dormant Divestment in Coal India fetched Rs 22,577 crore, but retail quota remained undersubscribed.
Government wants a share of public sector wealth for all citizens