To reach this goal, the Securities and Exchange Board of India (Sebi) is considering a 'triple-A approach' of spreading awareness among investors, promoting appropriate products and ensuring proper audit of the marketplace.
This is one of the key suggestions made by an independent consultant for an overhaul of Sebi's functions, role, structure and vision, a senior official said.
The proposals, which have been made after extensive consultations with top officials from Sebi, finance ministry, RBI, IRDA and large market intermediaries, will take the final shape after incorporating the suggestions made by the board of capital markets regulator.
After consulting the internal and external stakeholders, the global consultancy major, Oliver Wyman, has suggested eight key goals for Sebi over the next five years, the top-most being 'increasing mobilisation of household savings into capital markets'.
The other goals identified in this project are building a diversified and balanced investor base in the country, developing viable alternatives to bank credit, enhancing ability to prevent and respond to crises, empowerment of investors and ensuring full trust and confidence of investors in the securities market.
Besides, it also wants Sebi to become a 'centre of excellence' for conducting supervision functions and achieve best in class efficiency, knowledge institution and employer of choice status.
An 15-point agenda has also been suggested for Sebi to achieve these eight goals. According to officials, some of the recommended measures are either already in place or are in the advanced stages of implementation, while others might be adopted in due course.
It has been suggested that Sebi should pursue the government and other regulators to address the regulatory gaps in the existing setup with proposals like consolidated supervision of all types of investment schemes through a single body and creation of a separate regulator for auditors.
Besides, Sebi has also been asked to strengthen the supervision of the exchanges' oversight of listed companies by setting up a dedicated internal team to oversee the bourses' functions and ensure adequate enforcement.
It has also asked Sebi to enhance its crisis prevention and response capabilities through steps like an effective coordination with RBI and ongoing monitoring of systemically important institutions.
The triple-A approach for mobilising household savings into productive capital market products include collaboration with other regulators to spread investor awareness, developing appropriate low-risk products for retail investors and proper audit of marketplace to safeguard investors' interest.
In wide-ranging changes to the way Sebi can act against market manipulators and fraudsters, the government last month gave it powers to regulate all kinds of investment schemes involving Rs 100 crore or more, conduct search and seizure activities, pass attachment orders and sell the attached properties to recover the ill-gotten money.
Following these powers, Sebi is now setting its eyes on steps required to give the small investors confidence to put their hard-earned savings into the capital markets, rather than unproductive assets like gold, a top official said.
Among other proposals, Sebi has asked to to build skills for non-equity and off-exchange markets such as corporate bonds and structured products. Besides, Sebi has also been asked to maintain a clear and consistent vision and communicate the same to market explicitly, while ensuring a consistency even across leadership changes.
Sebi also needs to adopt principles-based approach in key policy areas like fraud, compliance, disclosures and institutional interface, while it also requires to maintain a regular and open communication with the industry, the proposals say.
The consultant has also suggested Sebi to adopt a risk-based supervision approach and categorise different market entities regulated by it by their risk levels.
Sebi has been asked to make through greater use of soft enforcement tools like public censure and waring letters, while increasing the size of its monetary penalties for larger violations. Besides, it has been asked to issue guidance for turnaround times of cases and to set year-end targets, while ensuring a smooth handover of cases from investigation to enforcement stages.
For enhancing its supervision capabilities, it has been recommended that Sebi develops omnibus licensing for market conglomerates, institutes a whistle blowing policy and builds a state-of-the-art research and analytics cell.
Other suggestions include increase in headcount with larger workforce in supervision functions, re-aligning the support functions under a Chief Operating Officer role, enhancing delegation of powers at various levels, linking monetary and non-monetary rewards to performance, skill development through external exposure and re-defining IT strategy of the organisation.