Ease of Doing Business: India's Score on Protecting Minority Investors has Declined, Warns Official

India’s score on protection of minority investors compiled by the World Bank as part of the Ease of Doing Business rankings has slipped recently and there is a need for stakeholders to improve on this aspect, a senior finance ministry official said on Tuesday. Brokers need to look beyond the short-term benefits and look at long-term strategies focused on attracting, retaining and motivating investors in the capital markets, which are very important tool for nation building, Additional Secretary Anand Mohan Bajaj said.

The comments come at a time when there have been some defaults by brokerages in which small investors have been impacted. India’s ranking on protecting minority investors slipped from 7th last year to 13th in World Bank’s Doing Business 2020 report.

“Protection of minority investors, we (India) are ranked reasonably high. But recently, India’s ranking has slipped on this count although the overall score remains unchanged,” Bajaj said at a conference organised by BBF India. “We need to rededicate ourselves to leverage tech, fintech, other kinds of dissemination of information to rededicate for the protection of minority investors and retail investors,” he added.

Bajaj further said small investors are more in number, carriers of trust in the markets and also play an important role in motivating others to join the capital markets. The official said investors’ education and protection is very important and appealed to the stakeholders to be forthcoming on this aspect.

“As brokers, we must look beyond the short-term benefit to a longer-term benefit of attracting, retaining and motivating investors in the markets,” he emphasised. Speaking at the same event, founder of discount brokerage Zerodha Nithin Kamath wondered about the future of the brokerage industry a decade from now because all the work is getting digitised.

At present, reducing systemic risk is an important work being done by the brokers, he added. Kamath also said his company is more of a technology player rather than a brokerage and credited the Aadhaar project for the rise in the number of investors it has been able to add despite the lockdown.

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