SEBI’s income surplus fell in FY21, for the second consecutive year

20 Jun 2022

The surplus of income over expenditure of the Securities and Exchange Board of India fell for the second consecutive year in 2020-21 (Apr-Mar) causing the accumulated income surplus, or SEBI’s General Fund, to record a low single-digit growth for the second year running, according to audited annual accounts for 2020-21 (Apr-Mar) released by it today.

SEBI earned an income surplus of 1.59 bln rupees in 2020-21, down nearly 30% on year. In 2019-20 too it had fallen sharply, by 52% to 2.24 bln rupees. Prior to that, it had recorded a growth of 6% in 2018-19 and 21% in 2017-18.

The capital market regulator has accelerated its spends on operational matters in the last two years while the growth in income from fees and other charges levied on market intermediaries has not kept pace.

This is interesting because the 2020-21 was second year of the effect of a new government rule which required SEBI to transfer 75% of its annual surplus of income over expenditure to the government exchequer. This new rule may have spurred SEBI to spend more on establishment-related items and also on technology.

Fee income stayed flat at 6.1 bln rupees in 2020-21, while establishment expenses rose 16% on year to 4.38 bln rupees. In the previous year, 2019-20, the fee income had dropped 19% to 6.08 bln rupees and establishment expenses had risen sharply by 28% to 3.76 bln rupees.

The establishment expenses of SEBI are mainly on account of staff salaries, staff allowances and bonus, staff welfare expenses, provisions for gratuity and leave encashment.

Overall, in 2020-21, SEBI’s total expenses were up by 13% on year to 6.67 bln rupees and total income inched up by 2% to 8.26 bln rupees.

In the market regulator’s financial accounts, the annual income surplus gets added to its General Fund.

The General Fund of SEBI represents the accumulated annual surplus of all years and its corpus stood at 44.59 bln rupees as of March 31 2021, up by only 4% from the year ago level. In 2019-20 too, the General Fund had gone up by just 6% to 43 bln rupees at the end of the year.

Since the General Fund serves as the pivotal account to tap into for capital expenditure like technology upgrades and acquisition of new software, hardware and network systems for improving surveillance, enforcement and other regulatory matters.

The Investor Protection and Education Fund, like the General Fund, sits on the liabilities side of SEBI’s balance sheet, and its corpus saw a substantial rise to 8.83 bln rupees in 2020-21 from 1.28 bln rupees in the previous year.

SEBI’s annual report for 2021-22 is expected to be released in the next couple of months, while the annual accounts for the year will follow next year.