'I know where all the skeletons are hidden': Sebi boss Madhabi Puri Buch on capital markets, corporate governance and more

Madhabi Puri Buch, 57, the first woman Chairperson of the Securities and Exchange Board of India (Sebi), has completed a little over two years at the capital markets regulator. Buch is the second non-bureaucrat in about two decades to head Sebi. In an exclusive interview with Business Today’s Sourav Majumdar at the BT Most Powerful Women in Business Awards, Buch talks about her journey, her passion for technology and data, women at the workplace and her agenda for the remainder of her term. Edited excerpts:

Q: How would you describe your journey as the Chairperson of Sebi?

A: The most important thing with respect to my position as the Chairperson of Sebi is that I had the benefit of being a part of Sebi one level lower, as a whole-time member. I think the learnings and, as somebody called it, my ‘house training’ happened during those four and a half years. And it was also said to me at the time of my appointment as whole-time member that ‘we want you to get house-trained but not so house-trained that the purpose of bringing a private sector person gets defeated.’ So that balance between... bringing the public accountability as well as the spirit of the private sector and the entrepreneurial spirit—I think that was the mandate given to me and it was a big privilege to get that. And I think that is the balance that I have tried my hardest to maintain. In a sense it is not hard because when you have been in the markets for two decades and you understand and know the entire domain like the back of your hand, and then you have been a part of the regulator and the system and the ecosystem for five years; it is not that hard.

Q: How does that impact your interactions with market intermediaries, because they know that you are someone who already knows all the tricks?

A: The repercussions or the impact of my understanding the markets is two-fold. One is that I know where all the skeletons are hidden. When I engage with market intermediaries and have a conversation, and if they say that ‘this is not how it works’, I look them in the eye and say ‘I have done that with my own two hands and I have been there, so let’s just not go there in terms of being in denial of what actually happens in the market.’ But at the same time, the understanding and the appreciation of what are the pain points of the industry, where exactly does the shoe pinch, where is it that there is a question and a frustration. For instance, I frequently say that when capital has to be raised, if there is a delay at the regulatory end, you can actually miss the timing that you need in the market and that timing may never come back. So that deep sense of frustration that you have with the regulator is something that I’ve experienced myself. And so, the focus that we have brought within Sebi is to say that every action or inaction or delay or speediness of what the regulator does has a very serious impact on somebody. And that understanding and realisation is also, I would say, the other side of having come from the markets.

Q: You are very passionate about technology and data. Why is that so and how has that helped you and, more importantly, Sebi to evolve into a much better regulatory body?

A: Technology is what I am passionate about. I would say data and technology... And I think the reason for that is that I learnt many years ago that there is this beautiful, perfect thing called technology that allows you to reduce cost, manage risk, and delight your customer. Traditionally, these were trade-offs. You either got to delight the customer or manage costs, you either managed to delight the customer or managed risk. Nowhere did we have this ability to optimise on all of this and get that perfect balance of these three. So, to me, technology is really magic. Which is why I am really passionate about it... both in terms of deployment within Sebi, and deployment in the market ecosystem... I am equally passionate about data because I think that the responsibility that you have as the market regulator, where you impact the lives of so many people, is that you cannot have a discussion about your opinion or my opinion. There has to be logic, there has to be data, there has to be a hypothesis, and it has to be tested. You have to do back testing of the impact of what you do. And without that there is no discipline and there is no accountability. So, if you want to increase discipline and the accountability in a regulator, to me, being data-driven and therefore [being] transparent about it, and being able to say to the world that look, we have a point of view based on the data we have [is important]. Now if the data changes, we will change our view. That is the discipline that we need to have. That is what, again, I feel very passionate about.

Q: You are the first female chairperson of Sebi. In that context, were there any kind of challenges you faced?

A: At ICICI [group, her previous employer], gender was not a thing. You were a professional. You had a role to play… I didn’t find it very different at Sebi. So, gender was never a thing for me. I had a great boss. He was very empowering. Did I see any difference in the way he treated me or treated my three other colleagues? Absolutely not. The way my colleagues interact with me today, do I sense anything which is gender-related? No. So I don’t know if I’m just exceptionally lucky on this front, but it’s never been a thing.

Q: Even when you interact with market participants? In fact, they might be more careful when they deal with you because they know your background...

A: The quality of the interaction that I have with market participants, the dominant flavour of that conversation has nothing to do with gender. It has to do with the fact that I have been where they are and that I know and appreciate their position. And I just happen to be in this seat today. The equation is of a different flavour. So, I just don’t feel it [the gender issue].

Q: Sebi has been taking steps to empower women at the workplace, making it mandatory for the Top 1,000 companies to have at least one woman independent director. Are you looking at increasing the number of companies now that you know a beginning has been made?

A: The gender issue is very important to our country and to me. However, do I think that a dozen or two dozen privileged women like myself, being on a dozen boards each is going to cut it for our country? Absolutely not. And so that thinking has manifested in one of the key metrics that Sebi has articulated as core ESG or core BRSR (Business Responsibility and Sustainability Report) as we call it. On the gender issue, we have received representation that, you know, include this parameter or that parameter. We said look, finally, what is important? So, we have identified only two metrics. One is, what percentage of your payroll cost goes to women. It is simple. Don’t do this tokenism of putting two more women on the board and say we are brilliant. Let’s see the disclosure and say, what percentage of your manpower cost goes to women. It will take care of everything. It will take care of whether you have equal number of women at junior, senior, or middle positions. Do you pay them equally to have them in key positions? Do you encourage women to come back to work after their child-bearing period is over? It takes care of everything. So that is the bottom line for us. And the second metric is the POSH complaints because obviously that’s still a thing. And you know, we see that quite frequently. For us, that is more important.

If there is a company that has set up a factory in a Tier IV town and has built a fabulous hostel for its women employees, and has invited the parents of all those employees to say we are keeping your daughter safe here, and this is a safe environment in which they can work and that factory has 80 per cent women—that’s far more important than having another person like me on the board. So, we would like to see that gender manifest down the line. We would like to see more and more women KMPs [key management personnel]. And then when you have all of that, it will bubble up automatically to the board but simply, you know, parachuting in someone at the top and doing nothing at the bottom, I don’t think it’s going to cut it for our country.

Q: You have been in the market for long, even outside Sebi. How do you see the standards of governance evolve over the years? What do you see as the improvements or the areas of concern?

A: Governance goes to trust. And I think that is the fundamental approach that Sebi takes to fostering that trust is disclosure. Our view is that Sebi should not be interfering in what a company does or does not do. It only asks two things on behalf of the investor because the investors are diffused and they do not have bargaining power and so the regulator is representing the investors. We ask for only two things. The first is disclosure, which is to say that in the following things, these things are important for an investor to make an informed decision. And you must disclose this. After that the investor will vote with his feet, vote with his wallet, either he will buy you and your price will go up or he will sell you and your price will go down. And the second thing in terms of governance is the stipulation in terms of what kind of transactions require what kind of approvals. In our view, largely speaking, for most decisions that a company board takes, there is a very high level of alignment between the promoter and the dominant shareholders and the minority shareholders. So, there’s no problem there at all because their interests are aligned. And what is good for the goose is good for the gander.

The only place where there can be potentially a divergence, in terms of the interests, is where there are related-party transactions because the promoter may benefit from a particular kind of transaction because it is with a related party, and it may not be in the interest of the minority shareholders for that transaction to go through. So long as related-party transactions are disclosed honestly and in the spirit of the law, in our view, that is the level of governance that we think is required. After that it is really up to the market and to the investors to decide how they want to vote.

Q: You have completed nearly two years at the helm and a little over a year is left in your stint. What are the two or three key unfinished tasks that you would want to focus on going forward?

A: I will break that up into internal to Sebi and external in the marketplace. So internal to Sebi, our restructuring was done in four months, which normally with an external consultant takes a couple of years. What I would really like to do is try and institutionalise many of the things that we have done. And after I demit office, my sense is the new person who will come will leave his or her own stamp. If even 60-65 per cent of what has been created over the last few years stays and gets institutionalised and cemented further, I will be delighted. So, my efforts going forward... will really be to institutionalise the changes that we have brought about.

In the external marketplace, I think the most important piece that I would like to see happening is greater financial inclusion. And a simple example of that is a conversation that I had with some of our mutual funds, for instance, because that’s a great product for financial inclusion. I asked them if the Rs 500 per month SIP is viable for them. And they said, yes. And I said, what will it take to make it Rs 100? And almost all of them said it is just not possible. I said, I’ll settle for Rs 250. So, now we are working with them to see where is that cost, what can Sebi do to facilitate making it possible and to bring that viability down to Rs 250 a month. Because then it is the equivalent of what Hindustan Lever [now Hindustan Unilever or HUL] did with the shampoo sachet. [It] just exploded the market. Just grow the market and the kind of financial inclusion it will bring, and, equally importantly, the strength it will give to our markets.

In the last one year or so, globally money became expensive as the US Fed was tightening liquidity and so foreign money left our shores. Unlike other emerging markets, our markets were still resilient. Why was that? That was because retail money came in to fill that vacuum, both direct investments by retail investors as well as through our mutual funds. Now what happened because the markets remained resilient is that our share in the global indices went up. The people who left India started underperforming their benchmark index, because we were roaring thanks to domestic demand, and they had left so they were missing out on the Indian returns. And very soon they came back... So, in effect, the benefit of our domestic flows and the retail flows had a double impact. The impact of their coming in and the impact of the foreign money returning because they couldn’t afford to miss the Indian story; I think that’s the strength of India. And if I can in the next year (2024) or so somehow make that viable and make that Rs 500 SIP into Rs 250, I think that would lay the foundation for the next many years for future growth and further resilience of the market.

@TheSouravM