RBI, IRDAI oppose banks and insurers in commodity derivatives: SEBI chief
Synopsis
SEBI chief Tuhin Kanta Pandey has confirmed that both the RBI and IRDAI are blocking banks and insurers from entering the commodity derivatives market, citing structural mismatches and investment horizon concerns. The disclosure, made at the NSE's capital markets conference, signals that regulatory consensus on this front remains elusive — even as SEBI pushes ahead with CKYC 2.0 integration.
Key Takeaways
SEBI Chairman Tuhin Kanta Pandey confirmed on 5 May 2025 that RBI and IRDAI oppose banks and insurers entering the commodity derivatives market.
Both regulators cited a "valid rationale" , including concerns about aligning commodity derivatives with insurance's long-term investment horizon.
Pandey warned that algorithms and AI tools can outpace human controls and exploit digital platforms for fraud at scale.
CKYC 2.0 , a unified KYC system led by CERSAI , is under development with a target framework readiness by end of July 2025 .
At the IMF-World Bank Spring Meetings on 17 April , Pandey described Indian markets as a globally competitive, structurally resilient investment destination.
Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Monday, 5 May 2025, revealed that the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) are not in favour of allowing banks and insurance companies to participate in the commodity derivatives market. Pandey made the disclosure on the sidelines of the IMC Capital Markets Conference at the National Stock Exchange (NSE) in Mumbai.
Regulators' Stance and Rationale
Pandey said both the RBI and IRDAI have a
Point of View
By design, manage long-duration liabilities; commodity derivatives are short-cycle, high-volatility instruments. The fit is genuinely poor. What is notable, however, is that SEBI has chosen to make this impasse public rather than paper over it — a signal that the regulator is managing expectations on market expansion timelines. The CKYC 2.0 delay, meanwhile, reflects the broader challenge of cross-regulator coordination in India's fragmented financial architecture.
NationPress
5 Jul 2026
Frequently Asked Questions
Why are RBI and IRDAI against banks and insurers entering commodity derivatives?
The RBI and IRDAI have cited a 'valid rationale' for their stance, with concerns particularly around how commodity derivatives — which are short-cycle and volatile instruments — would align with insurance companies' long-term investment horizons. SEBI Chairman Tuhin Kanta Pandey confirmed both regulators did not respond positively during regulatory engagements.
What is CKYC 2.0 and when will it be ready?
CKYC 2.0 is an initiative aimed at creating a unified KYC system across India's financial sector. It is being led by CERSAI with inputs from multiple regulators, and SEBI has expressed hope that the framework could be ready by the end of July 2025.
What did SEBI chief Pandey say about AI and algorithmic risks?
Pandey warned that algorithms can move faster than human controls and that digital platforms can become channels for fraud. He also cautioned that next-generation AI tools, while useful for detecting vulnerabilities, can also exploit them at scale and speed.
What did Pandey say about India's capital markets at the IMF-World Bank meetings?
Speaking on 17 April at the IMF-World Bank Spring Meetings, Pandey described India's capital markets as a stable, resilient and globally competitive destination for long-term investments, backed by strong macroeconomic fundamentals and a growing investor base.
Where did SEBI Chairman Tuhin Kanta Pandey make these remarks on commodity derivatives?
Pandey made the remarks on the sidelines of the IMC Capital Markets Conference at the National Stock Exchange (NSE) in Mumbai on 5 May 2025.
