Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Friday, 12 June laid out a wide-ranging agenda to deepen India's capital markets, covering a comprehensive overhaul of the short-selling and securities lending and borrowing (SLB) framework, the launch of bond index derivatives, and formal guidelines for the responsible use of artificial intelligence (AI) in financial markets. Speaking at an industry event in Mumbai, Pandey said the regulator is squarely focused on reducing market frictions, broadening participation, and supporting sustainable growth against a backdrop of global uncertainty.

Short-Selling and SLB Framework Under Review

SEBI is undertaking a comprehensive review of the SLB and short-selling framework with the stated objective of improving the linkage between cash and derivatives markets while enhancing overall market liquidity. The move signals a structural rethink of how securities are lent and borrowed in India — a segment that has historically lagged peer markets in depth and utilisation. Analysts have long argued that a more efficient SLB mechanism is a prerequisite for a well-functioning derivatives market, making this review potentially consequential for institutional participants.

Bond Derivatives and Equity Options Expansion

SEBI is working jointly with the Reserve Bank of India (RBI) to introduce derivatives linked to bond indices, a step aimed at widening investment and hedging avenues in the fixed-income segment. The collaboration with RBI is notable given that bond market regulation straddles both authorities. In the equity derivatives space, the regulator is separately examining the feasibility of introducing longer-tenure futures and options contracts, which could attract a broader class of institutional hedgers and structured-product issuers.

Commodity Derivatives and Debt Market Reforms

For commodity derivatives, SEBI is considering extending early pay-in benefits to options contracts, a gradual shift towards physical settlement in select agricultural commodities, and a review of existing position limits. On the debt market front, the regulator is developing a market-making framework for corporate bonds and measures to deepen the municipal bond market. SEBI is also exploring the tokenisation of corporate bonds as part of a broader push to modernise market infrastructure — a move that would place India among a small group of markets experimenting with blockchain-based fixed-income instruments.

AI Guidelines, Innovators Platform and Foreign Access

SEBI plans to issue guidelines governing the responsible use of AI in capital markets, reflecting growing regulatory concern globally about algorithmic decision-making and model risk. The regulator is also reviewing the Innovators Growth Platform to improve fundraising for companies in strategic sectors including AI, semiconductors, clean energy, biotechnology, advanced materials, and defence technology. On foreign investment, Pandey said SEBI will simplify market access by easing know-your-customer (KYC) requirements, adopting a risk-based approach to disclosure norms, and coordinating with other authorities to streamline KYC procedures for non-resident Indians (NRIs).

Governance and Disclosure Standards

SEBI is also examining changes to the delisting framework and the Listing Obligations and Disclosure Requirements (LODR) regulations to ensure governance and disclosure standards keep pace with evolving market needs. Regulations governing municipal debt securities and portfolio management services are concurrently under review. With multiple reform tracks running in parallel, the regulator's agenda signals one of its most active policy cycles in recent years — and markets will be watching closely for draft circulars in the months ahead.