SEBI Must Shift to ‘Anticipatory Regulation’ as Markets Grow: Nirmala Sitharaman

Speaking at the 38th Foundation Day of the Securities and Exchange Board of India, Union Finance Minister Nirmala Sitharaman said India's capital markets must evolve with greater sophistication and foresight as they expand in scale and complexity, urging SEBI to adopt anticipatory regulation, deepen the corporate bond market and strengthen cybersecurity frameworks.

Addressing the gathering, Sitharaman highlighted SEBI's role in transforming Indian markets from trading rings and physical certificates to electronic order books and real-time supervision.

"Periods of stress led to stronger regulation. Episodes of volatility led to stronger market infrastructure. That is how mature financial systems evolve," she said, noting that SEBI embodies this evolution through the discipline with which it has deployed its powers.

The Finance Minister cited SEBI's global leadership in market reforms, including the transition to the T+1 settlement cycle for all listed securities -- completed in January 2023, ahead of the U.S. shift in May 2024.

She also pointed to the ASBA mechanism for IPOs and the UPI-based IPO application system, developed with NPCI, as innovations that have brought real-time retail participation to every smartphone.

With NSDL and CDSL holding over $5 trillion in dematerialised securities, India now operates one of the world's most advanced depository infrastructures.

Sitharaman praised SEBI's institutional strength, noting its success rate of over 90% in the Supreme Court and 92 per cent in Civil Courts and NCLT.

She highlighted that FY 2025-26 saw a record 366 IPOs raising around Rs 1.9 lakh crore, a testament to buoyant capital formation.

How is SEBI addressing risks from rising retail participation while strengthening investor protection?

While the retail participation revolution has democratised finance, she cautioned that "participation without understanding can create vulnerability. Access without safeguards can create risk."

Investor protection, she said, must evolve from a defensive function into a developmental one.

Sitharaman stressed that SEBI must move beyond a reactive approach to become more anticipatory in regulation.

She urged the regulator to institutionalise frequent consultations with global counterparts on issues such as cross-border fraud, AI in markets, sustainable finance disclosures and settlement interoperability.

"Indian regulation need not be an imitation of global regulation. But it must be in sustained dialogue with it," she said, adding that greater global understanding of SEBI's frameworks would strengthen foreign investor confidence.

(With inputs from ANI)