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Sebi, RBI explore steps to shield companies from market volatility

April 06, 2026 4 min read Economics Polity & Governance GS Paper 3 (Indian Economy) GS Paper 2 (Governance and Institutions)
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What Happened

  • India's market regulator SEBI is in discussions with industry bodies to navigate financial market volatility triggered by the West Asia conflict.
  • The RBI is simultaneously preparing policy tools to counter the economic spillover from the conflict.
  • Proposed measures include extensions for listed companies to meet minimum public shareholding (MPS) norms and emergency credit and liquidity support for MSMEs and exporters.
  • The Confederation of Indian Industry (CII) praised the swift, coordinated response from the government and the RBI, and released a 20-point policy agenda calling for a unified fiscal, financial, and trade response.
  • SEBI Chairman Tuhin Kanta Pandey underlined that India's capital markets are deepening and becoming more resilient, urging investors to remain patient during volatility.

Static Topic Bridges

SEBI: Establishment, Powers, and Functions

The Securities and Exchange Board of India (SEBI) was established as an executive body on April 12, 1988, and granted statutory powers through the SEBI Act, 1992. It functions as the apex regulator of India's securities and commodity markets, under the administrative oversight of the Ministry of Finance.

  • SEBI holds three powers in one body: quasi-legislative (drafts regulations), quasi-executive (investigates and enforces), and quasi-judicial (passes orders and rulings).
  • Key functions: protecting investor interests, developing the securities market, regulating stock exchanges, mutual funds, investment advisers, credit rating agencies, and foreign portfolio investors (FPIs).
  • SEBI can impose penalties, issue cease-and-desist orders, debar market participants, and compel restitution to defrauded investors.
  • Appeals against SEBI orders lie with the Securities Appellate Tribunal (SAT) and thereafter with the Supreme Court.

Connection to this news: SEBI's proposal to extend minimum public shareholding compliance deadlines is a classic quasi-legislative intervention — temporarily relaxing a market norm to prevent distressed selling by promoters during a period of externally induced volatility.

Minimum Public Shareholding (MPS) Norms

SEBI mandates that all listed companies maintain a minimum public (non-promoter) shareholding of 25% for most companies, and 10% for public sector undertakings (PSUs). This rule ensures float, prevents excessive promoter dominance, and protects price discovery. Non-compliance can attract trading suspension and penalties.

  • The 25% MPS requirement was made mandatory through SEBI (LODR) Regulations, 2015.
  • Companies failing MPS norms must achieve compliance within prescribed timelines; SEBI has previously granted extensions during stressed market periods (e.g., the COVID-19 pandemic in 2020).
  • Listed government companies (PSUs) had a separate lower 10% MPS threshold, with the possibility of further exemptions.
  • In periods of sharp market falls, forced divestiture to meet MPS can depress prices further — hence the logic for temporary extensions.

Connection to this news: The proposed MPS extension prevents a perverse feedback loop where volatility forces promoters to sell at depressed prices, further depressing prices and worsening market instability.

RBI's Emergency Credit Tools: TLTRO and Targeted Liquidity

When specific sectors face liquidity stress (as opposed to system-wide stress), the RBI deploys targeted instruments rather than broad policy rate changes. Targeted Long-Term Repo Operations (TLTROs) allow the RBI to provide low-cost, long-tenor funds to banks on the condition that the funds be deployed in specified sectors or instruments, ensuring liquidity reaches stressed segments.

  • TLTROs were first used extensively during the COVID-19 pandemic in 2020 to channel liquidity into corporate bonds, NBFCs, and stressed sectors.
  • The RBI can also create Special Refinance Windows for priority sectors through NABARD, SIDBI, and NHB.
  • A potential ECLGS-style (Emergency Credit Line Guarantee Scheme) instrument for conflict-affected MSMEs and exporters is being discussed — similar to the pandemic-era ECLGS that provided ₹3.69 lakh crore in collateral-free credit.
  • The RBI's forex swap windows for oil PSUs are designed to reduce pressure on the open market for US dollars, preserving reserves and limiting rupee depreciation.

Connection to this news: The proposed measures for MSME and exporter support follow a proven playbook — targeted liquidity and credit guarantees that address sector-specific stress without distorting overall monetary conditions.

Key Facts & Data

  • SEBI established: April 12, 1988 (executive body); statutory powers granted January 30, 1992
  • MPS requirement: 25% for private sector listed companies; 10% for PSUs
  • CII released 20-point policy agenda for coordinated response to West Asia crisis
  • ECLGS (pandemic precedent): ₹3.69 lakh crore disbursed to ~1.2 crore MSMEs
  • SEBI Chairman: Tuhin Kanta Pandey (as of 2026)
  • Key proposed tools: CL-ECLGS (conflict-linked emergency credit), MSME debt moratorium, TLTRO for affected sectors, forex swap window for oil PSUs