Finance Minister advocates ‘anticipatory’ regulation in capital markets

At SEBI's 38th Foundation Day event held in Mumbai on April 25, 2026, the Union Finance Minister delivered the keynote address calling for a fundamental shif...

What Happened

At SEBI's 38th Foundation Day event held in Mumbai on April 25, 2026, the Union Finance Minister delivered the keynote address calling for a fundamental shift in regulatory philosophy — from reactive to "anticipatory" regulation.
The Finance Minister urged SEBI to prescribe common KYC norms and drive simplification and digitalisation of the KYC process across all securities market intermediaries, creating a seamless, secure, and portable KYC experience for investors.
Cybersecurity was flagged as the most pressing near-term challenge: a successful cyberattack on a major exchange, depository, clearing corporation, or large broker could disrupt markets at a national scale.
The Finance Minister called for deepening the corporate bond market and strengthening SEBI's role in anticipating risks from AI-driven market abuse, cross-border fraud, and sustainable finance disclosures.
SEBI was urged to institutionalise frequent consultations with global counterparts on settlement interoperability and cross-border regulatory harmonisation.

Static Topic Bridges

SEBI: Establishment, Statutory Powers, and Functions

SEBI was established on 12 April 1988 as an executive body under the Ministry of Finance. It was granted statutory status on 30 January 1992 through the Securities and Exchange Board of India Act, 1992 (Act No. 15 of 1992). The preamble of the Act defines SEBI's mandate as protecting the interests of investors in securities, promoting the development of, and regulating, the securities market. SEBI exercises quasi-legislative (drafting regulations), quasi-executive (investigation and enforcement), and quasi-judicial (passing orders) powers — making it a uniquely powerful regulatory body.

Established: 12 April 1988 (executive); statutory status from 30 January 1992
Governing statute: SEBI Act, 1992 (No. 15 of 1992)
Administrative domain: Ministry of Finance, Government of India
Headquarters: Mumbai (with regional offices in Delhi, Kolkata, Chennai, Ahmedabad)
Three-in-one powers: quasi-legislative + quasi-executive + quasi-judicial
Regulates: equity markets, debt markets, mutual funds, FPIs, alternative investment funds, commodity derivatives, and more

Connection to this news: SEBI's 38th Foundation Day marks the anniversary of its statutory constitution. The Finance Minister's address used the occasion to set a forward-looking regulatory agenda.

Anticipatory vs. Reactive Regulation

Traditional financial regulation is reactive — rules are written in response to observed market failures or crises. "Anticipatory regulation" is a forward-looking approach that identifies and addresses emerging risks before they materialise into systemic events. This is particularly relevant in the context of rapidly evolving financial technologies, AI-driven trading, and interconnected global markets where the speed of contagion has increased dramatically.

Reactive regulation: responds to events post-facto (e.g., Harshad Mehta scam of 1992 led to SEBI strengthening)
Anticipatory regulation: proactive scanning of emerging risks (AI market manipulation, cyber threats, crypto assets)
Global parallel: the Financial Stability Board (FSB) and IOSCO promote anticipatory risk frameworks internationally
Indian context: India's capital markets are expanding rapidly (NSE is world's largest derivatives exchange by volume)

Connection to this news: The Finance Minister's call to shift SEBI towards anticipatory regulation reflects the growing complexity of Indian capital markets and the need to pre-empt risks from AI, cyber threats, and cross-border fraud rather than react to them.

KYC Framework in Indian Financial Markets

Know Your Customer (KYC) is a mandatory due diligence process for all financial intermediaries to verify the identity and address of clients. In India's securities market, SEBI introduced KYC Registration Agencies (KRAs) under the SEBI (KYC Registration Agency) Regulations, 2011 to centralise KYC data and eliminate duplication across intermediaries. Under this framework, an investor who completes KYC through one SEBI-registered intermediary does not need to repeat the process with another.

KRA Regulations enacted: 2011 (SEBI KYC Registration Agency Regulations, 2011)
KRAs store, safeguard, and retrieve KYC documents submitted by SEBI-registered intermediaries
In-Person Verification (IPV) completed by one intermediary can be relied upon by others
Current friction: KYC norms differ across financial sectors (securities vs. banking vs. insurance), requiring multiple verifications
Finance Minister's ask: single, portable, digital KYC across all financial products

Connection to this news: The Finance Minister's call for simplified, standardised KYC directly builds on the existing KRA architecture — proposing to extend portability across financial sectors (not just securities), making the investor experience seamless.

Corporate Bond Market in India

India's corporate bond market remains underdeveloped relative to its equity market and to peer economies. Outstanding corporate bonds are approximately 17-18% of GDP (compared to 120%+ in the US). This limits financing options for infrastructure and long-term projects, forcing over-reliance on bank credit. SEBI has periodically taken steps to deepen this market, including mandatory listing requirements for large private placements and the development of a repo market for corporate bonds.

India's corporate bond market size: approximately 17-18% of GDP [Unverified — precise current figure]
Key challenge: limited secondary market liquidity; most bonds are held to maturity
SEBI measures: Electronic Book Provider (EBP) platform for issuances; repo in corporate bonds
Comparison: US, South Korea, and China have significantly deeper corporate bond markets
Government bonds dominate India's debt market; corporate bonds lag

Connection to this news: The Finance Minister's call to deepen the corporate bond market is part of a broader vision of reducing India's dependence on bank-intermediated credit and channeling long-term savings directly into productive investment.

Key Facts & Data

SEBI established: 12 April 1988 (executive); statutory status: 30 January 1992
Governing Act: SEBI Act, 1992 (No. 15 of 1992)
SEBI Foundation Day 2026 edition: 38th
KRA Regulations enacted: 2011 (SEBI KYC Registration Agency Regulations)
SEBI's mandate: protect investors, develop and regulate securities markets
SEBI powers: quasi-legislative + quasi-executive + quasi-judicial
Finance Minister's 3 priority asks: (1) anticipatory regulation, (2) unified digital KYC, (3) deeper corporate bond market + stronger cybersecurity
Global benchmark body for securities regulation: IOSCO (International Organization of Securities Commissions)