SEBI Chief Says RBI and IRDAI Hesitant to Let Banks, Insurers Trade Commodity Derivatives

India's effort to widen participation in commodity derivatives markets has stalled, with the country's top financial regulators opting to stay on the sidelines for now. Speaking at a capital markets conference, Securities and Exchange Board of India chairman Tuhin Kanta Pandey said both the Reserve Bank of India and the Insurance Regulatory and Development Authority of India have reservations about allowing banks and insurance companies to participate in commodity derivatives trading. The markets regulator had earlier signalled it would engage policymakers to explore broadening the investor base in commodities, including permitting banks and pension funds to enter the segment, a move that could deepen liquidity and improve price discovery. However, those discussions have not translated into regulatory support, with the banking and insurance regulators judging that now is not the right time. The cautious stance reflects concerns about the risks that commodity price volatility could pose to institutions whose core mandates centre on deposit-taking and policyholder protection. For India's commodity exchanges, the reluctance limits a potential source of institutional depth, leaving participation concentrated among existing traders and hedgers while regulators weigh financial-stability considerations against the goal of developing more mature derivatives markets.