The Reserve Bank of India and Insurance Regulatory and Development Authority of India are not in favour of allowing banks and insurance companies to participate in the commodity derivatives market at present, Tuhin Kanta Pandey, chairman of the Securities and Exchange Board of India (SEBI), said on Monday.
Speaking on the sidelines of the IMC Capital Markets Conference at the NSE, Pandey said both regulators have a “valid rationale” for not being favourably inclined towards the segment.
Last year in September, the markets regulator said it would engage with the government to enable banks and pension funds to trade commodities to give a boost to the market.
“They were engaged with them and they had their rationale that at this moment, they do not feel it is the right time,” Pandey said, adding that insurance is a long-term product, so commodity derivatives may not work.
GST concerns
SEBI has made a representation to the government to resolve structural Goods and Services Tax (GST) issues faced by investors trading in physically settled commodity derivatives, Pandey said.
“We have proposed that there could be an Integrated GST mechanism instead of the State GST. The warehouses could be located in various places. So they have to take registration from all the states and for the purpose of delivery. It is really cumbersome,” he said.
AI risks
The SEBI chief also raised concerns on the emerging risks from advanced artificial intelligence models such as Mythos AI model, as such tools could test market resilience.
“SEBI will soon issue an initial advisory on risks emanating from such models and AI-led vulnerability detection tools,” Pandey said, adding that the regulator is in discussions with stakeholders.
He said that increasing interconnectedness in financial markets amplifies systemic risks. “Algorithms may move faster than human controls. Digital platforms may become channels for fraud. This is especially relevant as next-generation AI models become more powerful. While these tools can help identify weaknesses faster, they can also exploit vulnerabilities at speed and scale,” he said.
CKYC 2.0
On the progress of CKYC 2.0, which is aimed at enabling a unified know-your-customer system across the financial ecosystem, Pandey said the framework is under preparation.
“The CKYC 2.0 is now under preparation. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India is doing it and we are all contributing to it. We had a meeting last week with CERSAI for identifying all the different points which need to be addressed. We may have something by end-July,” he said.
CERSAI is the Central Registry of Securitisation Asset Reconstruction and Security Interest of India. He further said that issues such as lack of clarity on authentication of data within the system also need to be addressed as part of the revamp.
Published on May 4, 2026