Tuhin Kanta Pandey lays down SEBI’s ‘optimal regulation’ roadmap — 5 key highlights

Securities and Exchange Board of India (SEBI) Chairperson Tuhin Kanta Pandey on Friday laid out the regulator’s philosophy on market oversight, stressing that SEBI’s role is rooted in achieving balance rather than imposing regulatory excess. Speaking at the Mint Annual BFSI Conclave 2025, Pandey said India’s capital markets require “optimal regulation” — firm enough to protect investors, yet flexible enough to allow innovation and growth.

Addressing the 18th edition of the conclave, Pandey underlined that regulation should be viewed as a means rather than an objective in itself. Excessive rules, he cautioned, can choke innovation and slow economic momentum, while weak oversight risks creating systemic vulnerabilities. SEBI’s approach, he said, is to strike the middle ground.

As part of this effort, the regulator has initiated a broad review of regulations governing stockbrokers and mutual funds. The objective is to make the rules more objective, contemporary and easier to comply with, while simultaneously strengthening safeguards for investors.

In a fireside chat with Mint Editor-in-Chief Ravi Krishnan, Pandey expanded on this theme, noting that India’s markets have significant untapped potential if regulation evolves in line with changing conditions. Regulation, he said, must serve a purpose that itself shifts as markets mature and risks change.

Pandey flagged what he described as the “stickiness” of regulations — a tendency for rules to remain in force long after the original context that led to their introduction has changed. In many cases, he noted, regulations lack sunset clauses or periodic reviews, resulting in compliance burdens for the entire ecosystem even when the original intent was to address misconduct by a limited set of players.

This problem, Pandey said, is not unique to India but is increasingly recognised globally. Several countries that once pushed aggressive re-regulation are now reassessing their approach, acknowledging the economic and operational costs of overly complex regulatory frameworks. A global shift towards selective deregulation, he observed, reflects this reassessment.

While acknowledging the necessity of regulation, Pandey said there is always scope to simplify and refine rules to make them more effective. He cited examples where prolonged penalties or overlapping enforcement actions can create the perception of double punishment, underscoring the need for clarity and consistency in regulatory frameworks.

Looking ahead, Pandey said SEBI is working to streamline regulations without raising risks. One key initiative under consideration is the introduction of common regulations for fund managers, which would separate industry-level rules from those governing individual managers. Such a move, he said, could reduce compliance costs and shorten approval timelines, improving efficiency without diluting investor protection.

Overall, Pandey’s remarks signalled SEBI’s intent to move towards smarter, more adaptive regulation — one that supports market development while remaining vigilant against emerging risks in a rapidly evolving financial ecosystem.