SEBI Chairman Says RBI and IRDAI Are Not Keen to Let Banks and Insurers Trade Commodity Derivatives, Citing 'Valid Rationale', as MCX Shares Fall 3.4% on Worries About Institutional Liquidity

India's securities regulator has said that two other financial regulators are not keen on a change that market participants have sought. Speaking at the IMC Capital Market Conference 2026, the chairman of the Securities and Exchange Board of India (SEBI), Tuhin Kanta Pandey, said that the Reserve Bank of India (RBI), which supervises banks, and the Insurance Regulatory and Development Authority of India (IRDAI), which supervises insurers, are not keen on allowing the entities they regulate to invest in commodity derivatives. This article reports the remarks as described in two news reports. It does not have a transcript, so the quotations are those given by the reports.

When and where the remarks were made

A report by Moneylife dated May 4, 2026 says Pandey spoke on a Monday, in a fireside chat and a keynote address at the conference. A second report, by Kotak Neo, carries an update stamp of May 22, 2026, and also says he spoke "on Monday". The second date is an update stamp on that page, so this article uses May 4, 2026 for the speech, which is the Moneylife report's date. Readers who need a precise date should check SEBI's own materials.

What Pandey said

According to Moneylife, Pandey said the RBI and IRDAI are not keen on letting banks and insurers invest in commodity derivatives, and that they have "some valid rationale for it". He said the concerns partly stem from the nature of these institutions. In the report's account, an insurer's long-term liabilities may not match the volatile, short-term character of commodity derivatives. The report adds that market participants want more institutional participation to improve liquidity and price discovery, but that a lack of alignment among regulators is a constraint.

He also said the pension regulator has examined the issue. The report says he did not say whether a final decision had been made. On the basis of these reports, the pension regulator's position is not known, and this article does not describe it.

The background

Kotak Neo's report says that in September SEBI outlined an agenda to strengthen commodity markets. That agenda included talks with policymakers about letting banks and pension funds trade derivatives, which the report describes as a way to bring in long-term capital and improve price discovery. The report notes that trading in India's commodity derivatives market is largely driven by proprietary desks, brokers and smaller participants. The comments are therefore notable because they relate to a proposal SEBI had itself described, and they indicate that SEBI cannot act alone on it. The reports do not say that the proposal has been formally rejected or withdrawn, and they do not give any timetable.

Market reaction

Kotak Neo reports that shares of Multi-Commodity Exchange of India, the listed commodity derivatives exchange, fell 3.4% in early trade. At 2:02 p.m. they traded at ₹2,910.70 on the National Stock Exchange. The report attributes the fall to investor concern that the absence of large institutional players could limit liquidity and volume growth on domestic commodity exchanges. That is the report's interpretation rather than a statement from the exchange, and share prices can move for several reasons on a given day. This article does not offer a view on the shares.

Other remarks at the conference

The reports describe several other points. Pandey said that "a forward-looking regulation is not necessarily light-touch regulation. It is smart regulation", and described SEBI's approach as proportionate and risk-based, supporting growth with guardrails. He said SEBI would soon issue an initial advisory on the risks from AI models and AI-led tools that detect vulnerabilities; Kotak Neo's report says the advisory is aimed at preparing market intermediaries for potential system vulnerabilities and will focus on operational safeguards and risk management. Moneylife adds that a unified know-your-customer framework known as CKYC 2.0 could have a framework ready by the end of July, and that Pandey called for deeper corporate bond markets, stronger market integrity and a proposed nationwide investor-awareness initiative called "Project Jagrook". These points are separate from the commodity derivatives question.

What the reports do not say

The reports contain no figures from SEBI, the RBI or IRDAI on how much money banks or insurers might invest, and they do not quote the RBI or IRDAI directly. The only account of those regulators' views is Pandey's. The reports also do not say whether the pension regulator has taken a position. The Moneylife page includes a reader comment that SEBI flagged 90% retail losses in futures and options trading; the article itself does not state this, and the claim is unverified, so it is not repeated as fact here.

How to read the remarks

Three points are worth keeping in mind. First, this is one regulator describing the views of two others, not a joint announcement, so the RBI and IRDAI may express their positions differently. Second, the stated reason for insurers is a mismatch between long-term liabilities and volatile instruments, which is a reason about the institution rather than about commodity markets in general. Third, the reports do not suggest any change to who may trade commodity derivatives today.

What to watch

Readers may watch for any formal communication from the RBI, IRDAI or the pension regulator, any SEBI consultation on widening participation, and the AI-risk advisory that Pandey said would be issued. This article is a summary of news reports and is not investment advice.