SEBI chief says RBI, IRDAI not inclined to allow banks, insurers in commodity derivatives

Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (SEBI), on Monday (May 4) said the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI) are not inclined to permit banks and insurance companies to invest in commodity derivatives, citing regulatory concerns.Pandey said both regulators have expressed reservations about allowing such participation, particularly given the nature of risks involved.

He added that commodity derivatives may not align well with the long-term investment profiles of insurance companies.
“Commodity derivatives don’t make much sense for insurance firms, which typically focus on long-term investments,” he said, indicating that the current stance reflects the rationale of the respective regulators.No further engagement planned

The SEBI chief said the markets regulator will not pursue the matter further with RBI and IRDAI for now. “They have their rationale… we will leave it here,” he noted.Earlier push to broaden participation

SEBI had earlier indicated plans to engage with the government to enable wider participation in commodity derivatives, including by banks and pension funds, as part of efforts to deepen the commodities market.

Pandey said the pension fund regulator has also examined the issue, but did not specify whether a decision has been taken.

Advisory on AI risks

Separately, Pandey said SEBI will soon issue an advisory to market intermediaries on emerging risks from artificial intelligence tools, including those such as Anthropic’s “Mythos”. He said the regulator wants intermediaries to be prepared for potential system vulnerabilities as the use of AI expands in financial markets.