RBI, IRDAI not in favour of banks, insurers' entry into commodity derivatives: SEBI chief

MUMBAI: The Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority of India (IRDAI) are not in favour of allowing banks and insurance companies to participate in the commodity derivatives market, Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said on Monday.

Speaking on the sidelines of the IMC Capital Markets Conference at the NSE, Pandey said both regulators have a “valid rationale” behind their stance and are not favourably inclined towards the segment at present.

He noted that insurance, in particular, is a long-term business, and there are concerns about how commodity derivatives would align with such investment horizons.

"SEBI did not receive a positive response from the banking and insurance regulators during its engagements due to certain concerns surrounding the segment," Pandey added.

“Algorithms may move faster than human controls, and digital platforms can become channels for fraud,” he said, adding that next-generation AI tools, while useful for identifying weaknesses, can also exploit vulnerabilities at scale and speed.

On the progress of CKYC 2.0, aimed at enabling a unified KYC system across the financial sector, Pandey said the initiative is currently under development.