Economic Survey views Sebi code as blueprint for regulatory reform

The Economic Survey 2025-26 said the Securities Markets Code, 2025, could become a model for regulatory governance beyond India’s capital markets. The Survey stated that the framework could influence reforms across the country’s wider financial and administrative ecosystem.

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The Survey was tabled in Parliament on Thursday as part of the Budget Session. This is ahead of the Union Budget 2026 on February 1. 

Background of the proposed Code

The Securities Markets Code was introduced in the Lok Sabha in December 2025. The Securities Market Code consolidates the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India Act, 1992, and the Depositories Act, 1996 into a single legislative framework.

The Survey stated that the Code fulfils a commitment made in the Union Budget 2022 and aims to overhaul the regulatory architecture, strengthen investor protection, and support capital formation.

Key governance principles

According to the Economic Survey, the Code is grounded in principles of transparency, consultation, proportionality, and accountability. The Survey said these principles could guide the creation of new regulators or the reform of existing ones across India’s regulatory system.

The Survey added that the effectiveness of the Code would depend on the extent to which these standards are embedded in day-to-day regulatory practices.

Changes to regulatory processes

The Code proposes several changes to SEBI’s regulatory functioning. Interim orders are capped at 180 days, with extensions limited to a maximum of 2 years. Investigations and inspections would require written authorisation, defined timelines, and recorded reasons for extensions.

The framework also requires enforcement actions to quantify investor harm or unlawful gains and proposes an eight-year limitation period for initiating investigations from the date of an alleged violation.

Role of market infrastructure institutions

The Survey highlighted the elevation of market infrastructure institutions such as stock exchanges, clearing corporations, and depositories. Under the Code, these entities would be granted statutory status as bodies performing public functions rather than remaining classified solely as regulated entities.

The Code proposes that such institutions may be delegated regulatory powers, including intermediary registration, subject to adherence to principles of natural justice, confidentiality, and procedural fairness.

Transparency and oversight measures

The Securities Markets Code mandates the creation of a publicly accessible electronic database of regulations, orders, and instructions. It also requires SEBI to conduct periodic impact assessments and performance audits and disclose the findings.

The Survey noted that the Code calls for regular reviews of regulatory proportionality and effectiveness, preferably through independent external evaluations.

Board expansion and legislative status

The Code proposes expanding the Sebi board by increasing the number of members appointed by the central government to 15 from 9, with at least 5 full-time members.
The Securities Markets Code is currently under consideration by the parliamentary standing committee on finance.