SEBI Says RBI, IRDAI Oppose Commodity Derivatives Exposure

Shares of Multi Commodity Exchange of India (MCX) declined by up to 3.5% on May 4 after Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey said 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 invest in commodity derivatives.

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At around 1:20 pm, MCX shares were trading 1.5% lower at ₹2,925.8 apiece on the NSE. The statement comes months after SEBI said in September 2025 that it would engage with the government and other regulators to broaden participation in commodity markets by permitting banks and pension funds to trade in commodity derivatives.

RBI And IRDAI Not In Favour

Speaking on May 4, Pandey said the RBI and IRDAI had expressed reservations over allowing regulated entities such as banks and insurance firms to participate in commodity derivative markets.

According to Pandey, commodity-linked instruments may not fit the investment structure followed by insurance companies, which generally focus on long-term assets.

He also said the pension fund regulator had examined the issue of permitting pension funds to invest in commodity derivatives. However, no final decision has been announced so far.

Pandey added that SEBI is unlikely to pursue the proposal further at this stage due to the absence of broader regulatory support.

Commodity Market Expansion Proposal

SEBI had earlier proposed widening participation in commodity derivatives to improve market depth and liquidity.

Commodity derivatives are financial contracts linked to commodities such as crude oil, gold, silver and agricultural products. These instruments are traded on exchanges, including MCX.

Market participants had expected that the entry of banks, insurers and pension funds could increase institutional participation in the segment.

However, the latest comments from the SEBI chairman indicate that the proposal may remain on hold for now.

SEBI To Issue AI Risk Advisory

Separately, Pandey said SEBI will soon issue an advisory to market intermediaries regarding risks linked to artificial intelligence tools and emerging technology systems.

According to the chairman, the regulator is engaging with stakeholders on possible vulnerabilities associated with AI-based platforms and systems.

He said intermediaries are being asked to remain prepared for technology-related risks that may impact financial market operations.

SEBI has been increasing its focus on technology governance and risk monitoring as the use of AI tools expands across financial services and trading platforms.