MUMBAI: The Securities Markets Code (SMC), 2025, could become a template for regulatory governance well beyond India’s capital markets, offering a model that may be replicated across the country’s wider financial and administrative ecosystem, according to the government’s Economic Survey for fiscal year 2025-26 (FY26), tabled in Parliament on Thursday.
Introduced in the Lok Sabha in December 2025, the SMC delivers on a promise first made in the Union Budget for 2022 by consolidating the Securities Contracts (Regulation) Act, 1956, the Sebi Act, 1992, and the Depositories Act, 1996 into a single, unified framework. Through the Code, the government aims to overhaul the regulatory architecture, strengthen investor protection, and support capital formation at a scale that keeps pace with the needs of a rapidly growing economy.
“Its (SMC’s) principles-transparency, consultation, proportionality, and accountability-could guide the creation of other regulators or the reform of existing ones,” said the Economic Survey. “The ultimate test will be how deeply these governance standards embed themselves into everyday regulatory practice and whether they inspire similar transformation across India’s regulatory landscape.”
The Code introduces several new norms that are expected to make the Securities and Exchange Board of India’s (Sebi) functioning more transparent, efficient, and investor-friendly.
Interim orders, which historically took several years, are capped at 180 days, with extensions limited to two years. Investigations and inspections now require written authorization, defined timelines, and recorded reasons for extensions, while enforcement actions must quantify investor harm or unlawful gains.
It also proposes that investigations cannot be initiated more than eight years after an alleged violation, introducing greater predictability into the system.
A feature highlighted by the survey is the elevation of market infrastructure institutions (MIIs), such as stock exchanges, clearing corporations and depositories. MIIs are to be positioned on a formal statutory status as bodies performing public functions, in contrast to their earlier footing as mere regulated entities.
They are now recognized as quasi-regulatory bodies that can be delegated powers such as intermediary registration, provided they follow principles of natural justice, confidentiality and procedural fairness. Under the SMC, MIIs must be formally registered rather than recognised, granting them statutory status and placing them under continuing supervisory and governance requirements.
“Registration confers legal status and establishes accountability mechanisms, including the possibility of supersession in cases where governance fails,” said the survey.
Transparency is reinforced through a publicly accessible electronic database of regulations, orders and instructions in the SMC. Sebi is required to conduct periodic impact assessments and performance audits, and disclose these results.
The SMC mandates regular reviews of regulatory proportionality and effectiveness, preferably through independent external evaluations, a practice Sebi has already applied to market infrastructure institutions but will now need to apply to itself.
It also mandates the expansion of the Sebi board. The number of members appointed by the central government will increase to 15 from nine, with at least five full-time members. The move is intended to improve accountability within India’s market regulator.
The Code is currently under discussion with the parliamentary standing committee on finance led by Bharatiya Janata Party lawmaker Bhartruhari Mahtab.
