As the first-generation regulator in India’s post-liberalisation financial system, SEBI’s 38-year supervisory horizon marks a long journey in cultivating regulatory acumen and institutional maturity. It has introduced forward-looking rules, set market standards, and taken enforcement actions that built deeper, more resilient and more trusted markets.
But markets have become more complex, interconnected and technology-dependent. The risk is no longer merely of a bad trade or a rogue intermediary; it is of contagion across platforms, products and participants. That raises a more consequential question: how should SEBI’s own effectiveness, agility and accountability be assessed?
A regulator must respond to emerging risks without mistaking activity for achievement. The test is whether regulation improves market outcomes while preserving room for innovation.
Critically, initiatives that prioritise less material or vanity aspects of market development-largely disconnected from ground realities and accountability concerns can impose heavy burden on market intermediaries while constraining supervisory capacity. In recent times, rigid regulatory stances—such as the T+0 settlement, qualified stock broker framework, and shifting derivatives regulations—have yielded suboptimal outcomes, while more critical issues, such as rationalising mutual fund expenses framework, remained neglected for a long period after the consultation.
Sketchy Evaluation Framework
The central government and Parliament are ultimately responsible for regulatory oversight. They must assess whether SEBI is advancing the larger objectives of economic policy: market stability, efficiency, trust and accountability.
Under the SEBI Act, SEBI is required to submit prescribed returns, statements, and particulars on existing and proposed programmes for securities market development to the central government. It must also submit an annual report within ninety days, later laid before parliament. The SEBI (Annual Reports), Rule 1994 mandated annual reports covering activities, policies, programmes, mandated functions, operational review, and organisational matters. The 2021 Rules required detailing of policy developments, market trends, risk management across segments and intermediaries, investor protection, enforcement, technology adoption, international engagements and organisational aspects.
SEBI’s recent annual reports, averaging 250 pages, appear overloaded with segmented statistics, policy snapshots, and ambiguous outlook. Despite emphasis on data-driven reporting, they fall short in analytical depth, performance indicators, and peer benchmarking. Beyond annual reports, the speeches, press releases, and occasional statistical studies offer limited thematic insights, providing insufficient basis for evaluation of regulatory performance and effectiveness.
More importantly, both quantitative and qualitative evaluation remain thin. Core functions—licensing, rulemaking, risk management, monitoring, enforcement, market development, and investor protection— are described, but not consistently assessed against comparable outcomes.
Self-review Not Enough
Chapter 2 of the proposed Securities Markets Code, 2025, places responsibility on SEBI to review its own performance, including the proportionality and effectiveness of its regulations. It also envisages research, regulatory impact assessments, performance audit of securities markets and service providers, and publication of findings. After examining the bill and related hearings, the Committee submitted its report to the Lok Sabha and Rajya Sabha on July 23, 2026, without proposing a change to this provision.
That is a useful beginning, but self-assessment cannot be the final safeguard. A regulator should review its own work; it should not be the sole judge of it.
Despite the prominence of “ease of doing business” in the financial-sector regulatory discourse since the 2023-24 Budget, accountability across supervisory frameworks remains patchy. As the Securities Markets Code is revised after the Standing Committee’s review, India has an opportunity to create a stronger framework for regulatory governance.
That framework should follow a simple principle: minimum necessary intervention, maximum measurable impact. It should be risk-based, principle-driven and data-led—but also independently assessed. Performance-linked supervision must be tied to outcomes, not to the number of circulars issued, inspections conducted or penalties announced.
Evaluaton Contours
SEBI’s statutory charter offers the starting point: investor protection, fair and efficient markets, market development, stability and systemic resilience. The evaluation framework should move beyond market statistics and instead measure whether supervision has improved these outcomes.
Market stability and resilience: Business and operational resilience of intermediaries, recovery and resolution interventions, critical market systems’ resilience, glitches and disruptions, data and cyber breaches, threat protection, incident-free settlement cycles, settlement defaults.
Market efficiency: Benchmarking of enhancement in market liquidity, spread, volatility, execution quality, transaction costs, capital raising costs, capital reorganisation and liquidation costs, issuers compliance costs.
Cost effectiveness: Direct and indirect compliance cost reduction, rationalised processes and practices, redundant and overlapping reporting, rationalisation or scrapping of decrepit rules across segments of intermediaries.
Enforcement action: Speed and responsiveness to perceived abuse or manipulation, investigation timeliness and aging, soundness and validity of orders, overturned and modified orders, recovery rate of penalty and misappropriated money.
Rulemaking effectiveness: Cost-benefit and opportunity cost analysis, pre and post regulatory impact assessment, adaptability to stakeholders’ feedback on changes and enhancements, implementation gap analysis, adaptability to factor emerging risks.
Innovation: SupTech-led automated compliance checks, codification of regulations, pull-driven regulatory data, disclosure and filing analysis, risk scoring, market abuse and anomaly detection, communication and sentiment surveillance, introduction of innovative products and models.
Investor protection: Timeliness and aging of complaints resolution, compensation and penalty recovery rate, access, inclusiveness and intuitiveness of investor education, improvement in investor awareness and confidence.
Inter-regulatory alignment: Consultation and coordination, joint policy framing, market development, foreign investment facilitation, systemic enablement, joint enforcement, domestic and cross-border information sharing.
Perceived fairness: Clarity and consistency of regulatory communication, transparency in regulatory interactions, responsiveness to feedback from market participants on regulatory priorities, qualitative trust in regulatory deliverance.
Looking Ahead
India’s Vision 2047 ambitions require a regulator that is not merely active, but accountable for results. SEBI needs a comprehensive performance framework that covers its full mandate and measures the difference its interventions make.
A credible framework would make regulation more participatory, supervision more disciplined and outcomes more visible.
Parliamentary scrutiny, independent audits, peer-regulator comparisons and external expert review should complement SEBI’s own assessments.
The objective is not to second-guess the regulator’s every decision. It is to ensure that a powerful market institution is held to equally exacting standards of performance, proportionality and public accountability.
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