Just a month before the Union Budget, Tuhin Kanta Pandey was moved to the revenue department as secretary, where he oversaw some of the boldest tax-related announcements made in the Budget. And even before the Budget was passed in parliament, Pandey found himself heading the capital market regulator – Securities and Exchange Board of India (Sebi). Barely second months into his tenure as Sebi governor, Tuhin Kanta Pandey speaks with TNIE on some of the burning issues and latest developments related to capital markets. An excerpt:
In your early interactions with the media, you mentioned reviewing disclosure norms for SEBI employees. What progress has been made on that front?
It’s not just about disclosures for employees — the top priority is addressing conflict-of-interest issues for both board members, including the Chairperson, and employees. Currently, we have different frameworks: the Employee Service Regulations for staff and a Code of Conduct for board members. What we’re aiming for is a more comprehensive and unified framework — one that clearly defines conflict of interest, specifies when recusal is necessary, and distinguishes between internal disclosures and public disclosures. The committee’s terms of reference have been finalised, and it held its first full meeting on Thursday, May 1.
On your first day in office, you emphasised the need to restore confidence and integrity in SEBI. It’s been two months — how is employee morale? Under your predecessor, there were internal protests and unrest.
I would prefer not to comment on my predecessor. All I can say is that we are moving forward in a cohesive and positive manner. I have emphasised teamwork — one of the four “Ts” I spoke about. And by teamwork, I mean collaboration both within SEBI and with external stakeholders. In my view, regulations are most effective when they’re co-created with all relevant stakeholders, balancing competing interests. The regulator must also act as an arbitrator. For instance, if investor interests clash with those of intermediaries, we need to find common ground. Conversely, if investor interests are being safeguarded but the system is overly burdened, we need to reduce that burden — without compromising investor protection.
Over the past three years, SEBI was seen as prioritising retail investors. But in recent months, there’s been a shift — now it seems to favor broader stakeholders over small investors.
It depends on the perspective. SEBI has three interconnected mandates: regulation, development, and investor protection. Balancing these is crucial. It’s not about more regulations — it’s about more effective ones. For example, we already have regulations for insider trading. The
focus now should be on enforcement — robust surveillance, effective resourcing, and prompt action — rather than creating more rules.
So, are you suggesting there’s been over-regulation?
Yes, in some areas, over-regulation exists — not just at SEBI, but more broadly. During my tenure as Revenue Secretary, I saw room to simplify tax laws. More regulation doesn’t necessarily equate to better oversight or effectiveness. In fact, excessive regulation can sometimes be counterproductive.
On the topic of regulation, SEBI recently tightened norms around F&O trading. There’s speculation about further tightening. Is that being considered?
No, we haven’t said there will be another round. What we’ve said is we’ll continue monitoring the data. The recent tightening was based on data — which we made public, along with a position paper to seek feedback.
The F&O market plays a vital role in liquidity, hedging, and price discovery. But a small portion — specifically, index options around expiry — had become highly speculative. That warranted caution.
Has F&O volume declined since the changes?
Yes. In the December 2024-March 2025 period, index option premium volumes are down 15% YoY, and notional volumes have declined 34%. However, compared to two years ago, there is an 11% rise in premium terms and 47% in notional terms. The number of individual investors trading on expiry days is down 12% YoY.
Is SEBI considering new eligibility criteria for F&O traders such as minimum net worth?
We’ve already increased lot sizes as a measure. Within a month, we plan to issue a circular outlining the limits. But no, we’re not looking at imposing a minimum net worth requirement at this stage.
You recently visited the US. What feedback did you receive from investors there?
The feedback was encouraging. Investors appreciated our engagement and our openness to practical issues. Our FPI outreach cell has been effective in addressing concerns — whether it’s about registration, forms, or regulatory coordination. A willingness to listen and engage creates comfort.
Did they raise concerns about the increased capital gains tax?
That’s a government policy matter, not within SEBI’s purview. The rate was unified at 12.5% for all, and that’s it. While SEBI doesn’t handle tax policy, we do what we can on related matters. Overall, sentiment toward India remains very positive.
Domestic investors now hold more Indian equities than FPIs — a first in 22 years. Is this a healthy trend? Some have raised concerns about over-financialisation of household savings.
If people are borrowing to invest in equities, that’s clearly a problem. But otherwise, individuals have the right to invest their savings as they see fit. The capital market should provide space for IPOs, help entrepreneurs build businesses, and support companies in raising funds. As long as this happens, markets are playing their role. Equities have delivered strong returns over 5, 10, even 30 years. The fact that domestic institutional investors have surpassed foreign ones — even slightly — shows the market is maturing and becoming less reliant on foreign capital.
The Gensol Engineering case raised serious concerns about corporate governance. Are independent directors failing to act when promoters engage in misconduct?
There will always be some egregious cases. But the key question is: how widespread are such issues? If too many cases emerge, that’s a systemic risk. Regulations can’t anticipate every scenario. They provide a framework, but not a guarantee.
Do SEBI penalties act as a deterrent in such cases?
Penalties exist, yet violations still happen. Fraud is a criminal offense and falls under several laws, including money laundering statutes — not just securities law. SEBI penalties apply as per the law, but what’s more important is prevention. There are boards, independent directors, auditors — layers of checks and balances. But sometimes, those checks fail.
There’s been a lot of concern around overvaluation of IPOs. Can SEBI intervene in such cases?
SEBI does not intervene in market valuation — that’s something the market itself must discover. We have a robust disclosure framework in place, including detailed information on P/E multiples, discounts, and other metrics. The book-building process, driven by merchant bankers and market participants, determines the price. We’re not going back to the era of the Controller of Capital Issues, which we moved away from long ago. Investors have access to plenty of information and independent research. It’s not SEBI’s role to dictate pricing — our job is to ensure transparency and fairness in the process.