Summary: There is an unmistakable change in India’s regulatory architecture. Traditional heavyweight institutional regulators are gradually introducing measures to move away from a rigid enforcement system to a more trust-based framework. Enforcement actions of two key regulators – the Securities and Exchange Board of India (SEBI) and the Reserve bank of India (RBI) appear to be softening. The finance ministry’s move towards deregulation was also evident in Budget 2025, where the formation of a committee to overhaul non-financial sector regulations was announced. The intention behind this announcement was to shed regulatory load and nurture an environment where enterprises can thrive. Simultaneously, newer watchdogs and their enforcement instincts are emerging as powerful force. They are turning out to be more assertive, which thwarts the effort to balance systemic resilience with enterprise growth.
In the first instance, the change is visible. Both SEBI and the RBI have brought in career bureaucrats to helm the two institutions, signaling the direction these institutions are taking. Being strategic thinkers, their administration regime is likely to be more market facing, replacing intellectually-stimulating-but-highly-regulated oversight with optimal governance. On the financial services side, Both SEBI and the RBI are adopting a collaborative approach by engaging with the stakeholders before introducing new norms. They are floating discussion papers and concept notes to gather feedback. This model of regulating is far removed from the previous decade’s confidentiality-cloaked approach to regulation. SEBI has been pushing for market transparency so that information affecting share prices can be disclosed swiftly. Through its amendments to LODR and insider trading, the market regulator has ensured that information is not selectively disclosed and no investor is left out of the information loop. In the interest of all class of investors, SEBI has placed great emphasis on well-rounded public communication.
The second instance, i.e., the emergence of new-age regulators as new power centers proves that regulatory enforcement isn’t dormant. While a watchdog like the Serious Fraud Investigation Office (SFIO) has taken a backseat, the trio of the Ministry of Corporate Affairs (MCA), National Financial Reporting Authority (NFRA) and the National Company Law Tribunal have risen to prominence. Particularly, the NCLT’s economic footprint has become disproportionately powerful vis-à-vis its stated legal role, and has a big impact on corporate India. The evolving situation demands that corporates tread this landscape with nuanced strategy and stand up to NCLT’s assertiveness.
Besides these three, the income-tax department too has sharpened its arsenal in recent years. The offshore promoter structures in particular have come under its scrutiny. Post Covid, many promotors have relocated to the Middle East, triggering questions on claims of residency and economic substance are commonplace. The tax authorities along with the RBI also question structures involving ODI, FEMA and GAAR framework.
Lastly, technology governance has not escaped regulatory attention. It plays a big role in the quiet recalibration of the regulatory ecosystem. Both SEBI and the RBI have robust cyber resilience framework in place. These regulations cover entire service ecosystem where both the regulated entity and the service providers share accountability.