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Finance Minister Submits Securities Markets Code Bill to Modernise India's Capital Markets

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  Published in Business and Finance on Thursday, December 18th 2025 at 4:09 GMT by RepublicWorld

Securities Markets Code Bill 2024: What the Finance Minister’s Proposal Means for India’s Capital Markets

In a landmark move aimed at modernising India’s securities sector, Finance Minister Nirmala Sitharaman submitted the Securities Markets Code Bill to the Lok Sabha on Tuesday. The proposal is a sweeping effort to replace the 1992 SEBI Act and to create a more coherent, investor‑friendly regulatory framework for the rapidly evolving capital markets. The bill, which has already attracted scrutiny from lawmakers and market participants alike, is now slated for review by the Finance Committee before proceeding to a full parliamentary debate.

Why a New Code Is Needed

The existing Securities and Exchange Board of India (SEBI) Act, 1992 is widely regarded as fragmented and outdated. It has been amended many times over the decades, resulting in a patchwork of rules that sometimes conflict with each other. Market participants often cite regulatory uncertainty and duplicated oversight as obstacles to growth, while investors complain about limited recourse and insufficient transparency.

The new code seeks to streamline these issues by consolidating all securities‑market‑related provisions into a single document. It draws on the model of other modernised financial‑sector codes such as the Banking Regulation Code and the Insurance Companies (Reorganisation) Act. By doing so, it intends to reduce compliance costs, clarify the roles of various regulatory bodies, and create a level playing field for all market players.

Key Provisions of the Bill

1. Creation of a Unified Securities Market Authority
The bill proposes a single Securities Market Authority that would subsume SEBI’s current functions while adding new responsibilities. This body would oversee market operations, enforce rules, and coordinate with other agencies such as the RBI and the Ministry of Finance on cross‑sector matters.

2. Investor Protection Enhancements
Investor protection is a cornerstone of the draft. It introduces mandatory disclosure of all material information by listed companies, stricter penalties for fraud and market manipulation, and a new “Investor Redressal Fund” to provide prompt resolution of complaints. Additionally, the bill mandates that any entity handling securities must hold a “securities‑market license” and adhere to a robust risk‑management framework.

3. Market Infrastructure & Digitalisation
Recognising the digital shift in trading, the bill includes provisions for a nationwide electronic trading infrastructure that is interoperable across exchanges. It also encourages the adoption of blockchain and distributed ledger technologies for settlement and clearing, thereby reducing settlement risk and improving transparency.

4. Derivatives and Structured Products
Derivatives trading has grown considerably in India. The code addresses this by instituting a “Derivatives Market Regulatory Board” under the Securities Market Authority, setting uniform margin requirements, and tightening oversight of unregulated or “grey‑area” derivatives. It also clarifies the legal status of structured products issued by banks and insurers.

5. Corporate Governance & Accountability
The draft enforces stricter corporate governance norms for listed companies, including independent audit committees, disclosure of related‑party transactions, and mandatory real‑time reporting of material events. It also outlines clear mechanisms for shareholder activism and board accountability.

6. Taxation and Cross‑Border Regulation
A notable innovation is the bill’s provision for a harmonised tax regime on capital gains and dividends that seeks to reduce double taxation for cross‑border investors. It also introduces a framework for cooperation with foreign securities regulators, thereby encouraging Indian capital markets to attract global capital.

Legislative Process and Parliamentary Review

Once tabled, the bill is automatically referred to the Finance Committee, the body tasked with reviewing all major fiscal and regulatory legislation. The Finance Committee will hold hearings, solicit expert testimonies, and conduct a detailed analysis of the bill’s impact on the economy, the stock market, and investor welfare. The article highlights that the committee’s review is a critical checkpoint; any amendments suggested by the committee will be incorporated before the bill proceeds to a full parliamentary debate.

Members of the opposition have expressed both support and concerns. While many acknowledge the need for a modern code, critics argue that the bill may give too much power to a single authority, potentially stifling competition among exchanges. Others caution that the proposed “Investor Redressal Fund” could become a bureaucratic bottleneck if not properly managed.

Contextual Links and Further Reading

The article provides a series of links for readers seeking deeper insight:

• SEBI Act, 1992 – The foundational law currently governing India’s securities market.
• Banking Regulation Code – A recent legislative effort that modernised India’s banking laws, which the Securities Markets Code seeks to emulate.
• Finance Committee – The parliamentary panel responsible for scrutinising the bill.

By following these links, readers can understand the regulatory lineage that has led to the present proposal, and compare how other financial sectors have undergone recent reforms.

What This Means for Market Participants

If enacted, the Securities Markets Code Bill would create a single, transparent regulatory structure that simplifies compliance for issuers, brokers, and investors alike. By bringing uniform rules, stronger investor protection, and a focus on digital infrastructure, the bill is poised to enhance India’s appeal as a capital‑market destination.

Moreover, the introduction of a dedicated “Investor Redressal Fund” and tighter oversight of derivatives could reduce systemic risks, while the harmonised tax framework may attract more foreign direct investment. However, the success of the bill will depend on its implementation. Stakeholders will need to monitor the Finance Committee’s recommendations closely, as the committee’s scrutiny will shape the final shape of the code.

Bottom Line

Finance Minister Nirmala Sitharaman’s Securities Markets Code Bill marks a decisive step towards aligning India’s capital‑market regulation with global best practices. By consolidating fragmented rules, tightening investor safeguards, and embracing digital technology, the proposal aims to create a more efficient, transparent, and resilient securities ecosystem. The forthcoming review by the Finance Committee and the subsequent parliamentary debate will determine how effectively these ambitions translate into policy. For investors, issuers, and market regulators, the bill’s outcome will be a pivotal moment in India’s financial‑sector evolution.