The Parliamentary Standing Committee on Finance, in a report tabled in July 2026, recommended clearer SEBI-RBI jurisdictional boundaries under the proposed Securities Markets Code, 2025, introduced in Lok Sabha in December 2025. It suggested jurisdiction be determined by activity type, not entity identity. The panel also proposed including Clearing Members and FPIs as 'intermediaries', stronger enforcement definitions, a transparent SEBI leadership appointment process, and an interim self-regulatory framework for virtual digital assets.

India's financial regulatory architecture has long suffered from jurisdictional ambiguity — particularly between SEBI, which governs capital markets, and RBI, which oversees banking and monetary systems. Many entities, such as banks, NBFCs, and payment intermediaries, operate across both domains. The Securities Markets Code, 2025 is a landmark consolidation effort, seeking to unify multiple securities laws. However, if jurisdictional lines remain blurred, regulated entities face dual compliance burdens, regulatory arbitrage becomes possible, and enforcement gaps emerge — undermining both investor confidence and systemic stability.

The committee's core recommendation — that jurisdiction follows the nature of the activity, not the identity of the entity — is a principle borrowed from functional regulation theory, as opposed to institutional regulation. This means a bank conducting securities market operations would fall under SEBI for those activities, even while remaining under RBI for banking functions. This avoids both over-regulation and under-regulation.

For UPSC GS2 and GS3, this story connects constitutional provisions on regulatory bodies, separation of powers, parliamentary oversight of executive agencies, financial sector reforms, and the broader theme of 'ease of doing business'. The call for transparent SEBI leadership appointments and public consultation before major regulations reflects accountability norms central to good governance discourse. The virtual digital assets framework recommendation also feeds into India's fintech regulation debate.