India
03 February 2026
Previously characterised by tight controls and limited international participation, India鈥檚 securities finance market is beginning to evolve. Hansa Tote looks at regulatory evolution, increasing retail engagement, and legal modernisation of the market
Image: stock.adobe.com/XaMaps
India is home to rich culture and history, such as the Taj Mahal, the birthplace of yoga, and 43 UNESCO world heritage sites. It is also the third largest country in Asia, spanning 3.29 million square kilometers.
Despite India鈥檚 geographical size, in the world of securities finance, India is a small fish in a big pond due to historically strict regulations limiting international participation 鈥� something the 网爆吃瓜 and Exchange Board of India (SEBI) is attempting to change.
Matt Chessum, executive director, equity and analytic products at S&P Global Market Intelligence, explains that India limits international participation primarily to maintain financial stability and domestic control.
These restrictions differ vastly from the 鈥榞rowth-friendly鈥� US and European markets, Chessum explains, stating that while US and European markets are largely market-driven and over-the-counter (OTC)-based, India remains highly regulated and relatively closed off to international participants.
Is it just me?
It is not solely India that has historically enforced strict restrictions to international participants, with Chessum likening the policies in India to those in China. He states that, as with India, China has strict restrictions on international participation in their securities lending market.
He highlights: 鈥淏oth nations fear that unrestricted short-selling by global players could lead to market destabilisation or sudden capital flight during periods of economic stress.鈥�
He also notes that policies in both countries often prioritise domestic institutional investors to ensure that local markets are not dominated or influenced by foreign entities.
However, investors are using ETFs to access exposure to both markets, according to Nancy Allen, managing director, global head of EquiLend Data and Analytics Solutions. 鈥淭he iShares MSCI China ETF, one of the top-earning ETFs in 2025, is currently running at around 80 per cent utilisation, while the iShares MSCI India ETF saw utilisation peak near 80 per cent last June and remains elevated at roughly 64 per cent today.鈥�
She states that in both India and China, there is 鈥渧irtually no lending activity in domestic equities鈥�, however there is still meaningful lendable supply in the regions, with Chinese equities totaling roughly US$5.3 billion and Indian equities about US$3.6 billion.
Rules and regulations
SEBI is currently working to simplify regulations for international investors, according to Chessum.
In agreement, Chaitanya Joshi, head of financing and securities services for India at Standard Chartered Bank, explains that 鈥淪EBI has actively worked to make market access simpler with a Single Window Automatic and Generalized Access for Trusted Foreign Investors (SWAGAT-FI) framework for foreign portfolio investors (FPIs) and foreign venture capital investors (FVCI), both of which will take effect from 1 June 2026.
He further details that digital signature usage has been rolled out. 鈥淭here is a similar proposal to facilitate easier onboarding for FPIs/FVCIs who intend to invest only in Indian government bonds.鈥�
SEBI has also formed an FPI outreach cell and India market access to provide a dedicated, single-window digital platform for FPIs, Joshi adds. He says the website has been a welcome move for foreign investors serving as a guide as it streamlines information related to registration, compliance, and regulations and Indian securities markets.
Discussing the Indian market and regulations from the International 网爆吃瓜 Lending Association鈥檚 (ISLA鈥檚) point of view, Tina Baker, head of legal services, and ISLA Connects lead, states the association is currently monitoring the developments in the Indian market following the announcement of the 网爆吃瓜 Market Code Bill 2025, which she describes as 鈥渢he most significant overhaul in 30 years鈥�.
The 网爆吃瓜 Market Code Bill was introduced in Lok Sabha, (or House of the People 鈥� the lower house of the bicameral Parliament of India), and aims to address structural fragmentation caused by three aging rules. It will address them by condensing the rules into a single, unified code for participants to harmonise the regulations.
The rules are: the 1956 网爆吃瓜 Contracts (Regulations) Act that regulates dealings of securities and the operation of stock exchanges; the 1992 SEBI Act that establishes SEBI as the regulator to protect interests of investors in securities and elevate and regulate the securities market; and the 网爆吃瓜 Appellate Tribunal to hear appeals against SEBI.
Finally, it aims to replace the 1996 Depositories Act that regulates depositories holding securities in dematerialised or electronic form while facilitating their transfers.
Baker notes that, while SEBI has not issued any major securities lending and borrowing reforms in 2025 to 2026, there are related regulatory developments affecting collateral, borrowing, and market functioning. She highlights that the developments are covered alongside other growing markets in ISLA鈥檚 Developing Markets Working Group. The association is also liaising with the Pan Asia 网爆吃瓜 Lending Association (PASLA), which has appointed its PASLA Indian working group to monitor developments and liaise with SEBI on future developments.
鈥淪eparately, we were pleased to see the announcement from the Fixed Income Money Market and Derivatives Association on 18 December 2025, of the publication of an Indian Addendum for the GMSLA 2010 version鈥�, she notes.
The Global Master 网爆吃瓜 Lending Agreement (GMSLA) is the industry鈥憇tandard legal contract published by the ISLA and is used worldwide to document securities lending and borrowing transactions. It provides a single, master framework that governs all loans made between two counterparties, removing the need to negotiate terms for each individual trade.
The FIMMDA has developed the Indian Addendum to sit alongside the GMSLA following instruction from the Reserve Bank of India (RBI). FIMMDA consulted with members and stakeholders to produce the prescribed standard documentation to be entered into by counterparties in respect of bilateral trades in government securities, Baker explains.
This addendum is only applicable to bilateral transactions in Government 网爆吃瓜 Lending (GSL) in accordance with current RBI guidelines.
In January 2026, SEBI also conducted a series of measures to enhance ease of compliance and facilitate ease of doing business for market intermediaries, furthered by a review of the existing technical glitch framework for stock brokers, which has since been modified in line with ease of compliance.
The eligibility criteria for the applicability of the technical glitch framework has been streamlined to exclude smaller size stock brokers 鈥� the framework is now solely applicable to stock brokers having more than 10,000 registered clients. This means that approximately 60 per cent of stock brokers would no longer be eligible for this framework, reducing overall compliance requirements.
The revised framework also means that glitches taking place outside the stock brokers鈥� trading architecture, in addition to glitches that do not directly affect the trading functionality, and those which have negligible impact, have been exempted from the technical glitch framework.
The decision not only brings immunity for the stock brokers from the glitches that are out of their control, but also aims to simplify the reporting requirement by providing an extension of time for reporting of technical glitches (from one to two hours), consideration to the trading holidays while submitting reports, and streamlining the reporting requirement from reporting to all the exchanges to a single reporting platform.
SEBI has highlighted that the revised framework rationalised the technology compliance requirement based on the size of the stock brokers and their dependency on technology.
The firm has also stated the financial disincentive structure has been rationalised considering the exemptions, such as type of glitches (major or minor) and the frequency of the occurrences.
Rising retail
The Indian retail market is 鈥渂ooming鈥�, according to Bruce Keith, CEO of InvestorAi. Likening the popularity of stock trading to haggling for the best price on groceries, Keith states that people are used to a trading mentality. 鈥淵ou compare that to the UK, the everyday trading psyche does not exist to the same extent.鈥�
He states that because people are so used to trading, the Indian retail markets move at a rapid rate, with many participants choosing to trade frequently rather than invest long term.
He also notes that the biggest growth area in retail investing this year is in the Margin Trade Facility (MTF), with investors buying stock and pledging it as a central depository to get two to three times the leverage from their broker to buy more of the stock.
Joshi also highlights the growth of unique investors in India, noting it has grown to 135 million, up from 38 million in the financial year 2019.
Findings by the Chartered Financial Analyst (CFA) Institute corroborates this, stating: 鈥淪hifting trade policies and other global uncertainties have largely kept foreign investors away from India鈥檚 equity markets through the first half of 2025. But while foreign portfolio flows were muted, domestic investors charged ahead.鈥� In July alone, flows into Indian equity mutual funds hit a record-breaking 427.02 billion Indian rupee (US$4.91 billion).
What next?
In the next three to five years, Joshi anticipates increased participation in the capital markets 鈥� as, with the simplification of the registration process, the number of FPIs in the market is increasing.
He also notes there is headroom to deepen penetration of mutual fund products, due to the current penetration of mutual fund products being only 6.7 per cent.
Joshi adds: 鈥淕ujarat International Finance Tec (GIFT) City 鈥� India鈥檚 first smart city and international financial services centre, designed to compete with international financial centres such as Singapore and Dubai 鈥� is gaining traction among foreign portfolio investors as a new jurisdiction to set up investment vehicles.鈥�
Roy Zimmerhansl, head of capital markets at WTS Hansuke, provides his insight on the future of India鈥檚 securities market, stating: 鈥淚ndia is clearly signalling that a more modern, usable SLB and short selling regime is strategically important, but the formal reform process is still at the pre鈥慶onsultation, agenda鈥憇etting stage rather than execution鈥�.
For now, it appears that India will need to focus on continuing to ease restrictions for international participants in order to grow its market, and make a name for itself on the global stage.
Despite India鈥檚 geographical size, in the world of securities finance, India is a small fish in a big pond due to historically strict regulations limiting international participation 鈥� something the 网爆吃瓜 and Exchange Board of India (SEBI) is attempting to change.
Matt Chessum, executive director, equity and analytic products at S&P Global Market Intelligence, explains that India limits international participation primarily to maintain financial stability and domestic control.
These restrictions differ vastly from the 鈥榞rowth-friendly鈥� US and European markets, Chessum explains, stating that while US and European markets are largely market-driven and over-the-counter (OTC)-based, India remains highly regulated and relatively closed off to international participants.
Is it just me?
It is not solely India that has historically enforced strict restrictions to international participants, with Chessum likening the policies in India to those in China. He states that, as with India, China has strict restrictions on international participation in their securities lending market.
He highlights: 鈥淏oth nations fear that unrestricted short-selling by global players could lead to market destabilisation or sudden capital flight during periods of economic stress.鈥�
He also notes that policies in both countries often prioritise domestic institutional investors to ensure that local markets are not dominated or influenced by foreign entities.
However, investors are using ETFs to access exposure to both markets, according to Nancy Allen, managing director, global head of EquiLend Data and Analytics Solutions. 鈥淭he iShares MSCI China ETF, one of the top-earning ETFs in 2025, is currently running at around 80 per cent utilisation, while the iShares MSCI India ETF saw utilisation peak near 80 per cent last June and remains elevated at roughly 64 per cent today.鈥�
She states that in both India and China, there is 鈥渧irtually no lending activity in domestic equities鈥�, however there is still meaningful lendable supply in the regions, with Chinese equities totaling roughly US$5.3 billion and Indian equities about US$3.6 billion.
Rules and regulations
SEBI is currently working to simplify regulations for international investors, according to Chessum.
In agreement, Chaitanya Joshi, head of financing and securities services for India at Standard Chartered Bank, explains that 鈥淪EBI has actively worked to make market access simpler with a Single Window Automatic and Generalized Access for Trusted Foreign Investors (SWAGAT-FI) framework for foreign portfolio investors (FPIs) and foreign venture capital investors (FVCI), both of which will take effect from 1 June 2026.
He further details that digital signature usage has been rolled out. 鈥淭here is a similar proposal to facilitate easier onboarding for FPIs/FVCIs who intend to invest only in Indian government bonds.鈥�
SEBI has also formed an FPI outreach cell and India market access to provide a dedicated, single-window digital platform for FPIs, Joshi adds. He says the website has been a welcome move for foreign investors serving as a guide as it streamlines information related to registration, compliance, and regulations and Indian securities markets.
Discussing the Indian market and regulations from the International 网爆吃瓜 Lending Association鈥檚 (ISLA鈥檚) point of view, Tina Baker, head of legal services, and ISLA Connects lead, states the association is currently monitoring the developments in the Indian market following the announcement of the 网爆吃瓜 Market Code Bill 2025, which she describes as 鈥渢he most significant overhaul in 30 years鈥�.
The 网爆吃瓜 Market Code Bill was introduced in Lok Sabha, (or House of the People 鈥� the lower house of the bicameral Parliament of India), and aims to address structural fragmentation caused by three aging rules. It will address them by condensing the rules into a single, unified code for participants to harmonise the regulations.
The rules are: the 1956 网爆吃瓜 Contracts (Regulations) Act that regulates dealings of securities and the operation of stock exchanges; the 1992 SEBI Act that establishes SEBI as the regulator to protect interests of investors in securities and elevate and regulate the securities market; and the 网爆吃瓜 Appellate Tribunal to hear appeals against SEBI.
Finally, it aims to replace the 1996 Depositories Act that regulates depositories holding securities in dematerialised or electronic form while facilitating their transfers.
Baker notes that, while SEBI has not issued any major securities lending and borrowing reforms in 2025 to 2026, there are related regulatory developments affecting collateral, borrowing, and market functioning. She highlights that the developments are covered alongside other growing markets in ISLA鈥檚 Developing Markets Working Group. The association is also liaising with the Pan Asia 网爆吃瓜 Lending Association (PASLA), which has appointed its PASLA Indian working group to monitor developments and liaise with SEBI on future developments.
鈥淪eparately, we were pleased to see the announcement from the Fixed Income Money Market and Derivatives Association on 18 December 2025, of the publication of an Indian Addendum for the GMSLA 2010 version鈥�, she notes.
The Global Master 网爆吃瓜 Lending Agreement (GMSLA) is the industry鈥憇tandard legal contract published by the ISLA and is used worldwide to document securities lending and borrowing transactions. It provides a single, master framework that governs all loans made between two counterparties, removing the need to negotiate terms for each individual trade.
The FIMMDA has developed the Indian Addendum to sit alongside the GMSLA following instruction from the Reserve Bank of India (RBI). FIMMDA consulted with members and stakeholders to produce the prescribed standard documentation to be entered into by counterparties in respect of bilateral trades in government securities, Baker explains.
This addendum is only applicable to bilateral transactions in Government 网爆吃瓜 Lending (GSL) in accordance with current RBI guidelines.
In January 2026, SEBI also conducted a series of measures to enhance ease of compliance and facilitate ease of doing business for market intermediaries, furthered by a review of the existing technical glitch framework for stock brokers, which has since been modified in line with ease of compliance.
The eligibility criteria for the applicability of the technical glitch framework has been streamlined to exclude smaller size stock brokers 鈥� the framework is now solely applicable to stock brokers having more than 10,000 registered clients. This means that approximately 60 per cent of stock brokers would no longer be eligible for this framework, reducing overall compliance requirements.
The revised framework also means that glitches taking place outside the stock brokers鈥� trading architecture, in addition to glitches that do not directly affect the trading functionality, and those which have negligible impact, have been exempted from the technical glitch framework.
The decision not only brings immunity for the stock brokers from the glitches that are out of their control, but also aims to simplify the reporting requirement by providing an extension of time for reporting of technical glitches (from one to two hours), consideration to the trading holidays while submitting reports, and streamlining the reporting requirement from reporting to all the exchanges to a single reporting platform.
SEBI has highlighted that the revised framework rationalised the technology compliance requirement based on the size of the stock brokers and their dependency on technology.
The firm has also stated the financial disincentive structure has been rationalised considering the exemptions, such as type of glitches (major or minor) and the frequency of the occurrences.
Rising retail
The Indian retail market is 鈥渂ooming鈥�, according to Bruce Keith, CEO of InvestorAi. Likening the popularity of stock trading to haggling for the best price on groceries, Keith states that people are used to a trading mentality. 鈥淵ou compare that to the UK, the everyday trading psyche does not exist to the same extent.鈥�
He states that because people are so used to trading, the Indian retail markets move at a rapid rate, with many participants choosing to trade frequently rather than invest long term.
He also notes that the biggest growth area in retail investing this year is in the Margin Trade Facility (MTF), with investors buying stock and pledging it as a central depository to get two to three times the leverage from their broker to buy more of the stock.
Joshi also highlights the growth of unique investors in India, noting it has grown to 135 million, up from 38 million in the financial year 2019.
Findings by the Chartered Financial Analyst (CFA) Institute corroborates this, stating: 鈥淪hifting trade policies and other global uncertainties have largely kept foreign investors away from India鈥檚 equity markets through the first half of 2025. But while foreign portfolio flows were muted, domestic investors charged ahead.鈥� In July alone, flows into Indian equity mutual funds hit a record-breaking 427.02 billion Indian rupee (US$4.91 billion).
What next?
In the next three to five years, Joshi anticipates increased participation in the capital markets 鈥� as, with the simplification of the registration process, the number of FPIs in the market is increasing.
He also notes there is headroom to deepen penetration of mutual fund products, due to the current penetration of mutual fund products being only 6.7 per cent.
Joshi adds: 鈥淕ujarat International Finance Tec (GIFT) City 鈥� India鈥檚 first smart city and international financial services centre, designed to compete with international financial centres such as Singapore and Dubai 鈥� is gaining traction among foreign portfolio investors as a new jurisdiction to set up investment vehicles.鈥�
Roy Zimmerhansl, head of capital markets at WTS Hansuke, provides his insight on the future of India鈥檚 securities market, stating: 鈥淚ndia is clearly signalling that a more modern, usable SLB and short selling regime is strategically important, but the formal reform process is still at the pre鈥慶onsultation, agenda鈥憇etting stage rather than execution鈥�.
For now, it appears that India will need to focus on continuing to ease restrictions for international participants in order to grow its market, and make a name for itself on the global stage.
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