CNBC's Inside India newsletter: What's next for India's regulators?

This report is from this week's CNBC's "Inside India" newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse and the big businesses behind its meteoric rise. Like what you see? You can subscribe  here.

Bureaucrats, stereotypically but perhaps unfairly, are often seen as moving too slowly. Instead, there's been a flurry of activity this month at a number of regulators across India's financial system. 

As the South Asian country's financial markets evolve and expand, the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI) have been actively implementing new rules. 

They say it's to ensure the stability and integrity of the markets. 

One area that has caught their attention is the rapidly growing derivatives market, particularly futures and options trading. 

In 2023, more than three-quarters of the 108 billion options contracts traded worldwide were on Indian exchanges, according to data from the Futures Industry Association. The significant increase over the past five years has been mainly fuelled by retail investors, with the rise drawing the attention of senior politicians. 

"Any unchecked explosion in retail trading of futures and options can create future challenges, not just for the markets, but for investor sentiment and household finances," Nirmala Sitharaman, India's finance minister, told an industry conference this week. 

SEBI, however, late last month had asked exchanges to pay higher regulatory fees, a move which tanked the shares of the Bombay Stock Exchange by nearly 20% on the following trading day. 

Similarly, regulators have also banned 80% of the trading activity in the currency futures market to stamp out volatility in the Indian