The Securities and Exchange Board of India (Sebi) proposed a significant policy shift to allow cash-based settlement for selected agricultural commodity derivatives. This initiative aims to enhance participation and revive trading in thinly traded farm commodities. According to a consultation paper released on Tuesday, exchanges could initially offer cash-settled contracts before transitioning to physical delivery after meeting specific liquidity thresholds. Currently, physical delivery is mandatory for all agricultural derivatives, which has limited market activity and led to low trading volumes. The proposal, supported by Sebi’s Commodity Derivatives Advisory Committee (CDAC), targets commodities such as maize, groundnut, and chilli, which have historically experienced weak trading activity. The agricultural derivatives market in India has lagged behind metals and energy derivatives due to stringent regulations and trading bans on key commodities, such as wheat and soybean, aimed at controlling food inflation. These restrictions, initially imposed in 2007 and extended until March 2027, have further constrained the development of the agricultural derivatives market.