The Securities and Exchange Board of India (Sebi) has proposed significant changes to the position limit framework for agricultural commodity derivatives, aiming to enhance market liquidity and participation. The regulator plans to double the client-level trading limits: from 1% to 2% for broad commodities, from 0.5% to 1% for narrow commodities, and from 0.25% to 0.5% for sensitive commodities. This overhaul is in response to the evolving market dynamics since the last update in 2017. Additionally, Sebi intends to introduce a cap on penalties for violations exceeding 2% of position limits, setting a maximum of ₹2 lakh (roughly $2,400 USD). Currently, penalties do not have an upper limit, which has been criticized for potentially discouraging formal hedging activities. The proposed changes also include a phased approach for commodities transitioning from narrow to broad categories, ensuring a gradual increase in trading exposure. Sebi's consultation paper invites public comments on these proposals until June 2, 2026.