What insights does India's regulation of capital market service providers offer policymakers?

India’s capital markets have expanded significantly over the past three decades. With over 5 000 listed companies, India’s stock market ranks among the world's largest by number of listed firms. At the same time, a robust network of market intermediaries has taken shape, including proxy advisors, ESG rating and data providers, and index providers. Together, these developments mark India’s evolution into a sophisticated capital market, where intermediaries play an increasingly important role as in other jurisdictions. 

The 50 jurisdictions surveyed, all members of the OECD Corporate Governance Committee (including India, since 2016), oversee capital market service providers in a wide variety of ways. In India, they are primarily regulated by the capital market authority, the Securities and Exchange Board of India (SEBI), with dedicated regimes for each provider.

The proxy advisor framework is set out in the Research Analysts Regulations (2014) and Master Circular for Research Analysts (2026). While the framework places significant emphasis on managing conflicts of interest, in practice this is less of an issue. The market is dominated by three proxy advisors and most investors use the services of a domestic one. Although these domestic providers offer other services than proxy advice, conflicts of interest are not seen as significant, as these firms rarely provide services to issuers, helping to preserve independence. Moreover, India is the only jurisdiction among the 50 surveyed that requires disclosure of proxy advisors’ ownership structures.

While not mandated by SEBI, proxy advisors do engage with listed companies, but market practices differ. Some proxy advisors impose strict blackout periods on such engagements, beginning when the formal notice of a shareholder meeting is issued and lasting until the meeting is held. Outside this period, engagement is conducted. Others maintain continuous, year-round engagement.

ESG rating providers are regulated under the Credit Rating Agencies Regulations (1999) and Master Circular for ESG Rating Providers (2025) (ESG data providers are out of scope). In 2025, 19 providers were registered with SEBI across subscriber‑pays and issuer‑pays models. No international firm was active under the regime, although one held a licence, with some market participants suggesting the new regime may have contributed to provider exits.

India is the only surveyed jurisdiction where regulation explicitly accounts for the size and development level of ESG rating providers. Larger firms face more stringent staffing requirements, while smaller firms are subject to lighter requirements.

India’s regulatory framework includes detailed methodological requirements aimed at grounding ESG ratings in the domestic market context. Ratings must align with domestic sustainability-related disclosure standards, which may limit global comparability. Methodologies must also follow prescribed design rules, including industry-agnostic scoring on a 0–100 scale and domestic industry classifications, requiring international providers to adapt their rating models.

Methodological requirements also vary by business model: subscriber‑pays providers rely mainly on public data, while issuer‑pays providers engage directly with companies and may use both public and non‑public information. 

The Index Provider Regulations (2024) apply proportionately to “significant indices” used by domestic mutual funds above SEBI thresholds. In 2025, only three domestic providers operated, with no international providers, amid uncertainty over the definition of “significant indices”, which SEBI has recently consulted on.

Although SEBI does not establish how often methodologies should be reviewed, most index providers conduct reviews at least every six months. Similarly, while advance notice of significant changes is required without a set timeframe, providers typically give approximately two to four weeks’ notice. Providers also report no difficulty accessing stock exchange data at reasonable cost, reflecting requirements for equal, transparent data access under SEBI’s framework.

India’s regulatory framework for proxy advisors, ESG rating providers and index providers, with requirements on conflicts of interest and methodology transparency, aligns with the G20/OECD Principles of Corporate Governance. Nonetheless, some measures could help further strengthen it. Where relevant, these could also apply to other jurisdictions:

• SEBI could support the informed use of market services without substituting the judgment of institutional investors or imposing requirements that could inhibit innovation, the entrance of foreign service providers and market competition, particularly in ESG ratings and indices.
• Mandating institutional investors to vote on all resolutions should be carefully weighed against the risk that such requirements may lead to uninformed voting.
• Further inspections may be needed to verify the absence of conflicts of interest among proxy advisors considering other potential sources of conflicts such as the provision of other services to institutional investors and the ownership structure of proxy advisors.
• India’s ESG rating framework is more prescriptive than in other surveyed jurisdictions, with strict separation of subscriber and issuer-pays models, limits on use of non-public data and detailed methodological requirements aimed at local relevance, though these may constrain provider scale, innovation and international comparison of ratings.
• While the mandatory publication of top-level ESG scores may be helpful to retail investors, such disclosure may impact the revenue streams of ESG rating providers.
• Indian regulators could consider standardising the minimum time that index providers give to market participants when announcing significant changes to an index.
• Further supervision may be useful in areas where subjectivity arises, particularly in ESG indices or during corporate events such as mergers and acquisitions.

Capital market service providers are becoming an increasingly important part of modern capital markets. While India has developed one of the most comprehensive regulatory frameworks among the jurisdictions surveyed, its experience also highlights the challenges and trade-offs in establishing mandatory frameworks. As other jurisdictions consider how their own frameworks could evolve, the India case study and OECD analysis from The Role of Capital Market Service Providers in Corporate Governance report offer timely insight for policymakers seeking to ensure that regulatory frameworks remain fit for purpose.