Mumbai, May 11 -- Farm goods that have long remained shut out of cash settlements may be in for a pivotal shift, potentially deepening derivatives trading in India's vital commodities sector. A regulatory panel formed by the Securities and Exchange Board of India (Sebi) has greenlit cash settlements up to fixed thresholds in select agriculture commodities, two people aware of the discussions said, balancing the need to deepen the sector while minimizing the risks.

Currently, physical delivery is mandatory for all farm derivatives, meaning traders must hand over or take receipt of the physical goods once the futures or options contract expires.

While this keeps the critical agriculture segment free of excessive speculation and keeps cont...