"The notification for Sebi chairman's extension has been sent to Sebi late last night," a senior Finance Ministry official said.
The extension will be with effect from February 18 this year till 2016.
Under the stewardship of Sinha, who has been at the helm at Sebi for almost three years, key reform measures were initiated in the capital market.
These include stringent disclosure norms, strict regulations for merchant bankers and the introduction of a new category of foreign investors.
Sinha's three predecessors -— CB Bhave, M Damodaran and G N Bajpai -- had three-year term. Only D R Mehta had served as Sebi chairman for the longest duration from 1995 to 2002.
Sinha, a 1976-batch IAS officer, had served as Joint Secretary in Finance Ministry and joined Sebi after serving as the chairman and MD of UTI AMC.
In recent times, Sebi has also been active in cracking down on illegal money-pooling schemes.
In November, the Supreme Court had upheld Sinha's appointment as Sebi Chairman, saying the government had acted fairly and in accordance with the procedure of the law.
The apex court had dismissed a PIL against Sinha's appointment, observing that the petition was not maintainable on various grounds.
However, it decided to hear it as the appointment to a very senior position had been challenged.
Meanwhile, there is no clarity on Sebi getting more powers to crack down on illegal investment schemes since the lapse of an ordinance promulgated twice in this regard.
The ordinance was promulgated by President Pranab Mukherjee on July 18, 2013, after the Cabinet approved amending the Sebi Act, 1992, to give the regulator more powers. It was re-promulgated on September 16.