SEBI circular HO/49/11/11(106)2025-CFD-RAC-DIL3/I/1796/2026 · 02 Jan 2026
Official title
Specification of the consequential requirements with respect to Amendment of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992
Summary
Check the official recordThe Securities and Exchange Board of India has issued consequential requirements following the 2025 amendment to the Merchant Bankers Regulations. The update mandates phased compliance for existing merchant bankers regarding revised capital adequacy and liquid net worth requirements, with full implementation by January 2, 2028. Merchant bankers must categorize themselves as Category I or II, maintain specific liquid net worth ratios, and adhere to new underwriting obligation limits. Additional requirements include mandatory professional certifications for employees and compliance officers, independence of the compliance officer, and restrictions on outsourcing core activities. Furthermore, merchant bankers must meet minimum revenue thresholds and follow strict operational segregation when conducting non-SEBI regulated activities. These measures aim to enhance regulatory oversight and investor protection.
What you must do
Key dates
Who is affected
Thresholds
Exceptions
If you do not comply
भारतीय प्रतिभूति और विनिमय बोर्ड Securities and Exchange Board of India
CIRCULAR
HO/49/11/11(106)2025-CFD-RAC-DIL3/I/1796/2026
January 02, 2026
To,
All Registered Merchant Bankers (MBs)
Madam/ Sir,
Subject: Specification of the consequential requirements with respect to Amendment of Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992
SEBI (Merchant Bankers) Amendment Regulations, 2025 has been notified on December 05, 2025 and shall be applicable w.e.f. January 03, 2026 (hereinafter being referred as “Effective Date”).
Conditions for compliance with revised capital adequacy and new liquid net worth requirements as well as timelines to re-categorize as Category I or Category II; for Merchant Bankers:
2.1. In terms of clause (d) of regulation 6 of SEBI (Merchant Bankers) Regulations, 1992 (hereinafter being referred as “MB Regulations”), the revised net worth and liquid net worth as specified in regulations 7 and 7A are applicable as follows:
a) In case of applications made on or after January 03, 2026, the applicants shall fulfill the revised capital adequacy requirements under regulation 7 and new liquid net worth requirements under regulation 7(A) as on date of its application.
b) Existing Merchant Bankers (MBs) shall comply with the above requirements in phased manner as given at para 2.2. Those applicants who have filed application before January 03, 2026 and are granted registration subsequently are also considered as existing MBs for the purpose of this circular.
2.2. For existing MBs, the MB Regulations empowers Board to specify the time and manner for its implementation. Accordingly, to ensure smooth adoption of these requirements, it has been decided that revised capital adequacy and new liquid net worth requirements shall apply to existing MBs in a phased manner as under:
Table (I): Phased implementation of capital adequacy and liquid net worth requirements
| Category | Phase (I) - on or before January 02, 2027 | Phase (II) - on or before January 02, 2028 |
|---|---|---|
| capital adequacy being net worth | liquid net worth requirement | |
| Category I | Rs. 25 cr | Rs. 6.25 cr |
| Category II | Rs. 7.5 cr | Rs. 1.875 cr |
2.3. In terms of amended sub-regulation (4) of regulation 3 of MB Regulations, every existing MB shall categorize itself either as Category I or Category II by complying with net worth and liquid net worth requirements within such time period and in the manner as specified by the Board. Accordingly, it is specified that:
2.3.1. an existing MB shall continue to work as Category I or Category II till January 02, 2027. However, it is required to intimate SEBI through email to mb@sebi.gov.in, on or before January 02, 2027, about the category that an MB intends to continue from January 03, 2027. Along with this email it is required to submit a Chartered Accountant certified Net worth Certificate (including component of liquid net worth) confirming compliance with net worth and liquid net worth requirements.
2.3.2. An existing MB who fails to comply with requirements for Category I, by end of Phase (I) or Phase (II), as given under Table I, shall be automatically designated as Category II MB.
2.3.3. Further, an existing MB who fails to comply with requirements for Category II, by end of Phase (I) or Phase (II), as given under Table I, shall not undertake any fresh permitted activity as specified in sub-regulation (1) of regulation 13A.
2.4. The MB shall submit a certificate from Chartered Accountant as part of Half Yearly Report certifying that the net worth and liquid net worth of the MB have been maintained as specified in MB Regulations, at all times during the corresponding half year period.
3. Definition of liquid net worth:
3.1. For the purpose of regulation 7A of MB Regulations, “liquid net worth” shall mean net worth deployed in unencumbered liquid assets, with applicable haircut as given in the following table:
| Type of instrument* | Applicable haircut |
|---|---|
| Cash | 0% |
| Bank fixed deposits | 0% |
| Government securities | 10% |
| Units of overnight mutual fund schemes, liquid mutual fund schemes or government securities mutual fund schemes (by whatever name called which invest in government securities) | 10% |
| Listed securities of Nifty 500 companies held either as investment or Stock-in-Trade/ Inventories | 30% |
*Value of these instruments to be considered for calculating liquid net worth shall be the value as recorded in the books of accounts, on the date of computation of the net worth.
Illustration:
| Particulars | Amount (Rs.) | |
|---|---|---|
| Listed Shares | A | Rs. 200 |
| G-Sec | B | Rs. 100 |
| Total Marketable Securities | A+B | Rs. 300 |
| Value to be considered for calculating liquid net worth | Rs. 230 | |
| 70% of Listed Shares i.e., 70% of Rs. 200 = Rs. 140 | ||
| 90% of G Sec i.e., 90% of Rs. 100 = Rs. 90 |
Conditions for compliance in respect of underwriting obligations:
4.1. In terms of newly inserted sub-regulation (2) of Regulation 22B of MB Regulations, total underwriting obligations of MB shall not exceed 20 times of its liquid net worth. For existing MBs, Board has been empowered to specify the time and manner of compliance. Accordingly, it is specified that existing MBs shall comply with this requirement within two years from the effective date, i.e., by January 02, 2028.
4.2. The MB is also mandated to submit a certificate issued by Chartered Accountant providing the value of total underwriting obligations of the MB, as a part of Half Yearly Report. The certificate should also certify compliance with the sub-regulation (2) of regulation 22B by the MB.
Compliance with Conditions for requisite certification:
5.1. In terms of existing clause (b) of regulation 6 of MB Regulations, an applicant is required to have in its employment, a minimum of two persons who are professionally qualified in finance or law or accountancy or business management from a Government recognized university or institution or who have a recognized degree in finance or law or accountancy or business management from a foreign university or institution.
5.2. In terms of newly inserted clause (ba) of regulation 6 of MB Regulations, such employees and the compliance officer are required to obtain such certification(s) as may be specified by the Board.
5.3. It is, accordingly, specified that the employees of an applicant, as specified in clause (b) of Regulation 6, shall possess the certificate for NISM Series-IX: Merchant Banking Certification Examination at the time of application.
For an existing MB, a) an existing employee shall obtain requisite certification within one year from effective date, i.e., on or before January 02, 2027. b) the employees, who are appointed on or after January 3, 2026, shall be required to obtain requisite certification within ninety days from the date of his/ her appointment.
5.4. Further, the compliance officer of an applicant shall possess certificates for NISM Series-IX: Merchant Banking Certification Examination and NISM-Series-IIIA: Securities Intermediaries Compliance (Non-Fund) Certification Examination at the time of application.
For an existing MB, a) an existing compliance officer shall obtain requisite certifications within one year i.e., on or before January 02, 2027. b) the compliance officer, who is appointed on or after January 3, 2026, shall be required to obtain requisite certifications within ninety days from the date of his/ her appointment.