The Securities and Exchange Board of India (SEBI) has initiated a phased rollout of stricter merchant banker regulations starting January 2026. The new framework introduces higher capital adequacy, governance standards, and bans outsourcing of core activities. Existing merchant bankers have two years to comply, ensuring stronger investor protection and market resilience.
The Securities and Exchange Board of India (SEBI) has begun implementing its overhauled merchant banker regulations, marking a significant step toward strengthening India’s capital markets. The move comes amid a booming IPO pipeline and rising compliance demands, with SEBI aiming to enhance transparency, accountability, and investor confidence.
Major Takeaways / Notable Updates
• Phased Implementation: Existing merchant bankers have two years to fully comply with the new norms
• Capital Adequacy: Merchant bankers are now divided into two net-worth categories, with stricter capital and liquidity requirements
• Governance Standards: Enhanced rules on revenue thresholds, certification, and governance practices have been introduced
• Operational Restrictions: Outsourcing of core merchant banking activities has been prohibited to ensure accountability
• Industry Impact: The new rules affect 224 registered merchant bankers, including major firms like Kotak Mahindra Capital, JM Financial, and AK Capital Services
• Investor Protection: The reforms aim to build stronger capital buffers and safeguard investors in India’s rapidly expanding primary market
SEBI’s staggered rollout reflects its intent to balance regulatory tightening with industry preparedness, ensuring merchant bankers evolve in line with India’s dynamic financial ecosystem.
Sources: Livemint, Moneycontrol, Economic Times