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The Securities and Exchange Board of India (SEBI) has granted additional time to merchant bankers to comply with key provisions relating to separate business units (SBUs), net worth requirements and liquid net worth norms, following industry requests for more time to put systems and processes in place.
In a circular issued on June 11, SEBI said the extension comes after receiving representations from the industry highlighting operational challenges in implementing the SBU framework and seeking alignment of net worth-related requirements with the end of the financial year.
The regulator had earlier notified the SEBI (Merchant Bankers) (Amendment) Regulations, 2025, on December 5, 2025. The amendments revised the net worth and liquid net worth requirements applicable to merchant bankers and introduced Regulation 13A, which mandates segregation of certain activities through Separate Business Units.
Subsequently, SEBI had issued a detailed operational framework and implementation roadmap through a circular dated January 2, 2026.
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SBU compliance deadline
Under the revised timelines, merchant bankers now have until December 31, 2026, to transfer activities to Separate Business Units under Regulation 13A(2), compared with the earlier deadline of July 3, 2026. Compliance with Clause 11.2.10 of the January circular has also been extended to December 31, 2026.
Net worth norms
SEBI has also pushed back the implementation of Phase I net worth requirements under Regulation 7 from January 2, 2027, to March 31, 2027. Phase II requirements, originally scheduled for January 2, 2028, will now come into effect on March 31, 2028.
Similarly, the deadlines for complying with liquid net worth requirements under Regulation 7A have been revised. Phase I compliance has been extended to March 31, 2027, from January 2, 2027, while Phase II compliance has been deferred to March 31, 2028, from January 2, 2028.
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The timeline for merchant bankers to intimate SEBI regarding their categorisation as Category I or Category II merchant bankers has also been extended by nearly three months to March 31, 2027.
Industry concerns
According to the regulator, the additional time is intended to help merchant bankers establish the necessary systems and processes required for implementing the new framework. It also aligns compliance deadlines with the close of the financial year, addressing concerns raised by industry participants.
All other provisions of the January 2, 2026 circular will remain unchanged and must continue to be complied with by merchant bankers, SEBI said.
The circular has been issued under Section 11(1) of the SEBI Act, 1992, read with Regulation 45 of the SEBI (Merchant Bankers) Regulations, 1992.
The move provides merchant bankers with additional breathing room as they adapt to a more stringent regulatory framework aimed at strengthening capital adequacy and ensuring better segregation of activities within the industry.
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