Introduction
The Securities and Exchange Board of India has updated its Master Circular for Merchant Bankers, last revised on July 14, 2026, consolidating every operative circular issued to merchant bankers registered under the SEBI (Merchant Bankers) Regulations, 1992 into a single reference document. Issued under bearing number HO/49/14/15(3)2026-CFD-POD1/I/16178/2026, the circular reconciles all prior instructions with the SEBI (Merchant Bankers) (Amendment) Regulations, 2025, notified on December 5, 2025 and effective from January 3, 2026, along with two further circulars dated January 2, 2026 and June 11, 2026. For law firms, compliance officers, and merchant banking entities, this circular is now the single point of reference for registration, capital adequacy, governance, disclosure, and outsourcing obligations.
Legal Basis of the SEBI Master Circular for Merchant Bankers
The circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, which empowers SEBI to protect the interests of investors in securities and to regulate the securities market. It rescinds all directions in the circulars listed in its Appendix, though rights, liabilities, or proceedings that arose under the rescinded circulars before rescission continue to be enforceable as if those circulars remained in force.
The primary regulation governing merchant bankers continues to be the SEBI (Merchant Bankers) Regulations, 1992 (“MB Regulations”), read alongside the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 for the “fit and proper person” criteria under Schedule II, the Securities Contracts (Regulation) Act, 1956, the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SAST Regulations”) for the definition of control and immediate relatives, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”), the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), the Securities and Exchange Board of India {KYC (Know Your Client) Registration Agency} Regulations, 2011, and the Securities and Exchange Board of India (Certification of Associated Persons in the Securities Markets) Regulations, 2007. Where transfer of business involves a scheme of arrangement, Section 230 of the Companies Act, 2013 and the sanction of the National Company Law Tribunal (NCLT) also come into play.
Registration of Merchant Bankers Under the Amended Framework
All applications for registration, surrender, or modification of details must be filed through the SEBI Intermediary Portal at siportal.sebi.gov.in, as clarified under SEBI Circular No. SEBI/HO/MIRSD/MIRSD1/CIR/P/2017/38 dated May 2, 2017. Physical submission is now limited to declarations and undertakings required as supporting records, and does not affect online processing.
On group entity registrations, SEBI has clarified under Regulation 6(i) of the MB Regulations (substituted for the earlier Regulation 6(c) with effect from January 3, 2026) that an applicant may still be granted registration even where another group entity already holds one, provided the two entities are separate legal persons, maintain independent boards without a majority of common directors, operate at arm’s length, retain independent key personnel and infrastructure, and are subject to independent regulatory and supervisory controls. Where these conditions are met, a suspension or cancellation action against one group entity can still trigger consequential action against the other under Regulation 35 of the MB Regulations, and “same group” is read in line with the definition of control under Regulation 2(1)(e) of the SAST Regulations.
Prior approval for change in control now follows a defined online procedure through the SEBI Intermediary Portal, established under SEBI Circular No. SEBI/HO/CFD/PoD-2/P/CIR/2023/141 dated August 10, 2023. The applicant must submit the current and proposed shareholding pattern, disclose any prior rejected applications, disclose pending action under the SCRA or the SEBI Act, disclose pending investor complaints and litigation, confirm payment of SEBI dues, and file a stamped Declaration-cum-Undertaking confirming that the board will not change before approval, that existing clients will be informed of the proposed change, and that the fit and proper person criteria under Schedule II of the Intermediaries Regulations, 2008 are satisfied. Registered stock brokers, clearing members, or depository participants must additionally obtain no-objection certificates from the relevant exchanges, clearing corporations, or depositories. Once granted, SEBI’s approval is valid for six months, within which a fresh registration application must be filed.
Where a change in control arises through a scheme of arrangement requiring NCLT sanction, the sequencing is reversed: the application for SEBI’s approval must precede the NCLT filing. SEBI grants in-principle approval valid for three months, within which the NCLT application must be made, and the intermediary must then submit the NCLT order, the approved scheme, a statement explaining any deviation from the draft scheme, and confirmation of compliance with SEBI’s observations, within fifteen days of the NCLT order, for final approval. Separately, transfers or transmissions of shareholding among immediate relatives, as defined under Regulation 2(l) of the SAST Regulations, do not constitute a change in control, though any incoming shareholder acquiring controlling interest through such transfer must still satisfy the fit and proper person criteria.
On business transfers between legal entities, a transferee not already registered with SEBI in the same capacity must obtain fresh registration before the transfer, and will be issued a new registration number distinct from the transferor’s, whether the transfer occurs through a regulatory process (merger, amalgamation, or NCLT order) or a private commercial arrangement. On complete transfer of business, the transferor must surrender its certificate of registration; on partial transfer, it may continue to hold it.
Revised Capital Adequacy and Liquid Net Worth Requirements
The 2025 amendments introduced a phased net worth and liquid net worth regime under Regulations 7 and 7A of the MB Regulations. Applicants filing on or after January 3, 2026 must satisfy the revised requirements immediately. Existing merchant bankers, however, get a two-phase runway, most recently extended by the SEBI circular dated June 11, 2026: Category I merchant bankers must reach a net worth of Rs. 25 crore and liquid net worth of Rs. 6.25 crore by March 31, 2027, rising to Rs. 50 crore net worth and Rs. 12.5 crore liquid net worth by March 31, 2028. Category II merchant bankers must reach Rs. 7.5 crore net worth and Rs. 1.875 crore liquid net worth by the same first deadline, rising to Rs. 10 crore net worth and Rs. 2.5 crore liquid net worth by the second.
Under amended Regulation 3(4) of the MB Regulations, every existing merchant banker must self-categorize as Category I or Category II. An entity may continue in its current category until March 31, 2027, but must intimate its intended category to SEBI by email to mb@sebi.gov.in before that date, accompanied by a Chartered Accountant-certified net worth certificate covering the liquid net worth component. A merchant banker that fails to meet Category I thresholds by the end of either phase is automatically redesignated Category II; one that fails to meet even the Category II thresholds cannot undertake any fresh permitted activity under Regulation 13A(1).
For the purpose of Regulation 7A, “liquid net worth” means net worth held in unencumbered liquid assets, subject to a prescribed haircut: cash and bank fixed deposits carry no haircut, government securities and units of overnight, liquid, or government-securities mutual fund schemes carry a 10% haircut, and listed securities of Nifty 500 companies held as investment or stock-in-trade carry a 30% haircut, valued as recorded in the books of account on the date of computation. Compliance must be certified by a Chartered Accountant as part of every half-yearly report.
Professional Certification and Governance Requirements
Under existing Regulation 6(b), an applicant must employ at least two persons professionally qualified in finance, law, accountancy, or business management from a recognized university or institution. The newly inserted Regulation 6(ba) now requires these employees and the compliance officer to hold additional certifications specified by SEBI. Accordingly, Regulation 6(b) employees must hold the NISM Series-IX: Merchant Banking Certification at the time of application, with existing employees given until January 2, 2027 to obtain it, and new hires given ninety days from appointment. The compliance officer must additionally hold NISM Series-IIIA: Securities Intermediaries Compliance (Non-Fund) Certification, on the same timeline.
Under newly inserted Regulation 28A(2)(i), the compliance officer must now be separate and independent from the principal officer and from Regulation 6(b) employees, a requirement existing merchant bankers had to meet by April 3, 2026. The definition of “principal officer” under Regulation 2(1)(d) has also been substituted to require at least five years of experience in the financial markets, with existing merchant bankers given until January 2, 2027 to comply.
Reporting, Disclosure, and Investor Protection Obligations
Merchant bankers must file half-yearly reports electronically through the SEBI Intermediary Portal, within three months of the half-year’s expiry, in the format at Annexure III, certified by the compliance officer and submitted in both PDF and Excel formats. Boards must review these reports for deficiencies, corrective measures, and the due diligence process followed on issues managed. Any amalgamation, demerger, or corporate restructuring under Section 230 of the Companies Act, 2013, any change in directorship, and any shareholding change not amounting to a change in control must also be reported through this mechanism.
Merchant bankers must disclose, on their own website, the three-year post-listing track record of every public issue they have managed, in the format at Annexure IV, with all merchant bankers who signed the due diligence certificate on a given issue bearing this obligation jointly. They must also publish the SEBI Investor Charter, covering IPOs, FPOs, rights issues, QIPs, preferential issues, SME issues, buybacks, delisting, and open offers under the SAST Regulations, and must disclose monthly complaint data by the 7th of the following month, in the formats at Annexures V and VI respectively.
On cybersecurity, following an advisory from the Ministry of Electronics and Information Technology and CERT-In, merchant bankers using cloud-based Software as a Service platforms for governance, risk, and compliance functions must ensure that critical risk and compliance data stays within India’s legal and jurisdictional boundary, and must confirm compliance in every half-yearly report.
Underwriting Limits and Minimum Revenue Requirements
Under newly inserted Regulation 22B(2), total underwriting obligations of a merchant banker cannot exceed twenty times its liquid net worth, with existing merchant bankers given until January 2, 2028 to comply, and a Chartered Accountant certificate confirming this ratio required with every half-yearly report.
Under Regulation 9A(1)(j) read with Regulation 9C, every merchant banker must generate a minimum cumulative revenue over the three preceding financial years from the permitted activities listed under Regulation 13A(1): at least Rs. 25 crore for Category I and Rs. 5 crore for Category II. Failure to meet this threshold exposes the certificate of registration to cancellation under summary proceedings prescribed by the Intermediaries Regulations, 2008, though the first such assessment will only take place from April 1, 2029, and SEBI has indicated it will account for circumstances such as natural calamities, pandemics, global economic recession, or geopolitical conflict before initiating cancellation. Details of revenue from permitted activities must be filed within three months of each financial year-end, starting FY 2026-27.
Restrictions on Marketing-Only Involvement in an Issue
Under Regulation 21C, a merchant banker cannot lead-manage a public issue where its directors, key managerial personnel, compliance officer, Regulation 6(b) employees, or their relatives hold, individually or in aggregate, more than 0.1% of the issuer’s paid-up capital, or shares of nominal value exceeding Rs. 10,00,000, whichever is lower. Such a merchant banker may still be involved purely in marketing the issue, provided it discloses the nature of the instrument, the amount invested, the quantum of holding, and its relationship with the issuer, in the offer document and marketing material, applicable to filings made on or after January 3, 2026.
Conducting Non-SEBI Regulated Activities Through Separate Business Units
Under Regulation 13A(2), a merchant banker may carry on activities beyond the permitted list, but only through a Separate Business Unit (SBU) operated at arm’s length, ring-fenced from SEBI-regulated activities by a Chinese wall, with its own grievance redressal mechanism, its own records, and staff distinct from those handling SEBI-regulated business (except for key managerial personnel, who may cross the wall subject to board-approved procedures). Following the extension granted on June 11, 2026, this segregation must be completed by December 31, 2026, in place of the earlier July 3, 2026 deadline.
The merchant banker must disclose, on its website, the list of non-SEBI regulated activities it undertakes, expressly stating that SEBI’s investor protection mechanisms will not apply to disputes arising from them, and must name the relevant financial sector regulator where one exists. This disclosure had to be published by February 2, 2026 for entities already conducting such activities, and must also be made upfront, in writing, to clients, beneficiaries, and counterparties in every engagement letter and contract, with acknowledgment obtained at the time of engagement. For existing mandates, the same disclosures and a compliance report to SEBI were due, per the revised timeline, by December 31, 2026. A merchant banker also regulated by the Reserve Bank of India must conduct its permitted merchant banking activities through such an SBU under the first proviso to Regulation 13A(2).
Outsourcing Restrictions for Merchant Bankers
Under amended Regulation 9A(1)(i), core merchant banking activities can no longer be outsourced. Merchant bankers with an existing outsourcing arrangement for core activities as of the effective date had to terminate it by April 3, 2026. For any outsourcing that remains permissible, the general principles at Annexure IX apply, covering operational, reputational, legal, country, strategic, exit, counterparty, concentration, and systemic risk. Core business activities, compliance functions, and Know Your Client obligations under the KYC Registration Agency Regulations, 2011 cannot be outsourced under any circumstance, and merchant bankers remain responsible for reporting suspicious transactions carried out by third parties to the Financial Intelligence Unit.
Conflict of Interest and Market Conduct Guidelines
Merchant bankers and their associated persons, as defined under the Certification of Associated Persons in the Securities Markets Regulations, 2007, must maintain board-approved policies to identify and manage conflicts of interest, disclose potential conflicts to clients, restrict trading in securities connected to an active mandate, and refrain from dealing in or communicating unpublished price-sensitive information. On market rumors, merchant bankers must maintain an internal code of conduct, restrict or supervise employee access to blogs, chat forums, and messenger platforms, retain logs of such usage as records under the applicable regulations, and route any market-related news received by staff through the compliance officer before further circulation, failing which both the employee and the compliance officer may be held liable under the SEBI Act and its regulations. Investor complaints continue to be processed through the SEBI Complaints Redress System (SCORES), in line with Master Circular No. SEBI/HO/OIAE/IGRD/P/CIR/2022/0150 dated November 7, 2022.
Key Compliance Deadlines Merchant Bankers Should Track
Several obligations under this circular carry hard deadlines. Independence of the compliance officer from the principal officer and Regulation 6(b) employees was due by April 3, 2026, the same date by which any outsourced core merchant banking activity had to be brought in-house. Website disclosure of non-SEBI regulated activities for entities already conducting them was due by February 2, 2026. Category I and Category II net worth and liquid net worth thresholds, along with segregation of non-SEBI regulated activities into Separate Business Units and the related compliance report, now fall due by December 31, 2026, while intimation of category choice to SEBI falls due by March 31, 2027 — both extended from earlier 2026 and January 2027 deadlines by the circular dated June 11, 2026. Certification requirements for existing employees, compliance officers, and principal officers fall due by January 2, 2027, the underwriting cap of twenty times liquid net worth by January 2, 2028, and the first minimum-revenue assessment from April 1, 2029.
Conclusion
The updated SEBI Master Circular for Merchant Bankers replaces a scattered set of circulars issued since 1998 with one consolidated compliance document, while layering in the structural changes brought by the SEBI (Merchant Bankers) (Amendment) Regulations, 2025. For merchant banking entities, the practical work now lies in categorizing correctly under Regulation 3(4), meeting the phased net worth and liquid net worth thresholds, completing NISM certifications for compliance officers and key employees, separating non-SEBI regulated activities into a properly ring-fenced Separate Business Unit, and keeping half-yearly reporting and website disclosures current. Given how frequently SEBI has revised these timelines already, three times in the first half of 2026 alone, legal and compliance teams should track the SEBI website’s Master Circulars section directly rather than relying on any single earlier circular in isolation.
The regulatory principles discussed in SEBI ICDR Regulations 2018: Legal Framework & Compliance should be considered alongside the latest compliance obligations for merchant bankers, which further strengthen the framework governing public issues and capital market intermediaries.
