Regulatory Roundup

Capital Markets

Change: The Securities and Exchange Board of India (Sebi), in a circular dated September 5, issued new rules for know-your-customer (KYC) registration agencies (KRAs) for facilitating winding down of their businesses in an “orderly manner”.

Impact: With the new rules in place, investors will not have to undergo the KYC verification process again if their KRA decides to, or is compelled to wind down their operations. It will ensure that investor records are safely moved to another KRA and services continue without disruption.

Change: Sebi has proposed changing the method of determining how the closing prices of stocks are determined. At present, India uses the Volume Weighted Average Price (VWAP) system. Sebi plans to shift to the Closing Auction Session (CAS), which is globally practised and is considered more stable.

Impact: Besides aligning with global practices, it will also bolster passive investment and reduce tracking error.

Change: Sebi has issued fresh guidelines for the Social Stock Exchange (SSE), sharpening the eligibility norms for not-for-profit organisations and putting in place tougher disclosure and reporting requirements. The changes were notified through a circular dated September 19.

Impact: The regulator’s move aims to bring greater consistency in the types of entities that can seek registration. It will also ensure that only well-established organisations with a recognised legal base are allowed on to the platform.

Change: Sebi issued a circular on September 19 aimed at simplifying the process of inheritance of securities.

Impact: The new changes are set to benefit retail investors by simplifying the share transfer process, as the Transmission to Legal Heirs (TLH) code will report the transaction as a tax-free transmission, and not a sale. This will prevent the nominee from being wrongly assessed for capital gains tax. By removing the potential tax hurdle, the process of transferring securities is also likely to become more efficient and prone to less delays.

Change: Sebi has announced the reduction of the maximum permissible exit load which mutual fund houses can charge, reducing it from 5 per cent to 3 per cent. Mutual funds typically charge exit loads in the range of 1-2 per cent. Thus, reducing the maximum exit load is expected to align the regulatory requirement with the prevailing industry practice.

Impact: The change is set to benefit mutual fund investors, as the cost of switching or exiting a mutual fund prematurely can potentially be reduced. The new limit is also expected to protect investors from being charged excessively high fees.

Insurance

Change: The Goods and Services Tax (GST) Council on September 3, removed 18 per cent GST on insurance premiums. From September 22, policyholders will no longer see an additional GST component inflating their policy premiums.

Impact: This announcement sounds like a straight win for policyholders since premium invoices should immediately drop, right? But the long-term outcome of this relief may not be as straightforward. On the face of it, customers should see an 18 per cent fall in invoices. But in reality, since insurers are absorbing unrecoverable GST on their input costs, the net benefit that can be passed on may only be in the range of 5 per cent to 6 per cent.

Change: The Insurance Regulatory and Development Authority of India (Irdai) has formally launched the Bima Sugam website, a digital platform aimed at making insurance purchase and management simpler for consumers.

Impact: Bima Sugam is being developed as a single marketplace where life, health, and general insurance products will be listed. Policyholders are expected to be able to buy, renew, and port insurance policies and also initiate claims through the portal.

Banking

Change: The National Payments Corporation of India (NPCI) has raised the Unified Payments Interface (UPI) transaction limits, enabling customers to make payments up to Rs 5 lakh per transaction under certain categories. The change came into effect from September 15.

Impact: The move aims to facilitate smoother and more convenient high-value digital payments.

Change: The Reserve Bank of India (RBI) has issued the Regulation of Payment Aggregators Directions, 2025, which adds new regulations on compliance for payment facilitators that accept digital payments along with occasional physical transactions through various other channels.

Impact: Aggregators will need to review escrow activities, merchant boarding requirements, regulatory capital, and reporting. Organisations will need to record compliance and fill the gaps. New entrants will need to anticipate tighter authorisation and ensure that financial and governance arrangements are in conformity with the guidelines.

Pension

Change: The Employees’ Provident Fund Organisation (EPFO) has directed its offices to allow partial withdrawal at the time of final settlement in case of delay for certain reasons. EPFO said in a recent circular that it has been receiving complaints regarding the rejection of settlement claims.

Impact: EPF subscribers can partially withdraw at the time of the final settlement in case the full amount is not available due to delay or non-transfer by the employer to the EPFO, or if it is stuck with the previous employer.

Change: The Pension Fund and Regulatory Development Authority (PFRDA) has notified the Unified Pension Scheme (UPS) VRS Rules.

Impact: With the changes in UPS rules, assured payment is permitted on voluntary retirement after 20 years, which was earlier 25 years. However, the pension payment will start only at superannuation.

Change: PFRDA has revised the annual maintenance charge structure for National Pension System (NPS), NPS Vatsalya, and Atal Pension Yojana (APY), making it slab-based for the private sector.

Impact: PFRDA stipulated an upper cap on the charges and central recordkeeping agencies (CRAs) cannot charge more than that from the subscribers. However, if they want, they can reduce it.

Change: PFRDA has introduced Multiple Scheme Framework (MSF) for non-government sector NPS subscribers, offering them the choice to have equity exposure up to 100 per cent in NPS Tier I account. These developments will be effective from October 1.

Impact: Pension fund managers will be allowed to offer multiple schemes, more customised ones for investors, by providing 100 per cent exposure to equity.

Tax

Change: Union Minister of Finance Nirmala Sitharaman on September 3, announced sweeping rate cuts in GST on several items across different categories. The new GST rates came into effect from September 22.

Impact: The restructuring brings most goods and services under the standard rate of 18 per cent, a merit rate of 5 per cent, and several other items under the nil category. Additionally, certain discretionary and luxury goods and services have been moved to special de-merit rate of 40 per cent. This means several items of daily use will become cheaper, giving some relief to the middle class. At the same time, certain discretionary and luxury goods will get more expensive under the new structure.

*List is not exhaustive | Compiled by Tarun Bhardwaj