Sebi Extends Deadlines for Merchant Bankers To Comply With Revised Net Worth Norms

Securities and Exchange Board of India (Sebi) has extended the timeline for merchant bankers norms introduced earlier in 2025. In a circular dated June 11, the market regulator extended the  deadlines for meeting revised net worth and liquid net worth requirements for merchant bankers.

The regulator has also provided more breathing room for the implementation of Regulation 13A, which mandates that merchant bankers must undertake the segregation of non-core activities into Separate Business Units. Sebi’s move to extend the timeline followed multiple representations from several stakeholders who highlighted operational hurdles in putting the new infrastructure in place to comply with the framework.

According to Sebi’s revised schedule, the deadline for transferring non-permitted activities into Separate Business Units (SBUs) has been deferred from July 3, 2026, to December 31, 2026. On the other hand, other compliance deadlines have also been pushed to align with standard financial quarters.

“Based   on   representations   received   from   the   industry   highlighting   operational challenges in establishing the necessary systems and processes for implementation of the SBU framework and seeking alignment of the compliance timeline for net worth and liquid net worth requirements with the end of the financial year, it has been decided to grant additional time for compliance with the aforesaid requirements,” Sebi said.

The Phase I compliance for both net worth and liquid net worth requirements has been moved from January 2, 2027, to March 31, 2027, the Phase II compliance deadline has been extended from January 2, 2028, to March 31, 2028. Additionally, merchant bankers now also have until March 31, 2027, to submit their intimation to the regulator regarding their categorisation as either Category I or Category II intermediaries.

Objectives of Sebi’s Framework

The Merchant Bankers Amendment Regulations notified by Sebi sought to tighten supervision over market intermediaries. The Regulation 13A defines the core activities that a registered merchant banker can undertake via its primary organisation. The rule mandates that any other unrelated business operations would have to be completely partitioned into Separate Business Units to prevent conflicts of interest. The regulatory framework also introduced a dual-layered capital requirement, forcing firms to maintain a higher overall net worth and a specific threshold of liquid net worth to absorb sudden market shocks.

The Impact on Retail Investors

The operational adjustments are aimed at altering the backend operations of financial institutions. However they can potentially safeguard retail investors as they prevent merchant bankers from mixing commercial operations with public issue management which in turn can reduce systemic conflicts of interest. Higher accountability and cleaner disclosures can ultimately foster a more secure and reliable investment ecosystem.