Law Updates

Subject

Summary: SEBI, which is India's stock market regulator, has made some changes to the rules for foreign venture capital investors, also called FVCIs. These are big investors from other countries who put money into Indian startups and businesses. The new rules change how much these investors pay as fees, when they must pay, and how the money reaches SEBI. Think of it like updating the price list and payment steps for a service, the service stays the same, but the cost and the way you pay for it are now clearer and written in Indian rupees instead of US dollars. This guide explains everything in simple words so anyone can understand what changed, why it changed, and who it affects. This update matters for: Global venture capital funds that invest money in India. Designated depository participants (DDPs), who act like helpers between foreign investors and SEBI. Indian startups, alternative investment funds (AIFs), and the wider startup community that depends on money coming in from foreign VCs. What the 2026 SEBI FVCI Amendment Regulations Do SEBI released an official notice that updates the older SEBI (Foreign Venture Capital Investors) Regulations, 2000, with new fee amounts and new payment steps. 1 Name and commencement Name: SEBI (Foreign Venture Capital Investors) (Amendment) Regulations, 2026. Commencement: The rules say they will start "on the one hundred eightieth day from the date of publication of these regulations in the Official Gazette." In simple words, that means the new rules kick in 180 days after they were printed in the government's official Gazette. The Gazette shows the notice was published on 3 July 2026. Counting 180 days forward, the new rules will actually start around late December 2026. 2. Key changes at a glance SEBI has made the following changes: Removed the fee-phrase from Regulation 3(3). In Regulation 3(3), the words "by the fee specified in the Second Schedule and" have been taken out. This means the fee rules are now fully explained in the Second Schedule (a separate list), instead of being mentioned twice in different places. Substituted rupees for US dollars as fees under the Second Schedule: Clause (1) - Initial registration fee: Previous fee: 2,500 US dollars Current fee: Rs. 2,30,000, to be paid in an eligible foreign currency having the same value in rupees. Timing change: Old rule: Pay the fee "at the time of submission of the Form." New rule: Pay the fee "before the grant of the certificate of registration", meaning before SEBI hands over the registration certificate, and the payment goes through the designated depository participant (DDP). Clause (2) - Renewal/period extension fee: Old fee: 100 US dollars New fee: Rs. 9,000 in eligible foreign exchange equivalent. This fee covers: Renewal payments. Fees for extending how long the registration stays valid (called "subsequent blocks"). Clause (5) - Late fees (per day and maximum): Old daily late fee: 5 US dollars & Now new: Rs. 500 per day (in eligible foreign exchange equivalent). Old maximum late fee: 150 US dollars & Now new: Rs. 15,000 maximum (in eligible foreign exchange equivalent). A brand-new Clause (6) with clear payment-forwarding rules: The new Clause (6) says every DDP must send the fees it collects from FVCIs to SEBI in Indian rupees. There are two situations: (a) For a first-time (initial) registration: The DDP must send the fee to SEBI within five working days from the date the FVCI's registration certificate is granted, along with the required details in the format SEBI asks for. (b) For renewal fees, fees to extend validity, or late fees: The DDP must send the fee to SEBI within five working days from the date it receives the payment from the FVCI, along with the required details. In short, this update makes the fee amounts clear, puts them in rupee terms (even though they're paid in acceptable foreign currency), and sets firm deadlines and reporting duties for DDPs. Implementation Date and Transition Publication date: 3 July 2026 (published in the Gazette of India, Extraordinary, Part III, Section 4). Start date of new rules: 180 days after publication, so around late December 2026. Until the new rules start: The old FVCI fee rules (based on US dollars) will keep applying as usual. From around late December 2026 onward: Registration, renewal, and late fees must follow the new rupee amounts listed in the amended Second Schedule. DDPs must follow the five-working-day rule for sending payments and use the specified reporting formats. Why Did SEBI Revise FVCI Fees and Payment Rules? This change fits into a bigger pattern SEBI has been following. Moving away from US-dollar pricing While the old guidelines provided prices in US dollars, the SEBI guidelines use rupee amounts, which are said to be "eligible foreign exchange equivalent." This has: Reduced dependence on dollar pricing directly. Matches India's own currency system better and makes it easier to compare fees across different investor categories. Clearer timing for fee payment The initial registration fee must now be paid "before the grant of the certificate of registration," not simply when the form is submitted. This makes sure SEBI only collects the fee for applications that are actually approved. Tighter control over how fees move through DDPs Clause (6) establishes timelines for the payment of fees from the DDPs to SEBI. This contributes towards: Enhanced financial discipline. Greater transparency. The ability to track and check how the fee money moves from foreign investors to SEBI. Matching other foreign investor rules Over time, SEBI has been making its rules for NRIs, FPIs, and FVCIs work in similar ways, for example, using DDPs and reporting fees in rupees. This amendment continues that same direction. Impact on Businesses in India And Global VC Investors (2026 - 27) 1. Foreign Venture Capital Investors (FVCIs) Major requirements for FVCIs: Registration Fee for the first time: Rs. 2,30,000 (equivalent to eligible foreign exchange) to be paid to DDP before the grant of a certificate by SEBI. Business impact: Since fee amounts are now shown in rupees, FVCIs get a clearer idea of the actual cost in local currency terms. The payment steps are also simpler to follow: Pay the fee to the DDP. The DDP then sends the money to SEBI in rupees. 2. Designated Depository Participants (DDPs) DDPs now have clearer duties: Clear payment-forwarding rule: For initial registration: Send the fee within 5 working days of the certificate being granted. For renewals or late fees: Send the fee within 5 working days of receiving the payment. Mandatory reporting: DDPs must share fee payment details with SEBI in the format SEBI specifies. This means DDPs will need: Strong internal systems to track fees. Timely processes to match and forward payments on time. 3. Indian startups and funds The impact here is indirect but still meaningful: With clearer FVCI rules: Global VCs get more predictable costs and a simpler process. This can encourage more FVCI registrations and renewals, keeping the flow of foreign money into India steady. Indian startups that depend on FVCI funding should notice: Fewer confusing administrative steps around FVCI registration. A smoother process when dealing with DDPs. Benefits to Businesses from the Revised Fee and Payment Rules Even though there are some adjustments to get used to, this amendment brings real benefits: Predictable and clear costs Fixed rupee amounts (Rs. 2,30,000, Rs. 9,000, Rs. 500, and Rs. 15,000) make it easier to: Plan budgets for registration and renewal. Compare FVCI fees with fees for other investor types, like FPIs and AIFs. Better match with local currency Use of rupee figures (accompanied by the "eligible foreign exchange equivalent" designation) will make life easier for: Accounting. Tax strategy and compliance planning. Getting internal clearance within international funds. Clearer day-to-day operations Knowing that payment is due "before the grant of the certificate of registration" removes confusion about exact timing. The 5-working-day rule for DDPs standardizes how fast money must move, cutting down on delays. Stronger trust in the regulatory system Clear fee rules reassure foreign investors that: SEBI is updating and simplifying its processes. Fee payments are properly tracked and can be checked/audited. Is This the Right Decision or an Extra Burden? 1. For FVCIs and DDPs There is some adjustment needed: •    FVCIs need to get comfortable seeing fees in rupee terms instead of dollars. •    DDPs need to strengthen their fee-tracking and reporting systems. However: The fee amounts have not increased dramatically, they are roughly the same value as before, just converted into rupees. This change is mostly about currency, timing, and stricter payment-forwarding steps, not about charging more money. Overall, this is not an unfair burden, it is a sensible update to modernize the system. 2. For India and capital markets From SEBI's point of view, these changes help: Reduce dependence on foreign currency-based fee listings. Strengthen the role DDPs play in the system. Make sure SEBI receives its fee collections on time and can trace them clearly. This looks like a reasonable and expected next step in how FVCI rules evolve. Quality, Investor Confidence, and "Environmental" Conditions Here, "environmental conditions" means the overall regulatory and investment climate, not the natural environment. 1. Quality of regulatory environment More clarity in regulations regarding fees results in: How well does SEBI regulate FVCIs? Ease in administration. This contributes to: Regulation of foreign venture capital investors. Increased trust in investors favours clear regulations. 2. Investor and consumer satisfaction While everyday retail consumers aren't directly involved here, Indian startups and fund ecosystems can be seen as the ones who benefit from FVCI money. The updated rules: Add certainty and cut down on confusion. Make India's FVCI system easier to predict. This can indirectly improve the experience for: Startup founders. Domestic investment funds. Foreign investors are managing where their money flows. Impact on the Indian Economy and Other Countries 1. Indian economy There are likely positive effects over the medium term: Steady foreign VC investment: Clear fee rules support continued FVCI participation in India. Easier business environment: DDPs and investors now have clear responsibilities to follow. Stronger regulatory reputation: This update brings India's FVCI rules closer in line with what global investors expect in terms of clarity and realistic currency use. Any short-term extra work is limited mostly to DDPs updating their internal systems and making small process changes. 2. Other countries and foreign investors Foreign funds stand to benefit because they: Get clearer signals about actual costs. Can compare FVCI registration and renewal costs against similar rules in other countries. See India moving toward rupee-based fee systems, which signals a push toward using domestic currency and modernizing regulations. Opportunities in Related Businesses 1. For global VCs and fund managers Using this newfound clarity, they can plan to: Create India-specific venture capital funds with greater conviction. Decide to set up a permanent base of operations in India as an FVCIs/AIFs. Manage compliance through internal teams or by hiring expert advisors. 2. For DDPs, custodians, and intermediaries These businesses can build: Tools to manage and track fees. Automated systems to send payments on time. Reporting templates that match SEBI's requirements. They can also market themselves as: Reliable, "high-compliance" partners for foreign investors. Experts who specialize in FVCI operations and reporting. Business Opportunities for Corpseed Corpseed can build a focused advisory service around SEBI's FVCI fee and registration rules: 1. FVCI Fee and Regulatory Advisory Help foreign funds understand: The new fee amounts (for registration, renewal, and late payment). The new payment timing (before the registration certificate is granted). How the 180-day start date affects their plans. They can also prepare cost estimates for FVCI registration and multi-year renewal forecasts. 2. DDP Workflow Support Help DDPs: Generate fee tracking and payment forwarding systems that adhere to the 5-working-day deadline. Generate templates for fee reporting to SEBI. 3. Structuring Advice for Foreign VC Funds Offer advice on: Whether the FVCI route, FPI route, or AIF route makes more sense. How the new FVCI fees compare with other investment routes. The best structure based on sector focus, investment size, and compliance risk. 4. India Entry and Licensing Package Offer full assistance, which includes: Making FVCI applications. Coordinating with DDPs. Processing the paperwork and documentation. Providing timely reminders and updates on regulations. Corpseed can be viewed as a reliable regulatory partner for foreign VCs in India.

Subject

Summary: SEBI has introduced important amendments to the SEBI (Buy-back of Securities) Regulations, 2018, bringing changes that will affect listed companies undertaking buy-backs. The revised regulations, effective from 1 August 2026 cover areas such as open market buy-backs, public announcements, merchant banker requirements, minimum public shareholding, escrow management and shareholder disclosures. The amended regulations will come into force on 1 August 2026 and are expected to strengthen transparency, improve investor protection and streamline the buy-back process for listed companies undertaking share repurchases. Background and Context SEBI has amended the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018 by exercising its powers under Sections 11(1), 11(2), and 30 of the Securities and Exchange Board of India Act, 1992, read with Section 68(2)(f) of the Companies Act, 2013. The amendments were notified on 1 July 2026 and will become effective from 1 August 2026. They introduce both substantive and procedural changes aimed at making the buy-back framework more efficient while enhancing regulatory oversight and shareholder protection. Besides introducing new compliance requirements, the notification also modifies timelines, clarifies existing provisions, and reallocates responsibilities where companies choose not to appoint a merchant banker for a buy-back. Key Highlights of the SEBI Buy-back of Securities (Amendment) Regulations, 2026 The latest amendment updates several provisions of the SEBI (Buy-back of Securities) Regulations, 2018, across different stages of the buy-back process, from timelines and disclosures to shareholder communication, merchant banker requirements and compliance procedures. Amendment Area Key Change Effective Date Regulations come into force on 1 August 2026. Open Market Buy-back Limit From 1 August 2026, buy-back through the stock exchange shall be less than 15% of the paid-up capital and free reserves based on both standalone and consolidated financial statements. Cooling-off Period Companies cannot make another buy-back offer within the period prescribed under the Companies Act, 2013 after the closure of the previous buy-back. Minimum Public Shareholding Companies cannot propose a buy-back that results in a breach of the minimum public shareholding requirements. Shareholder Intimation Companies must electronically inform shareholders about the open market buy-back within one working day of the public announcement. Public Announcement Timeline Public announcement must be made within two working days after the Board resolution or declaration of postal ballot results. Buy-back Offer Timeline From 1 August 2026, open market buy-back offers must open within four working days of the public announcement and close within 66 working days from the opening date. Promoter Share Freeze Shares held by promoters and the promoter group will remain frozen during the buy-back period, subject to specified exceptions. Merchant Banker Requirement Companies may choose not to appoint a merchant banker, provided the prescribed responsibilities are assigned to the designated persons under the regulations. Escrow and Bank Guarantee Several provisions relating to escrow management and bank guarantees have been revised and clarified. Detailed Amendments Introduced by SEBI The notification contains both substantive regulatory amendments and procedural changes. While some amendments strengthen shareholder protection and improve transparency, others simplify the buy-back process by introducing greater flexibility for listed companies. The major amendments are explained below. 1. Revised Threshold for Open Market Buy-backs Through Stock Exchange SEBI has revised the threshold for buy-backs undertaken through the stock exchange route. The existing transitional provision has been extended until 31 July 2026. From 1 August 2026, an open market buy-back through the stock exchange must be less than 15% of the company's paid-up capital and free reserves, based on both standalone and consolidated financial statements. What Does This Mean for Companies? The revised threshold will apply to all eligible open market buy-backs commencing on or after 1 August 2026. Companies planning larger buy-back programmes may need to evaluate whether the proposed transaction satisfies the revised regulatory limit. Boards of directors should consider the amended threshold while approving future buy-back proposals and planning capital allocation strategies. 2. Revised Cooling-off Period Between Buy-back Offers SEBI has aligned the cooling-off period for buy-back offers with the Companies Act, 2013. A company cannot make another buy-back offer within the period prescribed under the Act from the closure of its previous buy-back. Business Impact Listed companies should consider the statutory cooling-off period while planning future buy-back programmes. Capital restructuring decisions should be aligned with the timelines prescribed under the Companies Act. Compliance teams should verify that any proposed buy-back does not violate the prescribed waiting period. 3. Restriction on Buy-backs Affecting Minimum Public Shareholding SEBI has introduced a new safeguard preventing companies from proposing a buy-back that results in a breach of the minimum public shareholding requirements prescribed under the applicable regulations. This amendment reinforces SEBI's objective of ensuring that listed companies continue to maintain the prescribed level of public shareholding even after completing a buy-back programme. Business Impact Companies must evaluate the impact of every proposed buy-back on their public shareholding before making an offer. Boards should incorporate minimum public shareholding calculations into the buy-back approval process. The amendment reduces the possibility of listed entities falling below the prescribed public shareholding threshold following a buy-back transaction. 4. Revised Timeline for Public Announcement SEBI has revised the timeline for making a public announcement of a buy-back offer. Under the amended regulations, the public announcement must be made within two working days from the date of passing the Board resolution or the declaration of the postal ballot results, as applicable. Key Impact Reduces delays in announcing buy-back offers. Ensures timely disclosure to the market. Improves transparency for investors. 5. Electronic Intimation to Shareholders A new provision requires companies to send an electronic intimation regarding the open market buy-back offer to shareholders within one working day from the date of the public announcement. The communication must be sent to shareholders holding shares on the date of the public announcement. Key Impact Improves communication with shareholders. Ensures investors receive timely information. Promotes greater transparency during the buy-back process. 6. Revised Timeline for Open Market Buy-back Offers With effect from 1 August 2026, SEBI has prescribed revised timelines for open market buy-back offers. The offer must open within four working days from the date of the public announcement and close within sixty-six working days from the date of opening. Key Impact Introduces a defined timeline for completing buy-back offers. Encourages faster execution of buy-back programmes. Provides greater certainty for companies and investors. 7. Promoter and Promoter Group Shares to Remain Frozen During Buy-back SEBI has introduced a new provision requiring the shares or other specified securities held by the promoters and promoter group, including their associates, to remain frozen at the ISIN level from the date of approval of the buy-back until the closure of the offer. However, the regulations also provide specified exceptions, including tendering shares in a tender offer and transfers arising from the invocation of existing encumbrances, subject to prescribed conditions. Key Impact Prevents changes in promoter holdings during the buy-back period. Enhances transparency and regulatory oversight. Allows limited exceptions as specified in the regulations. 8.    Merchant Banker Appointment Made Optional One of the most notable amendments allows companies to choose whether to appoint a merchant banker for a buy-back. If a company decides not to appoint one, the responsibilities that were previously performed by the merchant banker must be carried out by the designated persons specified in the regulations. Key Impact Companies now have greater flexibility in managing buy-back transactions. Compliance responsibilities have been clearly assigned where no merchant banker is appointed. Companies choosing this option must ensure that each designated person fulfils the responsibilities prescribed by SEBI. 9. Changes to Escrow and Bank Guarantee Requirements SEBI has revised several provisions relating to escrow accounts and bank guarantees. The amendments clarify the validity of bank guarantees, their release, and the responsibilities associated with escrow management during a buy-back offer. Key Impact Brings greater clarity to escrow-related obligations. Strengthens safeguards for buy-back transactions. Helps ensure timely fulfilment of regulatory requirements. 10. Other Procedural Amendments Apart from the major changes, SEBI has introduced several procedural amendments across the Buy-back Regulations. These include revisions to disclosures, filing requirements, drafting corrections and regulatory terminology to improve consistency and implementation. Key Impact Enhances the clarity of the regulatory framework. Simplifies interpretation of the regulations. Promotes consistent compliance across listed companies. Impact on Stakeholders The amendments will affect different stakeholders involved in the buy-back process. While some changes strengthen investor protection, others simplify regulatory compliance, and improve operational efficiency. Listed companies should review their buy-back policies, timelines, and internal compliance procedures to align with the amended regulations before 1 August 2026. The requirement to send electronic intimations and the revised buy-back timelines will help shareholders receive timely information regarding buy-back offers. Compliance officers will have additional responsibilities, particularly where a company opts not to appoint a merchant banker and in relation to promoter share freeze and extinguishment requirements. The amended regulations assign specific compliance and certification responsibilities to secretarial auditors and statutory auditors where companies do not engage a merchant banker. The next sections should wrap up the compliance aspects without becoming repetitive. Compliance Checklist for Listed Companies Listed companies planning a buy-back after 1 August 2026 should consider the following compliance measures: Compliance Requirement Action Required Review the amended regulations Understand the revised SEBI requirements before initiating a buy-back. Assess buy-back eligibility Ensure the proposed buy-back complies with the amended regulatory framework. Verify minimum public shareholding Confirm that the buy-back will not breach the prescribed public shareholding requirements. Follow revised timelines Adhere to the updated timelines for public announcement and offer period. Inform shareholders Send electronic intimation within the prescribed timeline, where applicable. Review merchant banker requirements Decide whether to appoint a merchant banker or assign responsibilities as permitted under the regulations. Ensure internal compliance Update internal policies, documentation, and approval processes before launching the buy-back. Review the amended regulations Understand the revised SEBI requirements before initiating a buy-back. Is This the Right Decision, or an Additional Compliance Burden? The amendment reflects SEBI's continued efforts to strengthen the regulatory framework governing buy-backs while improving transparency and investor protection. At the same time, it introduces greater flexibility by making the appointment of a merchant banker optional in certain cases. Why It Is the Right Decision Strengthens transparency throughout the buy-back process. Protects minimum public shareholding requirements. Introduces defined timelines for open market buy-backs. Improves shareholder communication through mandatory electronic intimation. Provides flexibility by allowing companies to opt out of appointing a merchant banker, subject to specified responsibilities. Where It May Create a Compliance Burden Companies will need to review internal buy-back procedures before 1 August 2026. Additional compliance responsibilities may arise where no merchant banker is appointed. Companies must ensure adherence to revised timelines and disclosure requirements. Compliance teams will need to coordinate with auditors, stock exchanges, and other stakeholders to fulfil the amended obligations. Corpseed Offering: Ensuring Seamless Compliance with the SEBI Buy-back Amendment Regulations, 2026 The amended regulations introduce several new compliance requirements for listed companies undertaking buy-backs. Corpseed helps businesses understand these changes and implement the necessary regulatory measures efficiently. 1. Buy-back Compliance Assessment Evaluate your proposed buy-back against the amended SEBI regulations and identify potential compliance gaps before initiating the process. 2. Regulatory Gap Analysis Review existing internal policies, governance practices, and buy-back procedures to determine their alignment with the amended regulations. 3. Documentation and Disclosure Support Assist in preparing and reviewing regulatory filings, disclosures, public announcements, and other documentation required under the amended framework. 4. Compliance Strategy for Listed Companies Support companies in planning buy-back transactions while ensuring compliance with revised timelines, disclosure obligations and public shareholding requirements. 5. Merchant Banker Advisory Guide whether to appoint a merchant banker or adopt the optional framework introduced under the amended regulations, along with advice on allocating regulatory responsibilities. 6. Secretarial and Regulatory Advisory Assist compliance officers, company secretaries, and management teams in understanding their obligations under the amended regulations and implementing effective compliance controls. 7. Ongoing SEBI Regulatory Monitoring Keep businesses informed about future SEBI notifications, circulars, amendments, and regulatory developments that may affect listed companies, and capital market transactions.

Subject

Summary: SEBI has introduced an important amendment to the SEBI (Mutual Funds) Regulations, 2026, allowing mutual fund schemes to undertake intraday borrowing to manage temporary cash flow mismatches between the inflows and outflows of a scheme. The borrowing is permitted only for addressing same-day liquidity gaps and will be subject to conditions specified by SEBI. While the amendment does not change the broader restrictions on mutual fund borrowing it provides fund houses with greater operational flexibility to ensure timely redemption payments and more efficient cash management. What the Notification Actually Says Issuing authority: Securities and Exchange Board of India (SEBI) Notification date: 3 July 2026, Mumbai, published as the SEBI (Mutual Funds) (Amendment) Regulations, 2026 Effective date: The amendment came into effect on 3 July 2026, the date of its publication in the Official Gazette. Parent regulation amended: SEBI (Mutual Funds) Regulations, 2026, originally notified on 15 January 2026. Key amendment: Chapter VII, Regulation 42(2) has been substituted with the following provision: "Nothing in sub-regulation (1) shall restrict the mutual funds from intraday borrowing for addressing timing mismatch between outflows and inflows of a scheme, subject to such conditions as specified by the Board." In plain terms: if a mutual fund scheme has payments going out and money coming in on the same day, but the timing doesn't line up perfectly (e.g., redemption payouts due before securities-sale proceeds are credited), the fund can now borrow money intraday to cover that gap as long as it follows whatever specific conditions SEBI separately prescribes (limits, disclosure, repayment timing, permissible lenders, etc.). Why SEBI Introduced This Amendment Mutual fund schemes regularly experience temporary timing mismatches between cash inflows and outflows during their day-to-day operations. Redemption payments to investors are usually processed within a fixed T+1 or T+2 settlement cycle. At the same time, proceeds from the sale of portfolio securities, subscription money, or dividend and coupon receipts may be credited later in the day due to settlement cycles, clearing house processes or banking cut-off timings. Without a formal borrowing mechanism, fund managers would either have to maintain higher cash reserves, which could affect portfolio returns, or risk delays in meeting redemption obligations. Regulatory rationale 1. Investor protection and timely redemptions: Ensuring that investors receive their redemption proceeds on time is essential for maintaining confidence in mutual funds. By permitting intraday borrowing, SEBI has provided fund houses with a legitimate mechanism to meet redemption obligations even when expected inflows are received later in the day. 2. Reducing idle cash holdings: Earlier, fund managers often maintained higher cash buffers as a precaution against temporary liquidity gaps. While this improved liquidity, it also meant that a portion of the scheme's assets remained uninvested. The amendment allows funds to manage liquidity more efficiently without keeping excessive idle cash. 3. Alignment with global practices: Many mature financial markets, such as UCITS funds in Europe and mutual funds regulated under the US Investment Company Act, permit short-term borrowing for liquidity management subject to strict regulatory limits. By introducing a similar provision, SEBI brings India's mutual fund framework closer to internationally accepted practices. 4. Removing regulatory ambiguity: The earlier Regulation 42 already placed restrictions on borrowing by mutual funds to prevent excessive borrowing and protect investors. However, it did not clearly explain whether funds could borrow to manage temporary cash flow gaps during the day. The amendment clears up this position by allowing intraday borrowing only for such situations. 5. Responding to changing market dynamics: With T+1 settlement becoming the norm in Indian equity markets and the increasing use of debt and hybrid investment products, temporary gaps between cash inflows, and outflows have become a regular part of mutual fund operations. The amendment allows fund houses to manage these situations in a regulated and transparent manner. How Businesses (AMCs, Trustees, Custodians) Will Comply Since the actual "conditions" for this intraday borrowing are to be "specified by the Board" (SEBI) separately likely through a circular Asset Management Companies (AMCs) need to prepare on multiple fronts: 1. Await and implement SEBI's detailed conditions circular This will likely specify: borrowing limits (as a % of the scheme's net assets), permissible lenders (banks, clearing corporations), maximum borrowing tenure (must be same-day/intraday only), repayment timing, permissible schemes (equity, debt, hybrid) and interest cost treatment. 2. Update scheme documentation and SID/SAI Scheme Information Documents (SID) and Statement of Additional Information (SAI) should be updated to disclose the fund's intraday borrowing policy, limits and risk factors. 3. Establish internal treasury and liquidity management protocols AMCs need documented internal policies for: When intraday borrowing will be triggered  Approval workflows (fund manager, CFO, risk committee sign-off) Selection of counterparties/lenders for such borrowing Same-day repayment tracking 4. Board and Trustee approval AMC boards and mutual fund trustees will likely need to approve internal intraday borrowing policies and set scheme-specific limits within SEBI's overall framework. 5. Risk management and reporting systems Systems must be built or upgraded to track intraday cash positions in real time, flag mismatches, and execute borrowing/repayment within the same trading day. 6. Disclosure to investors Funds will likely need to disclose instances and costs of intraday borrowing in periodic scheme disclosures (portfolio disclosures, annual reports) for transparency. 7. Custodian and banking relationship management AMCs will need to formalise intraday credit facilities with custodian banks or clearing corporations, including documentation, credit limits, and interest rate terms. Who Gets the Maximum Benefit? The amendment is expected to benefit several stakeholders by improving liquidity management, operational efficiency and timely fund settlements. Asset Management Companies (AMCs) and mutual fund houses All SEBI-registered AMCs will benefit from greater flexibility in managing short-term liquidity, helping reduce the risk of technical delays in processing redemption payments. Funds with high redemption volumes or fluctuating daily cash flows, particularly liquid funds, ultra-short duration debt funds and overnight funds, are expected to benefit the most, as they are more likely to experience temporary timing mismatches.  Mutual fund investors (unit-holders) Investors are likely to benefit through: More reliable and timely redemption payouts, even when there are temporary settlement-related timing gaps. Better cash management by fund houses, allowing a larger portion of scheme assets to remain invested instead of being held as precautionary cash buffers, which may support overall fund performance. Custodian banks and clearing corporations Banks and clearing corporations that provide intraday credit facilities to AMCs may benefit from an additional source of fee or interest income by offering short-term liquidity support. Liquid and short-duration debt funds Liquid funds, overnight funds and other short-duration debt schemes, which handle large volumes of daily subscriptions and redemptions, are expected to experience the most significant operational benefits from this amendment. Who May Face Challenges or Additional Burden? While the amendment offers operational benefits, some stakeholders may need to strengthen their systems and compliance processes. Smaller AMCs with limited treasury infrastructure Smaller or newly established AMCs without advanced treasury and real-time risk management systems may need to invest in technology, internal processes and compliance frameworks before they can effectively use the intraday borrowing facility.  They may also find it more difficult to secure favourable intraday credit facilities compared to larger AMCs with well-established banking relationships. AMCs required to formalise internal processes AMCs will need to establish formal policies, documentation and approval procedures for intraday borrowing. Although this improves governance, it may also increase operational and compliance responsibilities. Compliance and audit teams Real-time monitoring, proper audit trails and periodic reporting of borrowing transactions will increase the workload for compliance and audit teams, particularly after SEBI issues the detailed operational guidelines. Risk of misuse As the exemption is limited to managing intraday timing mismatches, AMCs must ensure that it is not used as a substitute for broader borrowing or leverage. SEBI is also expected to maintain strict oversight to prevent misuse of the facility. What Was the Requirement/Need for This Amendment? The amendment addresses a practical operational gap while continuing to uphold the existing safeguards against excessive borrowing by mutual funds. Under the original SEBI (Mutual Funds) Regulations, 2026, which came into effect on 15 January 2026, Regulation 42(1) imposed broad restrictions on mutual fund borrowing as a prudential measure to prevent excessive leverage and protect investor interests. However, this general restriction also meant that mutual funds had no explicit regulatory provision allowing them to borrow even for the limited purpose of managing temporary intraday timing mismatches between redemption payouts and expected inflows, such as sale proceeds or subscription receipts. The amendment fills this gap by introducing a narrowly defined exception for intraday borrowing to address same-day liquidity mismatches. It does not relax the overall restriction on borrowing but permits this limited flexibility subject to the conditions that SEBI will prescribe separately. Impact on the Indian Economy The amendment is expected to strengthen the operational efficiency of the mutual fund industry while supporting overall market stability. Positive impacts Improved efficiency in the mutual fund industry: India's mutual fund industry manages assets worth over Rs 60 lakh crore. Better liquidity management can improve operational efficiency and help deliver better value to millions of investors. Strengthened investor confidence: Ensuring reliable, on-time redemptions strengthens trust in mutual funds as a savings and investment vehicle supporting continued growth in financial inclusion and household participation in capital markets (SIP flows, retail AUM growth). Deepening of money markets: Intraday borrowing facilities, once operationalized, could contribute to deeper, more liquid short-term money markets in India, as banks and clearing corporations develop dedicated intraday lending products for AMCs. Alignment with global regulatory standards: Bringing Indian mutual fund regulation in line with global norms (UCITS, US 1940 Act framework) makes the Indian fund management industry more comparable and attractive to global institutional allocators and potential foreign fund managers considering India-domiciled products. Minor economic risks or considerations If not tightly conditioned, there is a theoretical systemic risk if many funds simultaneously seek intraday borrowing during a market stress event, potentially straining short-term interbank/money market liquidity though SEBI's forthcoming conditions are expected to cap and structure this risk appropriately. Additional operational and compliance costs for the industry, though these are proportionate to the benefit and are typical of any regulatory refinement. Impact on India and Other Countries Although the amendment is primarily aimed at India's mutual fund industry, it also reflects the country's efforts to align its regulatory framework with global standards. For India specifically The amendment is a domestic regulatory change focused on improving liquidity management within India's Rs 60+ lakh crore mutual fund industry. It has no direct cross-border regulatory impact. At the same time, it supports India's broader objective of building a mature and globally competitive capital market. A stronger regulatory framework can enhance investor confidence, encourage greater foreign portfolio investment and support the growth of GIFT City as an international financial services hub. For other countries The amendment does not directly affect mutual fund regulations in other jurisdictions. However: Global asset managers with operations in India will need to align their India-specific treasury and liquidity management practices with the new provision. The amendment may also serve as a useful reference for emerging market regulators considering similar liquidity management measures for their domestic mutual fund industries. Is This the Right Decision, or an Additional Burden? The amendment strikes a balance between improving operational flexibility and maintaining regulatory discipline. Why this is a sound, well-calibrated regulatory decision It addresses a genuine operational challenge without weakening the existing safeguards against excessive borrowing by mutual funds. Since the exemption is subject to conditions prescribed by SEBI, the regulator continues to retain full control over borrowing limits, safeguards and monitoring. The amendment aligns India's mutual fund framework with internationally accepted liquidity management practices, reflecting the continued evolution of the country's capital market regulations. Its immediate implementation suggests that SEBI considers this an operational refinement rather than a major regulatory overhaul requiring a phased transition. Where it does create some burden AMCs, especially smaller ones, will need to build new treasury, risk, and compliance infrastructure to safely and transparently use this facility once SEBI's detailed conditions are released. Until SEBI issues its conditions circular, there is a period of regulatory uncertainty. AMCs know the exception exists, but cannot yet operationalize it without knowing the specific limits and safeguards. Overall, the amendment represents a practical regulatory improvement rather than an additional compliance burden. While AMCs may need to enhance their internal processes, the benefits of improved liquidity management and timely redemption payments are expected to outweigh the additional compliance efforts. How Will This Amendment Improve Market Efficiency and Investor Confidence? The amendment is expected to improve the overall functioning of the mutual fund industry while strengthening investor confidence. Investor satisfaction Timely redemption payments are one of the key factors influencing investor confidence. By reducing the possibility of payment delays caused by temporary settlement mismatches the amendment helps improve the overall investor experience. Better liquidity management may also enable fund managers to reduce unnecessary cash holdings and keep a larger portion of scheme assets invested, supporting overall fund efficiency. Market quality and transparency By clearly permitting intraday borrowing under defined conditions, the amendment removes regulatory uncertainty and provides greater clarity for the mutual fund industry. Once SEBI issues the detailed operational framework, disclosure requirements are expected to improve transparency around the use of intraday borrowing and liquidity management practices. Impact on the financial ecosystem Although the amendment has no direct environmental impact, it strengthens the resilience and efficiency of India's financial ecosystem. It also supports the development of a more structured short-term money market by encouraging formal intraday lending arrangements between AMCs, banks and clearing corporations. Implementation Timeline Date Event 15 January 2026 SEBI (Mutual Funds) Regulations, 2026, originally published 3 July 2026 SEBI (Mutual Funds) (Amendment) Regulations, 2026, notified Regulation 42(2) substituted 3 July 2026 (immediate) Amendment comes into force on the date of gazette publication Pending SEBI is expected to issue a separate circular specifying detailed conditions (limits, tenure, permissible lenders, disclosure requirements) governing intraday borrowing Corpseed Offering: Ensuring Seamless Compliance with the New Amendment This amendment creates a set of specialized advisory opportunities in the capital markets/AMC compliance space: 1. SEBI Compliance Advisory for AMCs Help AMCs interpret the amended Regulation 42(2) and prepare internal policies ahead of SEBI's detailed conditions circular, so they are ready to operationalize intraday borrowing as soon as the framework is finalized. 2. Treasury and Liquidity Risk Policy Design Assist AMCs (especially smaller/mid-sized ones) in designing formal intraday borrowing policies: approval workflows, borrowing limits, lender empanelment criteria and repayment tracking mechanisms. 3. SID/SAI and Scheme Document Updates Support AMCs in updating Scheme Information Documents and Statement of Additional Information to incorporate intraday borrowing disclosures once SEBI's conditions are known. 4. Custodian/Bank Facility Structuring Advise AMCs on structuring intraday credit facility agreements with custodian banks or clearing corporations, including documentation and regulatory compliance review. 5. Board and Trustee Governance Support Help AMC boards and mutual fund trustees draft and approve governance frameworks for intraday borrowing oversight, ensuring compliance with SEBI's eventual conditions. 6. Regulatory Monitoring and Alerts Service Offer a subscription-based SEBI regulatory tracking service for AMCs and fund houses, ensuring they don't miss the follow-up circular specifying the detailed conditions for this intraday borrowing exception and any future amendments to mutual fund regulations. 7. Training for Fund Operations and Compliance Teams Conduct focused training sessions for AMC treasury, risk and compliance teams on the new provision, its intended scope, likely regulatory expectations and best practices drawn from global mutual fund liquidity management standards.

Subject

Summary: SEBI has made a change that sounds small but actually matters a lot. Until now, when foreign investors wanted to invest in India, they had to pay certain fees in US Dollars. From now on, those same fees will be counted in Indian Rupees instead (though the investor can still pay using any foreign currency that is accepted). Along with this money change, SEBI has also updated some of the rules about when fees must be paid, what information investors must share, and how fast banks must send the collected money to SEBI. What the Notification Actually Says? Who made this rule: SEBI announced this rule on 3 July 2026 in Mumbai. It is called the SEBI ( Foreign Portfolio Investors ) (Amendment) Regulations, 2026. Which older rule does it change: It updates the SEBI (FPI) Regulations, 2019, which had last been changed in 2025. When it starts: Most of the new rules will start 180 days after this notice was printed in the government gazette, which works out to around early January 2027. But one small part of the rule (about removing an old cross-reference line) started immediately, on 3 July 2026. Key changes Fees are now counted in Rupees, not Dollars: Almost every fee that used to be a fixed number of US Dollars is now a fixed number of Rupees (though it can still be paid in any accepted foreign currency). When one must pay: Earlier, an investor had to pay the registration fee at the time they submitted their form. Now, they must pay it before SEBI gives them their registration certificate, so the fee must be settled a little earlier in the process. A new question has been added to the form: Investors must now also tell SEBI their date of birth (for a person) or the date their company/trust/partnership was formed. This is a new piece of information that wasn't asked for before. Faster money transfer to SEBI: The banks and firms that collect these fees from investors (called Designated Depository Participants, or DDPs) must now send the money to SEBI, in Rupees, within 5 working days of receiving it. A small cleanup: One confusing sentence in the old rule, which pointed to another part of the rulebook, has been removed because it was no longer needed. Fee item Old (in US Dollars) New (in Rupees) Registration fee (Category I FPI) 2,500 US Dollars Rs. 2,30,000 Registration fee (Category II FPI) 250 US Dollars Rs. 23,000 Late/renewal fee (higher slab) 50/day US Dollars Rs. 4,500/day Late/renewal fee (lower slab) 5/day US Dollars Rs. 500/day Application fee under Regulation 43B(2) 1,000 US Dollars Rs. 90,000 Offshore Derivative Instrument (ODI) fee per subscriber 800 US Dollars Rs. 75,000 Why SEBI Introduced This Amendment? Core rationale Making the money math simpler: Years ago, SEBI decided to charge foreign investors in US Dollars because it felt like a fair, steady currency to use worldwide. But SEBI itself collects and spends money in Rupees. So having fees in Dollars while everything else is in Rupees made the accounting messy. Switching to Rupees makes life easier for SEBI's own bookkeeping. Less confusion from currency ups and downs: A Dollar fee set many years ago slowly drifts away from its "real" Rupee value as exchange rates change over time. A Rupee-based fee stays steady and easy to plan around. Knowing investors better: By asking for the date of birth or the date a company was formed, SEBI can check more carefully who exactly is investing, this helps stop people from hiding behind shell companies or fake identities. Closing a small loophole: Before, someone could submit their form without having fully paid. Now, payment must be completed before they get their certificate, which tightens up the process. Getting the fee money faster: The new 5-day rule means SEBI receives the collected fees (and the details about them) much sooner, so it can keep better track of who is registering. Fits with SEBI's other July 2026 updates:  SEBI announced this rule on the very same day as some other fee-related changes (for custodians and mutual funds), showing this is part of a bigger cleanup effort happening at the same time. Compliance Requirements for Businesses For Foreign Portfolio Investors (FPIs) themselves Recalculate the registration, renewal, and late-fee budgets using the new Rupee amounts instead of the old Dollar amounts. Be ready to share the date of birth (if an individual) or date of formation (if a company, trust, or partnership) when registering or renewing. Make sure the fee is fully paid before SEBI issues the registration certificate, not just when one submits the form. If anyone deals in Offshore Derivative Instruments (ODIs), then one must now pay the new fee of Rs. 75,000 (or its foreign-currency equivalent) per subscription. For Designated Depository Participants (DDPs) Send all fees collected from investors to SEBI within 5 working days, whether it's a first-time registration fee, a renewal fee, or a late fee. Along with the money, submit the required details in the format SEBI asks for. Update the internal computer systems so they calculate fees in Rupees instead of old Dollar amounts. Add the new date-of-birth/formation-date field to the registration forms. Transition timing to note Most changes, the new fee amounts, the new form question, and the faster money-transfer rule, will only start 180 days after this notice was published, giving everyone about six months to prepare. The one small rule about removing the old cross-reference line started right away, on 3 July 2026. Benefits for Businesses Steadier fee planning: Since fees are now in Rupees, investors and DDPs don't have to keep worrying about Dollar-to-Rupee exchange rate swings affecting their costs. Easier accounting: No more juggling between Dollar-based regulatory fees and Rupee-based day-to-day accounting. Clearer registration process: Paying before getting the certificate removes any confusion about whether a registration is truly valid. Quicker processing: The faster 5-day money-transfer rule helps the whole registration system move more smoothly, so investors get certainty sooner. Who Benefits Most vs Who Faces Challenges? Because thousands of pension funds, sovereign wealth funds, hedge funds, and asset managers around the world invest in India through the FPI route, this change touches a very large group of investors, even though most of the individual changes are just administrative or currency-related, not big new restrictions. Category Likely Impact Large global custodians/DDPs (major banks) Manageable, they already have the systems needed to handle currency conversion and faster money transfers. Smaller/boutique FPIs (Category II) May see a small increase in effective cost depending on exchange rates, plus new paperwork to complete ODI subscribers (P-Note issuers) Fee recalculated from 800 US dollars to about Rs. 75,000, a currency adjustment, not a real fee hike. New FPI applicants Must get used to paying fees earlier and filling in the new date field from the start Existing registered FPIs Need to recalculate renewal and late fees in Rupees and update their compliance calendars. What Was the Requirement/Need for This Amendment? The old FPI Regulations from 2019 had fees fixed in US Dollars, a leftover choice from when SEBI wanted a currency that felt globally recognizable to foreign investors. Over time, this created friction: SEBI collects and spends money in Rupees domestically, but prices a large chunk of its fees in a foreign currency. This made its revenue swing up and down depending on exchange rates and made internal reporting harder. On top of that, global standards for knowing who really owns and controls an investing entity have gotten stricter, which is why the new date-of-formation question was added. The amendment also fixes the gap where fee payment wasn't firmly tied to getting the certificate, and it shortens how long DDPs can hold onto collected fees before sending them to SEBI. Impact on the Indian Economy Positive impacts More predictable fee income for SEBI: Rupee-denominated fees eliminate any unpredictability due to the movement in currency, which makes it easier for SEBI to plan its budget. Stronger checks support market trust: Stricter verification processes strengthen the market's trust. Requesting the incorporation date or date of birth makes sure that India's foreign investment system remains clean and transparent. Barely any change in cost of entry: Since this is mostly a currency relabelling rather than a real fee increase, it is unlikely to discourage foreign money from flowing into India. Smoother registration flow: Faster fee transfers from DDPs help keep the whole FPI registration system moving efficiently, which supports continued foreign investment. Minor economic considerations It is possible that some of the smaller FPIs, particularly those belonging to Category II and ODI Subscribers, may face an increase or decrease in their cost by a very small margin due to the application of the new Rupee cost, depending on what level the exchange rate is at during that time. Impact on India and Other Countries For India This change is part of SEBI's ongoing effort to modernize how India's capital markets are regulated, especially around keeping currency accounting consistent and knowing foreign investors better. It supports India's image as a well-run, trustworthy place for global investors to put their money. For other countries / global FPI ecosystem Global fund managers, pension funds, and sovereign wealth funds that invest in India through the FPI route will need their India compliance teams to: Update their internal fee budgets from Dollar figures to Rupee figures. Make sure their paperwork includes the newly required incorporation or formation date. Global custodian banks and DDPs operating in India will also need to update their systems for the new fee amounts and the 5-day transfer rule, but this is just an operational adjustment, not a barrier stopping them from investing. Nothing here suggests foreign investors will be discouraged from putting money into India; it's a currency and process cleanup, not a new restriction. Is This the Right Decision, or an Additional Burden? Why is this a sound decision Switching fees from Dollars to Rupees is a smart, practical update that removes currency confusion without really raising the true cost for most investors. The 180-day waiting period (except for the tiny immediate cleanup) gives everyone, investors, DDPs, and custodians, plenty of time to update their systems and paperwork. Asking for a formation or birth date is a light-touch addition that matches what other countries already require, without creating heavy extra paperwork. Tightening the payment timing and the money-transfer deadline improves discipline in the system without adding real cost. Where it creates some burden •    FPIs and DDPs will need to update their systems and paperwork to handle the new Rupee-based fees and the extra data field, a one-time setup cost. •    Firms that used to plan their budgets strictly in Dollars will need to redo their financial models, especially larger firms managing many FPI registrations across different countries. •    Having to pay the fee before getting the certificate (instead of at the time of submission) slightly tightens the timing for new applicants, though this is a minor procedural shift. Overall, this looks like a sensible, low-burden update to modernize the currency and process, not a new obstacle for foreign investment. The changes are mostly about paperwork and process, not about making it harder to invest. How This Improves Quality, Transparency, and Market Conditions? Regulatory quality and transparency Rupee-denominated charges will increase the clarity of the system of fees, being in line with the way of accounting in India, and hence less confusing for SEBI as well as the foreign investors. New requirements regarding the date of incorporation or birth would help SEBI check who the investors actually are and would contribute to making the foreign investment process more transparent. Investor confidence A fee system that is consistent in currency and well-documented helps global institutional investors trust that India's market rules are organized and well-run. No direct environmental angle This is purely a financial and administrative reform about market rules and fees, it has no connection to environmental matters. Implementation Timeline Category Likely Impact Large global custodians/DDPs (major banks) Manageable, they already have the systems needed to handle currency conversion and faster money transfers. Smaller/boutique FPIs (Category II) May see a small increase in effective cost depending on exchange rates, plus new paperwork to complete ODI subscribers (P-Note issuers) Fee recalculated from 800 US dollars to about Rs. 75,000, a currency adjustment, not a real fee hike. New FPI applicants Must get used to paying fees earlier and filling in the new date field from the start Existing registered FPIs Need to recalculate renewal and late fees in Rupees and update their compliance calendars. Corpseed Offering: Ensuring Seamless Compliance with the New Amendment This new rule opens up several ways to help the many foreign investors and firms affected by it: FPI Fee Transition Advisory: Help FPIs, DDPs, and custodians work out their new registration, renewal, and late-fee costs under the Rupee-based system before the 180-day deadline arrives, so no one makes a payment mistake during the switch. KYC/Documentation Update Support: Help FPIs prepare and submit the newly required date of birth, incorporation, or formation information as part of their registration or renewal filings. Registration Sequencing Compliance: Guide new FPI applicants through the updated rule that requires paying fees before receiving their certificate, so their registration goes through without delay. DDP Process Redesign Support: Help Designated Depository Participants update how they collect, convert, and transfer fees so they meet the new 5-working-day rule and reporting format. ODI Subscriber Compliance: Support entities dealing in Offshore Derivative Instruments in adjusting to the new Rs. 75,000 (foreign-currency equivalent) fee. Global FPI Client Advisory Desk: Offers dedicated support to international asset managers and custodian banks with India-related FPI operations, helping them handle the currency change and new paperwork smoothly, without disturbing their other compliance work across markets. Regulatory Monitoring Bundle: Since SEBI tends to release several related updates around the same time (as seen with the FPI, custodian, and mutual fund changes), offer a combined SEBI-tracking subscription for custodians, DDPs, and FPI-related firms to stay ahead of future rule changes.

Subject

Summary: The Securities and Exchange Board of India (SEBI) has amended the SEBI (Custodian) Regulations, 1996, to change the payment frequency of custodian registration fees from an annual basis to a monthly basis. The amendment will come into effect on 1 October 2026. This is primarily an operational change rather than a financial one. It does not introduce a new fee or significantly increase the overall registration cost for custodians. Instead, it changes the timing of fee payments and requires custodians to submit their Assets under Custody (AUC) details monthly rather than once a year. The amendment is intended to improve regulatory oversight while making fee payments more regular and aligned with business activity. Key Highlights of the SEBI Notification Issuing authority: Securities and Exchange Board of India (SEBI), Mumbai. Regulation amended: SEBI (Custodian) Regulations, 1996 (last amended 23 September 2025). Effective date: 1 October 2026 (a fixed future commencement date, unlike the mutual fund amendment, which took immediate effect). Key changes 1. Regulation 9(d) and Regulation 26(i): The word "annual" is replaced with "monthly" wherever it appears regarding fee payment. 2. Second Schedule, Part A, clause (iii) fee amount itself: The amendment also revises the fee structure under Part A, Clause (iii) of the Second Schedule. Earlier Fee Structure Annual fee of Rs 10,00,000 (Rs 10 lakh), or  0.0005% of the Assets Under Custody (AUC),  Whichever is higher.  Revised Fee Structure Monthly fee of Rs 85,000, or  0.0000416% of the monthly Assets Under Custody (AUC),  Whichever is higher.  Although the payment frequency has changed, the annual financial impact remains almost the same. Paying Rs 85,000 per month amounts to approximately Rs 10.20 lakh per year, which is only marginally higher because of rounding. This indicates that SEBI has restructured the payment schedule rather than increasing the registration fee. 3. Second Schedule, Part B, clause (II) payment mechanics: The amendment introduces a new payment mechanism for both existing and newly registered custodians. For New Custodians (Registered on or after 1 October 2026) A proportionate fee will be payable for the month in which registration is granted.  From the following month onwards, the full monthly registration fee must be paid.  Every payment must be made within 15 days from the end of the relevant month.  For Existing Custodians (Registered before 1 October 2026) They must pay a proportionate annual fee for the remaining period of FY 2026-27.  This payment must be made within 15 days from the commencement of the amendment.  Any annual registration fee already paid for a period extending beyond 1 October 2026 will be adjusted against the revised fee payable.  Starting the following month, custodians must switch to the monthly payment system. 4. Reporting requirement (sub-clause 4): Custodians must now submit their Assets under Custody (AUC) statement every month (instead of annually) along with the fee payment, in a SEBI-specified format, certified by the Functional Head of Custody Services as accurate and complete. Why Has SEBI Introduced This Change? SEBI has introduced this amendment to make the registration fee framework more efficient, improve regulatory reporting, and align fee payments more closely with the actual scale of custodial business. Aligning fee cash flows with actual business activity: Custodian AUC balances fluctuate throughout the year with market movements, fund inflows/outflows, and new client onboarding. An annual fee based on a single point-in-time AUC snapshot can be a poor proxy for the custodian's actual scale of business over the full year. Monthly fees based on monthly AUC make the fee structure more dynamically accurate. Improved regulatory oversight through more frequent data: Requiring a monthly AUC statement (rather than annual) gives SEBI far more granular, timely visibility into custodian balance sheets and market-wide custody trends useful for systemic risk monitoring, especially as India's AUM/AUC base has grown substantially. Smoothing SEBI's own fee revenue and administrative cash flow: Annual lump-sum collection creates uneven cash inflows for SEBI, monthly collection provides steadier, more predictable regulatory fee revenue. Reducing large one-time payment burden on custodians: Paying Rs 85,000/month (or the AUC-based equivalent) is administratively easier for many custodians than budgeting for a single Rs 10+ lakh annual outflow, improving cash flow predictability on the custodian's side too. Consistency with other SEBI fee-frequency reforms: SEBI has been moving multiple categories of market intermediaries toward more frequent, data-linked fee and reporting cycles as part of a broader modernization of its regulatory fee framework, improving real-time regulatory data rather than annual retrospective snapshots. Compliance Requirements for Custodians To ensure a smooth transition to the new fee payment framework, SEBI has prescribed separate compliance requirements for existing and newly registered custodians. In addition to changing the payment frequency, custodians will also need to adopt a monthly reporting process for their Assets under Custody (AUC). For Existing Custodians (Registered Before 1 October 2026) Custodians already registered before the amendment comes into effect must comply with the following requirements: Pay the Transition Fee: A proportionate annual registration fee for the remaining period of FY 2026-27 (1 October 2026 to 31 March 2027) must be paid within 15 days from 1 October 2026.  Adjust Previously Paid Fees: If an annual registration fee has already been paid for a period extending beyond 1 October 2026 the amount will be adjusted against the revised fee payable under the new framework.  Begin Monthly Fee Payments: From November 2026 onwards, custodians must pay the applicable monthly registration fee within 15 days after the end of each month.  Submit Monthly AUC Statements: Every monthly fee payment must be accompanied by an Assets under Custody (AUC) statement in the format prescribed by SEBI. The statement must also be certified by the Functional Head of Custody Services.  For New Custodians (Registered On or After 1 October 2026) Custodians obtaining registration on or after 1 October 2026 must comply with the following requirements: Pay a proportionate registration fee for the month in which registration is granted.  Pay the full monthly registration fee from the following month onwards within 15 days from the end of each month. Submit a certified monthly AUC statement along with every monthly fee payment from the beginning of their registration.  Operational Changes Required for Compliance To comply with the amended regulations, custodians will need to update their internal processes and systems. While the overall fee remains largely unchanged, the monthly compliance cycle requires several operational adjustments. Operational/systems changes needed Finance and treasury teams must move from an annual fee-budgeting cycle to a monthly recurring payment process requiring updated internal calendars, approval workflows and possibly automated payment scheduling. AUC reporting systems must be capable of generating accurate monthly (not just annual) AUC figures, since the fee is based on AUC in that specific month. Certification workflow: The Functional Head of Custody Services must review and certify each monthly AUC statement formalizing an internal monthly sign-off process where an annual one previously sufficed. Fee calculation logic: Systems need to compute the higher of (Rs 85,000 flat) or (0.0000416% of that month's AUC) every month, rather than once a year. Benefits Businesses (Custodians) Get Although the amendment introduces more frequent reporting, it also offers several operational and financial advantages for custodians. Improved Cash Flow Management: Replacing a single annual payment with monthly payments spreads the financial outflow across the year. This allows custodians to manage their cash flows more efficiently and makes budgeting easier, particularly for mid-sized institutions. Better Alignment between Fees and Business Size: Since the AUC-based fee is calculated every month, the registration fee reflects the custodian's current level of business more accurately. Organisations with fluctuating AUC will no longer rely on a single annual snapshot that may not represent their overall operations. Reduced Upfront Financial Burden: Monthly payments eliminate the need to arrange a large lump-sum payment once a year. This improves working capital management and allows organisations to distribute compliance costs more evenly throughout the year. More Consistent Regulatory Compliance: Submitting monthly AUC statements encourages continuous compliance instead of concentrating reporting activities into a single annual exercise. This can help custodians maintain better regulatory records as well as strengthen internal compliance practices. Who Benefits Most vs Who Faces More Burden Aspect Larger/Established Custodians Smaller/Newer Custodians Cash flow impact Minimal large balance sheets easily absorb monthly vs annual timing More favourable spreads cost, easing working capital pressure Reporting infrastructure Likely already capable of monthly AUC reporting May need to build new monthly reporting/certification processes Compliance overhead Marginal increase (12 filings vs 1) Proportionately larger burden relative to their compliance team size Net effect Slight administrative increase, otherwise neutral Net positive on cash flow, but added reporting workload Since only a handful of SEBI-registered custodians operate in India (mainly banks and large financial institutions offering custody services, e.g., major banks and specialized custody arms of financial groups), this amendment is a sector-specific, relatively low-impact operational change rather than one affecting large numbers of businesses. Impact on India's Economy Although the amendment affects only a small group of SEBI-registered custodians, it strengthens regulatory oversight and improves the efficiency of the compliance framework without creating any significant economic impact. Positive Impact Better Regulatory Oversight: Monthly AUC reporting gives SEBI access to more timely and accurate data, helping it monitor custody-related risks more effectively and strengthen oversight of India's growing capital markets. Improved Cash Flow Planning: Monthly fee payments replace a single annual payment, making it easier for custodians to manage cash flows and budget compliance expenses throughout the year. Supports Regulatory Modernisation: The amendment aligns with SEBI's broader objective of introducing more frequent reporting and improving the efficiency of regulatory supervision across market intermediaries. Limited Economic Impact: Since the amendment applies only to a limited number of custodians, it is unlikely to have any significant impact on India's overall economy or financial markets. Impact on India and Other Countries Limited to India: The amendment applies only to SEBI-registered custodians operating in India and has no direct impact on foreign regulatory frameworks.  Global Custodians in India: International custody service providers operating in India must update their Indian compliance and reporting processes, while their overseas operations remain unaffected.  No Cross-Border Market Impact: The amendment is an administrative compliance reform and is not expected to influence global financial markets or international regulations. Is This the Right Decision, or an Additional Burden? Overall, the amendment is a balanced regulatory reform. While it introduces more frequent reporting requirements, it does not significantly increase the financial burden on custodians. Instead, it modernises the fee payment framework, and maintains regulatory oversight. Why This Is a Positive Change No significant increase in registration fees: Although the payment frequency changes, the annual fee remains almost the same. This confirms that the amendment is aimed at improving the payment structure rather than increasing costs.  Better alignment with business activity: Monthly AUC-based fee calculations reflect the custodian's actual scale of operations more accurately than a single annual assessment.  Well-planned transition: SEBI has provided a clear implementation timeline, allowing custodians sufficient time to update their systems, processes, and compliance workflows before the amendment takes effect.  Improved regulatory efficiency: Monthly reporting enables SEBI to monitor market developments more effectively and respond to potential risks in a timely manner.  Additional Compliance Requirements More frequent reporting: Custodians must now submit 12 AUC statements each year instead of one annual statement. System and process upgrades: Organisations may need to update their finance, reporting, and internal approval systems to support monthly fee calculations, payments, and certifications. Overall Assessment The amendment is more of an operational change than a significant compliance burden. While custodians will have to move to monthly fee payments and reporting, the overall cost remains almost the same, making the transition practical and manageable. How This Improves Quality, Transparency, and Market Conditions The amendment strengthens regulatory transparency by introducing more frequent reporting, improving data quality and supporting more effective supervision of custodians. Stronger Regulatory Oversight Monthly AUC reporting provides SEBI with more timely and reliable information, enabling better supervision of custodians and improving its ability to identify potential risks within the financial system. Improved Data Accuracy The requirement for certification by the Functional Head of Custody Services strengthens accountability and encourages organisations to maintain accurate and up-to-date custody records. Better Protection of the Financial System Although custodians do not directly deal with retail investors, they play a critical role in safeguarding assets held by mutual funds, pension funds, insurance companies, and foreign portfolio investors. Better regulatory visibility over custodians indirectly supports the safety and integrity of India's capital markets. No Environmental Impact The amendment relates solely to the payment of registration fees and reporting requirements. It does not have any direct environmental or sustainability implications. Implementation Timeline The following timeline highlights the key compliance deadlines under the SEBI (Custodian) (Amendment) Regulations 2026, helping stewards prepare for a smooth transition to the new framework. Date Event 16 May 1996 Original SEBI (Custodian) Regulations, 1996, published 23 September 2025 Last prior amendment to Custodian Regulations 3 July 2026 SEBI (Custodian) (Amendment) Regulations, 2026 notified 1 October 2026 Amendment comes into force monthly fee regime begins Within 15 days of 1 October 2026 Existing custodians must pay a proportionate annual fee for remainder of FY 2026-27 From November 2026 onward Full monthly fee and monthly AUC statement due within 15 days of each month-end Corpseed Offering: Ensuring Seamless Compliance with the New Amendment Since SEBI-registered custodians are a small, concentrated group of large financial institutions, Corpseed's opportunity here is narrower but high-value: 1. Transition Compliance Advisory Help custodians calculate the correct proportionate annual fee for the FY 2026-27 transition period, including adjustment credits for fees already paid, ensuring accurate payment within the 15-day window after 1 October 2026. 2. Monthly Fee and AUC Reporting Process Design Design and implement a recurring monthly compliance calendar/process for fee calculation, payment and AUC statement submission, replacing the old annual cycle. 3. Internal Certification Workflow Support Help custodians formalize the internal sign-off process by the Functional Head of Custody Services, ensuring monthly AUC statements are accurate, complete and audit-ready. 4. SEBI Format Compliance Track and advise on the SEBI-specified format for monthly AUC statements once formally circulated, ensuring custodians' reporting templates stay aligned with regulatory expectations. 5. Regulatory Monitoring Subscription Given SEBI's pattern of issuing multiple related amendments together (custodian fees, mutual fund borrowing, on the same date), offer custodians and AMCs a consolidated regulatory tracking service covering all SEBI notifications affecting their specific business line. 6. Training for Finance and Compliance Teams Conduct focused sessions for custodian finance and compliance teams on the new fee mechanics, transition-period calculations, and monthly reporting obligations ahead of the 1 October 2026 effective date.