Law Updates

Subject

Summary: The Securities and Exchange Board of India (SEBI) has proposed a new digital Know Your Customer (KYC) route for individual Persons Resident Outside India (PROI). The proposal covers Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs) and foreign nationals who are outside India and want to enter or maintain an account-based relationship in the Indian securities market. The proposal under consideration is straightforward. An eligible offshore client need not come all the way to India to perform digital KYC. SEBI is looking into the possibility of permitting digital KYC from an FATF-compliant jurisdiction, based on document verification, VIPV, location matching, spoofing measures, audit, and cybersecurity measures. It is not the end of the story yet. SEBI came out with a consultation paper and Press Release No. 46/2026 on 14th August 2026. Comments can be provided to SEBI till 4th September 2026. Notification at a Glance Particular Verified details Issuing authority Securities and Exchange Board of India Document Consultation Paper: Review of Know Your Client Process for Individual Persons Resident Outside India Related press release PR No. 46/2026 Date of issue August 14, 2026 Legal status Consultation proposal accompanied by a draft circular; not a final binding circular Public-comment deadline September 4, 2026 Proposed effective date Thirty days after the date of the future final circular; the date is blank in the draft Governing framework SEBI Act, 1992; SEBI KYC Master Circular dated October 12, 2023; PMLA and PML Rules; KRA Regulations, 2011 People covered Individual NRIs, OCIs and foreign nationals located outside India Main condition Overseas digital onboarding is proposed for clients in FATF-compliant countries Main regulated entities SEBI-registered intermediaries and KYC Registration Agencies Core proposal Digital KYC without requiring the eligible client to be physically present in India Immediate compliance duty None created by the consultation paper itself The September 4 date is the deadline for submitting comments. It is not the date on which the proposed KYC system becomes mandatory. Document Status and Enforceability SEBI has invited public views on a set of proposals and attached a draft circular to the consultation paper. The draft describes how the framework could operate if SEBI decides to issue it in final form. Until that happens, businesses should not present the proposals as current law. The draft circular says that the new provisions would take effect 30 days after the final circular is issued. However, the issue date and corresponding effective date are left blank. Therefore, there is presently no confirmed commencement date. For now, intermediaries should continue following the existing KYC framework. They may assess technology, documentation, risk and operational changes that could be needed if the draft is finalised. Investors and industry bodies may also submit comments by the stated deadline. The Regulatory Framework SEBI sets out the KYC process for securities-market clients. It deals with KYC forms, supporting documents, verification, the duties of intermediaries and validation of records by KYC Registration Agencies (KRAs). The framework is aligned with the Prevention of Money Laundering Act, 2002 and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. The existing digital KYC process generally requires the intermediary's application to confirm that the client is physically located in India. That condition creates a practical barrier for a person who lives abroad and wants to complete the entire onboarding process remotely. SEBI had already provided limited relief on December 10, 2025. That circular relaxed the India geo-location condition for an existing NRI client undertaking re-KYC. The present consultation goes further: it considers a wider process for first-time KYC and re-KYC of NRIs, OCIs and foreign nationals in FATF-compliant jurisdictions.  The consultation also refers to the Foreign Exchange Management Act, 1999, the Information Technology Act, 2000, the SEBI (KYC Registration Agencies) Regulations, 2011 and the Central KYC Records Registry (CKYCRR). These connected frameworks matter because overseas status, electronic signatures, source verification and sharing of KYC records do not sit within SEBI's KYC circular alone. Key Definitions in Simple Language Person Resident Outside India For this consultation, an individual PROI includes an NRI, an OCI and a foreign national located outside India. The expression “person resident outside India” comes from section 2(w) of the Foreign Exchange Management Act, 1999. KYC Registration Agency A KYC Registration Agency, commonly called a KRA, maintains KYC records for the securities market. It verifies available attributes against official or source databases and makes the record available to intermediaries under the applicable framework. Officially Valid Document An Officially Valid Document, or OVD, is a document recognised under the Prevention of Money Laundering Rules for identity or address verification. The proposed process also refers to deemed OVDs and equivalent electronic documents. CKYC ID and CKYCRR A CKYC ID is the unique identifier assigned through the Central KYC Records Registry. Under the proposal, an intermediary would ask for this ID when available and use the KRA channel to retrieve CKYCRR records. Video In-Person Verification VIPV is a live video process used by an authorised official of an intermediary to verify the client. The draft does not treat it as a casual video call. It proposes consent, live-action checks, location controls, encryption, anti-spoofing measures and concurrent audit. FATF-compliant country The draft links overseas digital onboarding to the country status published by the Financial Action Task Force. Clients in FATF non-compliant countries would remain under the existing KYC process. Who Would Be Covered? The proposed framework is aimed at individual PROI clients who are outside India and seek securities-market onboarding or re-KYC through a SEBI-registered intermediary. Stakeholder or case Proposed treatment NRI in a FATF-compliant country May use the proposed overseas digital KYC route OCI in a FATF-compliant country May use the proposed overseas digital KYC route Foreign national in a FATF-compliant country May use the proposed route, subject to applicable securities and foreign-exchange rules Individual in a FATF non-compliant country Existing KYC process would continue Foreign national seeking registration as an FPI Separate FPI Master Circular would apply KYC completed before the future circular takes effect Existing KYC provisions would continue to govern that earlier KYC The proposal does not create a general exemption from KYC. It changes the possible location and method of completing the process. Identity checks, documentation, risk assessment, verification and intermediary responsibility would continue. How the Existing First-Time KYC Process Works The consultation paper describes seven broad stages in a first-time KYC process: Filling and signing the KYC form Providing self-attested OVDs or supporting documents Verification of original documents In-person verification, including a liveness check and additional due diligence Uploading the record to the KRA database Verifying KYC information against source databases Creating the KYC record An overseas client can presently use a physical route, such as visiting an intermediary's office or providing certified documents. In some situations, documents must be certified and sent to India. A fully digital route is difficult because the existing process checks that the client is physically in India. SEBI identifies practical problems with courier delays, document certification, overseas mobile verification, availability of Aadhaar-linked services and repeated KYC when records are not fully validated. The proposal seeks to reduce these difficulties without removing customer-identification and anti-money-laundering controls. Why SEBI Is Reviewing the Process SEBI says it received representations seeking relief from the requirement that an overseas client be in India during digital onboarding. Stakeholders also raised concerns about original-document verification, signatures and KYC portability. The consultation links the review to wider efforts to make participation in Indian securities easier for the overseas Indian community and eligible foreign nationals. It also refers to changes announced for overseas investment in listed Indian companies and the June 12, 2026 amendment to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The intended balance is clear: reduce unnecessary physical and paper-based steps while retaining reliable identity checks, risk-based due diligence and secure video verification. What SEBI Has Proposed? Area Existing concern Proposal Main condition or safeguard Client location Complete digital KYC generally requires the overseas client to be in India Permit digital onboarding while the client is abroad Client must be in India or a FATF-compliant country KYC form Overseas clients may depend on physical forms and courier Accept physical, scanned or digital forms through electronic signature Electronic-signature and verification conditions apply Specimen signature Digital submission may not provide a directly observed wet signature Accept a cropped image under electronic signature Client gives a wet signature during VIPV for matching Address Overseas address evidence can be difficult where the OVD differs from the current address Allow a current-address self-declaration in a defined case OVD must be verifiable through an official or source database Mobile and email Verification of foreign or overseas mobile numbers can be difficult Collect both; verify mobile if feasible and verify email OTP or another verifiable mechanism Document certification Current certification routes can be inconvenient Add eligible officials of overseas banks linked to Indian banks Official must fall within the proposed recognised list KYC portability A record may not be portable unless fully validated Treat PROI records as portable with attribute-level tags New intermediary may perform additional risk-based checks Third-party reliance Records may exist with another regulated financial entity Permit reliance through KRA/CKYCRR channels Intermediary keeps ultimate KYC responsibility Video verification Overseas digital onboarding creates impersonation and location risks Permit VIPV with detailed controls Consent, liveness, geo-location, anti-spoofing, encryption and audit These points remain proposals. The detailed draft circular shows SEBI's intended operating model, but the final text may differ. Proposal-Wise Analysis Digital KYC from Outside India The draft would remove the need for an eligible PROI client to be physically present in India during digital onboarding. The intermediary could accept KYC information and related documents from a client located in a FATF-compliant country. This is a location relaxation, not a KYC waiver. The intermediary would still need to identify the client, verify identity, understand the purpose and intended nature of the relationship, and apply enhanced measures where the risk profile requires them. PAN and Passport Requirements PAN would continue to be collected and checked against the Income Tax database. The intermediary would not need to insist on the original PAN card or a copy once the information is verified through the database. The KRA would also verify the PAN and the client's name and mark the verified attributes as validated. NRIs, OCIs and foreign nationals would continue to provide a passport copy. An OCI card would also be collected where applicable. If a passport is shared through DigiLocker and can be verified, the KRA would tag that attribute as validated. KYC Form and Electronic Signature The intermediary could collect KYC information using the CKYC template for individuals. The form could be received as: An original physical form A scanned physical form submitted under electronic signature A digital KYC form submitted under electronic signature The term electronic signature would carry the meaning given in the Information Technology Act, 2000. The practical availability of some foreign electronic-signature routes may still depend on recognition and technical arrangements outside SEBI's direct control. Specimen Signature During VIPV The proposal would allow a client to provide either a wet signature on a physical form or a cropped image of the specimen signature under electronic signature. Where the signature is submitted digitally, the client would make a wet signature in front of the intermediary during VIPV. The intermediary would compare it with the submitted specimen. This is intended to preserve a live verification step even when the onboarding begins online. Overseas Address and Self-Declaration For a PROI client, the current address is expected to be an overseas address. The client would provide an OVD or deemed OVD for identity and address. If a foreign national's OVD does not contain an address, the draft allows the intermediary to collect a document issued by a foreign government department or a letter issued by a foreign embassy or mission in India. The client may self-declare a current address that differs from the address on the submitted OVD, but only where that OVD can be verified through an official or source database. This proposed relief does not remove the need to provide identity documentation. Original Seen and Verified Alternatives Where the original document is not produced, the draft lists alternative routes: An equivalent e-document obtained through DigiLocker An equivalent e-document issued by the issuing authority through a verifiable mechanism OTP-, biometric- or face-authentication-based Aadhaar e-KYC A copy attested by a recognised certifying authority The proposed certifier list includes a notary public, an authorised official of an overseas branch of an Indian scheduled commercial bank, an eligible branch of an overseas bank having a relationship with an Indian bank, a court magistrate, a judge, and the Indian embassy or consulate general in the client's country of residence. The intermediary would record the authorised official's details and the date and time of Original Seen and Verified checks. Mobile Number and Email Verification The intermediary would collect both the client's mobile number and email address. The mobile number would be verified if feasible, while email verification would remain expected through OTP or another verifiable mechanism. The KRA would follow a similar approach and tag verified attributes accordingly. This proposal recognises that sending or receiving an OTP on a foreign mobile number can be difficult or costly. It does not suggest that intermediaries should stop collecting the mobile number. Portable KYC Records Under the existing framework, a fully validated KYC record is portable, meaning the client generally does not repeat the entire process with another intermediary. For a PROI client, validation of every attribute can be difficult because overseas mobile numbers, addresses or documents may not be verifiable against Indian databases. SEBI proposes treating PROI KYC records as portable while showing which individual fields have been source-verified or validated. A new intermediary could use the existing record and carry out additional checks based on its own risk assessment. Portability would therefore reduce repetition, but it would not eliminate an intermediary's right or duty to request additional information where the record is incomplete, out of date, inconsistent or high risk. Reliance on KYC Performed by Other Financial-Sector Entities An intermediary may be allowed to rely on KYC completed by another SEBI-registered intermediary, using the record obtained from a KRA. It may also rely on KYC performed by an entity regulated by the Reserve Bank of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority, or International Financial Services Centres Authority, using records obtained from CKYCRR through the KRA. The intermediary would still carry ultimate responsibility for its client. It would need to apply enhanced KYC measures proportionate to the risk. Reliance on an existing record is therefore an efficiency measure, not a transfer of accountability. KRA Upload and Record Updating The draft would require the intermediary to submit completed PROI KYC information to the KRA within three working days from completion of the KYC process. Where an existing record changes, the intermediary would provide the update to the KRA. The KRA would update the record and inform other intermediaries that maintain an account-based relationship with the client. The draft also envisages KRAs furnishing KYC information and updates to CKYCRR after the KRAs are integrated with that registry. VIPV and Cybersecurity Safeguards The proposed VIPV process is one of the most operationally important parts of the consultation. Where physical IPV is not feasible, the intermediary would conduct VIPV and build a verifiable record of the process. The draft safeguards include: Recording client consent in an auditable, alteration-resistant manner Using random live actions to show that the interaction is not pre-recorded Making an uninterrupted video recording with live GPS coordinates, date and time Using tamper-resistant technology Blocking spoofed IP addresses, virtual private networks and proxy servers Confirming that the IP address originates in India or a FATF-compliant country Matching the detected country with the KYC form and address document Clearly capturing and matching the client's face with the submitted photograph Using end-to-end encryption between the customer's device and the intermediary's hosting point Requiring an authorised official of the intermediary to conduct the VIPV Using face-liveness and spoof-detection controls that do not exclude persons with special needs Subjecting the process to concurrent audit Intermediaries could add further controls under their risk-management policy. The technology used for KYC would also have to comply with SEBI's Cybersecurity and Cyber Resilience Framework. For intermediaries, this means the proposal could reduce paper and travel barriers but increase responsibility for secure video infrastructure, location assurance, evidence retention, access controls and audit readiness. What Would Remain Unchanged? The consultation does not propose abandoning core KYC requirements. Several controls would remain: PAN would continue to be mandatory for securities-market participants, subject to existing exemptions. NRIs, OCIs and foreign nationals would continue to provide a passport copy. OCI clients would provide an OCI card where applicable. Overseas address evidence would remain relevant. Intermediaries would continue to perform IPV or VIPV as applicable. Risk-based and enhanced due diligence responsibilities would remain with the intermediary. Clients in FATF non-compliant countries would continue under the existing process. Foreign nationals applying as Foreign Portfolio Investors would remain governed by the separate FPI framework. The proposal therefore changes how eligible overseas clients may complete KYC, not whether KYC is required. Proposed Timeline and Transitional Treatment Event Date or proposed rule Meaning Consultation paper issued August 14, 2026 Public consultation opened Last date for comments September 4, 2026 Comments should be submitted through SEBI's portal Final circular Not yet issued SEBI may revise the draft after consultation Proposed commencement 30 days after the future final circular Exact date is not presently known Earlier completed KYC Would remain under existing provisions No proposed retrospective replacement of completed KYC FATF non-compliant countries Existing process continues Overseas digital relaxation would not apply The draft also says that the 2023 KYC Master Circular and the December 10, 2025 NRI re-KYC circular would be superseded only to the extent covered by the new final provisions. How to Submit Public Comments? SEBI seeks views on the main question of whether an intermediary should be allowed to onboard an individual PROI digitally without physical presence in India when the client is in a FATF-compliant country. It also invites comments on: Digital acceptance of KYC forms and OVDs under electronic signature Acceptance of a cropped specimen-signature image followed by wet-signature verification during VIPV Possible relaxation in mobile-number verification Mandatory collection of email addresses Expansion of the document-certifier list to eligible overseas-bank officials Self-declaration of a current address where the OVD is source-verifiable Whether further VIPV safeguards are needed Whether KRAs should share PROI records that are not fully validated or source-verified Any additional comments on the proposed onboarding process Comments should be filed through SEBI's public-comment portal by September 4, 2026. The consultation paper provides email contacts for technical problems with the portal; these emails are for submission difficulties and should not be treated as the primary filing route where the portal works. Drafting Inconsistency in the Consultation Paper The consultation paper contains inconsistent references to the earlier NRI re-KYC circular. One passage refers to December 10, 2026, while a related footnote refers to December 30, 2025. SEBI's published circular is dated December 10, 2025, and the consultation paper itself uses that date correctly in other places. This appears to be a drafting inconsistency in the consultation paper. It does not change the central proposal, but a publication-ready analysis should use December 10, 2025 when referring to the official circular and acknowledge the inconsistency where detailed legal review is relevant. Impact on Investors and Regulated Entities NRIs, OCIs and Foreign Nationals Eligible overseas investors could complete KYC without travelling to India or relying as heavily on physical courier processes. They may also benefit from greater KYC portability when moving between securities-market intermediaries. The benefit would depend on the investor's country, available documents, access to acceptable electronic verification and successful completion of VIPV. A person in a FATF non-compliant country would not receive the proposed location relaxation. SEBI-Registered Intermediaries Brokers, depository participants, mutual-fund intermediaries and other covered entities may gain access to a smoother overseas onboarding route. They would, however, need to update procedures, applications, customer communication, risk engines and audit controls. Intermediaries would remain responsible for client KYC even when they rely on records produced by another regulated entity. They would need clear rules for accepting a record, requesting further information and applying enhanced due diligence. KYC Registration Agencies KRAs would need to support attribute-level validation and portability. Their systems may need to show clearly which fields have been checked against an official source and which have not. They would also play a central role in passing CKYCRR records to intermediaries and distributing updates. Technology, Cybersecurity and Audit Teams These teams would need to translate the VIPV safeguards into working controls. Important areas include secure video capture, consent records, GPS and IP checks, VPN and proxy detection, end-to-end encryption, liveness detection, accessibility, evidence retention and concurrent audit. Stakeholder Likely immediate effect Overseas investor Less dependence on travel and courier Intermediary New digital onboarding opportunity KRA More portable PROI records Compliance team Revised procedures and controls Technology team VIPV and integration changes Internal auditor Concurrent review of VIPV Benefits and Implementation Challenges The proposal could make securities-market access easier for overseas individuals while reducing paper movement and repeated verification. It may also help intermediaries serve overseas clients more efficiently. Likely benefits include: Remote onboarding from an eligible overseas location Reduced travel and courier dependence Wider use of electronic documents and signatures Better reuse of available KYC records More transparent tagging of verified attributes A defined route for relying on other financial-sector KYC records Clearer video-verification safeguards Implementation will still require careful work. Intermediaries may face challenges in verifying foreign contact details, determining FATF-country status, recognising acceptable documents, integrating KRA and CKYCRR data, testing anti-spoofing tools and supporting clients with limited access to Indian mobile-linked services. The proposed framework is therefore not simply a relaxation. It exchanges some physical-process burdens for stronger technology, evidence and risk-management expectations. What Stakeholders Should Do Next Because the consultation is not yet binding, the immediate task is review and preparation rather than implementation. For SEBI-Registered Intermediaries Compare the draft with current KYC and re-KYC procedures. Identify every system rule that assumes the client must be in India. Assess whether the VIPV platform can capture consent, live actions, GPS, IP location, facial matching and tamper-resistant records. Review VPN, proxy and spoofed-IP detection. Map KRA and CKYCRR integration gaps. Define when additional KYC or enhanced due diligence would be required. Estimate training, audit and customer-support requirements. Submit evidence-based comments before September 4, 2026, where operational concerns exist. For KRAs Review readiness for attribute-level validation and portable PROI records. Assess how unvalidated fields will be displayed and shared. Evaluate CKYCRR integration and update-notification workflows. Consider whether three-working-day submissions and downstream updates require system changes. For NRIs, OCIs and Foreign Nationals Do not assume the proposed digital route is already available. Continue following the process communicated by the chosen intermediary. Keep PAN, passport, OCI card where applicable, overseas-address evidence and contact details current. Monitor SEBI's website for a final circular. Submit comments if the proposed process creates a practical concern that SEBI should consider. How Corpseed Can Help? The proposed framework requires businesses to read the consultation, the draft circular and the existing KYC rules together. Corpseed can support intermediaries and related businesses through focused securities regulatory compliance services without treating the draft as a final obligation. Corpseed can assist with: Applicability and stakeholder assessment Clause-wise review of the consultation paper and draft circular Comparison with current KYC and re-KYC procedures Consultation-response drafting and submission support KYC process and documentation gap assessment VIPV control and audit-readiness review KRA and CKYCRR workflow assessment Internal policy, standard operating procedure and customer-communication updates after the final circular is issued Professional review can help an intermediary identify technical and operational concerns early, present clear comments to SEBI and avoid building a process around provisions that may still change. Businesses seeking securities regulatory compliance services may contact Corpseed for a document-specific assessment of the proposed PROI KYC framework. Key Takeaways SEBI's August 14, 2026 consultation proposes allowing individual NRIs, OCIs and foreign nationals in FATF-compliant countries to complete securities-market KYC digitally without being physically present in India. It also proposes electronic document submission, address self-declaration in a limited case, portable KYC records, cross-regulator reliance and detailed VIPV controls. The framework is a proposal, not a final binding rule. Public comments are due by September 4, 2026. The overseas digital route would be limited to India and FATF-compliant countries. Core identity, document, IPV and risk-based KYC duties would continue. Intermediaries would retain ultimate responsibility even when using third-party KYC records. The final circular, if issued, is proposed to take effect 30 days after its issue date. Investors and intermediaries should monitor the final SEBI decision before changing their process.

Subject

Summary: The Securities and Exchange Board of India (SEBI) has issued a consultation paper proposing to replace the SEBI (Settlement Proceedings) Regulations, 2018 with a new framework, the Securities and Exchange Board of India (Settlement of Proceedings) Regulations, 2026. For now, this is only a proposal. It does not create any new compliance requirement. SEBI may make changes after reviewing stakeholder comments and completing its internal process. Until a final notification is issued and the new rules take effect, the 2018 regulations continue to apply. The proposed changes are important for listed companies, market intermediaries, directors, key managerial personnel, individual applicants and other persons facing, or expecting, eligible SEBI enforcement proceedings. SEBI has invited comments on the draft by 4 September 2026. Legal Status: The 2026 Regulations Are Still a Proposal A consultation paper allows the regulator to place a policy proposal before the public and obtain feedback before making a final decision. It can explain the regulator's preferred approach, but it is not the same as a notified and effective regulation. The draft states that the proposed 2026 Regulations would take effect on a date to be inserted. That date has been left blank. Businesses should therefore avoid treating the comment deadline, the PDF creation date or the publication of the consultation paper as the commencement date. The consultation paper also says that the draft may change after public comments and internal review. Any compliance plan based on the proposal should consequently be treated as scenario planning, not as implementation of an existing legal duty. Background: Why SEBI Is Reviewing the Settlement Framework SEBI's settlement process gives eligible parties another way to close certain civil and administrative proceedings. Instead of going through a long enforcement and appeal process, a matter can be settled on agreed financial terms and, where required, other conditions. The settlement framework received statutory recognition through amendments to the SEBI Act, 1992, the Securities Contracts (Regulation) Act, 1956 and the Depositories Act, 1996. The first settlement regulations were notified in 2014. They were later replaced by the SEBI (Settlement Proceedings) Regulations, 2018, which came into force on 1 January 2019. SEBI says it reviewed the existing framework after discussions with stakeholders and a clause-by-clause examination of the 2018 Regulations. The proposals were also considered by the High Powered Advisory Committee. The consultation paper identifies a practical concern with the existing financial model. According to SEBI's study of selected unsuccessful or withdrawn settlement applications from the preceding two years, after excluding outliers, the calculated settlement amount was on average about eight times the penalty ultimately imposed. SEBI estimates that its proposals could bring this comparison down to about four times. This observation comes from the study described in the consultation paper, it should not be read as a universal ratio for every case. SEBI wants the settlement process to remain strict enough to discourage violations, while making it easier to understand, more predictable and less dependent on discretion. The aim is also to make settlement a more practical option than lengthy litigation. Existing Framework versus the Proposed Approach Area Existing position described by SEBI Proposed approach Settlement amount Indicative amount based on multiplying and benchmark factors, plus legal costs Base amount multiplied by stage, regulatory history, gravity, aggravating and mitigating factors Application limitation Generally 60 days from service of the show-cause notice for pending Board proceedings Proposed increase to 90 days Fast disposal Summary settlement for specified violations Violation-based and monetary-threshold-based fast-track routes Monetary fast-track threshold No general threshold route described Up to Rs 10 lakh where no non-monetary term applies Filing fee for a natural person Rs 15,000 Rs 25,000 Filing fee for other entities Rs 25,000 Rs 35,000 Refiling after withdrawal 50% additional settlement amount 20% additional settlement amount Pre-show-cause opportunity Lower calculation factor exists, but the paper says there is no general mechanism to alert a person Proposed settlement notice before a show-cause notice, subject to exceptions Timeline relaxation No specific relaxation provision identified Up to 30 days in qualifying circumstances, excluding the main limitation period Pending applications No specific relaxation provision identified Proposed transition options based on the stage reached This table captures the direction of the proposals. The actual outcome in any matter would still depend on the final regulations, the alleged defaults, the enforcement stage, applicable factors and SEBI's decision-making process. The 21 Proposals at a Glance The 21 proposals cover changes to settlement calculations, application rules, fees, timelines and other key parts of the settlement process. No. Proposal Main proposed change Draft reference 1 Settlement-amount calculation Replace the existing model with BA × (S + R + G + A - M) Regulations 10-20 2 Application limitation Increase the post-show-cause period from 60 to 90 days Regulation 4(1) 3 Pre-disclosures Move disclosure compliance to a later stage in the settlement process Regulation 25(4)(c) 4 Market-wide impact and investor loss Permit committee-level examination of whether monetary and non-monetary terms can address the concerns Regulation 22(4)(c) 5 Non-monetary terms in adjudication Ordinarily avoid non-monetary terms where the show-cause notice seeks only monetary penalty, except disclosure terms Regulation 5(iv) 6 Voluntary debarment or suspension Set clearer circumstances for using these terms Regulation 5(v) 7 Filing fees Raise fees to Rs 25,000 for natural persons and Rs 35,000 for others Schedule I, Part B 8 Refiling after withdrawal Reduce the additional amount from 50% to 20% Regulation 4(5) 9 Application after rejection Permit a fresh application at a later stage if the reason for rejection no longer applies, with 20% additional amount Regulation 4(4) 10 Fast-track settlement Create violation-based and Rs 10 lakh threshold-based routes Regulations 26-30 11 Pre-show-cause settlement notice Give a proposed 60-day opportunity before a show-cause notice, subject to exceptions Regulation 31 12 Hearing before revocation Provide an opportunity for a hearing before revoking a settlement order Regulation 41(2) 13 Relaxation of timelines Allow limited relaxation where delay is beyond the applicant's control Regulation 44 14 Redundant provisions Remove provisions concerning adjudication penalty formula and compounding terms that SEBI says are not used Reflected through omission from the new draft 15 Application form Simplify and clarify required information Schedule I, Part A 16 Definitions Add or revise key expressions such as alleged default, days and specified proceeding Regulation 2 17 Terms affecting non-applicants Generally restrict settlement terms to the applicant Regulation 5(vii) 18 Financial misstatement and fund diversion Provide disclosure, restoration and related settlement treatment Regulation 18(3) 19 Calendar days Replace mixed references to working and calendar days with “days” meaning calendar days Regulations 2, 22 and 25 20 Multiple applicants Calculate the settlement amount separately for each applicant, while preserving joint treatment where applicable for disgorgement Regulation 10(3) and Regulation 17(2) 21 Pending applications Apply different transition routes depending on the application's stage Regulation 46 Detailed Explanation of the 21 Proposals The proposed changes cover key parts of the settlement process, including the settlement amount, application timelines, fees, fast-track routes and pending cases. Here is a closer look at what each proposal would change. 1.    A New Settlement-Amount Formula The draft proposes a new formula for working out the settlement amount: Settlement Amount = BA × (S + R + G + A - M) The calculation would take into account the applicant's role, the stage of the case, any previous regulatory action, the seriousness of the alleged violation, and factors that may increase or reduce the amount. The committees could still recommend a different amount in a particular case, but the reasons would have to be recorded. 2. Ninety Days to Apply After a Show-Cause Notice The proposed time limit would increase from 60 to 90 days from the date of service of the show-cause notice or supplementary notice, whichever is later. This would give applicants more time to review the allegations, collect records and decide whether to pursue settlement. Different rules would apply to matters pending before the Securities Appellate Tribunal or the Supreme Court. 3. Disclosure Compliance at a Later Stage The draft proposes moving certain disclosure requirements to a later stage in the settlement process. The applicant would make the disclosure after approval by the Panel of Whole Time Members but before the settlement order is passed. This could reduce the risk of making a sensitive disclosure before knowing whether the settlement will actually be approved. 4. Market-Wide Impact and Investor Loss The draft would allow the relevant committees to examine whether serious concerns involving investor loss, market integrity or market-wide impact can be addressed through monetary and non-monetary terms. This does not mean such matters would automatically qualify for settlement. The Panel of Whole Time Members would still have the final say. 5. Non-Monetary Terms in Adjudication Cases Where a show-cause notice proposes only a monetary penalty, the draft says non-monetary settlement terms should generally not be added. Disclosure-related terms would remain an exception where corrective action is needed. 6.    Clearer Use of Voluntary Debarment and Suspension The draft seeks to provide clearer situations for using voluntary debarment or suspension. These terms may apply in serious cases, including those involving key operators, main beneficiaries or repeat defaulters. They may not be necessary where monetary terms are sufficient to address the issue. 7. Higher Non-Refundable Filing Fees The proposed fees would increase as follows: Applicant Existing fee Proposed fee Natural person Rs 15,000 Rs 25,000 Other applicants Rs 25,000 Rs 35,000 The filing fee would remain separate from the settlement amount and other financial terms. 8. Lower Additional Amount after Withdrawal The additional settlement amount for refiling after withdrawal would fall from 50% to 20%. This could make it easier for applicants to reconsider settlement later, although withdrawal would still have consequences under the proposed framework. 9. A Later Application After Rejection An applicant whose settlement application was rejected could apply again at a later stage if the reason for rejection no longer exists. A 20% additional settlement amount would apply, and a fresh application would not guarantee acceptance. 10. Two Fast-Track Settlement Routes The draft proposes two fast-track options: Violation-based route: For specified defaults such as delayed filings and certain disclosure-related violations. Amount-based route: Where the settlement amount is up to Rs 10 lakh and no non-monetary term applies. The violation-based route would generally require payment and compliance within 30 days, with a possible 15-day extension in appropriate cases. 11. Settlement Notice Before a Show-Cause Notice In specified cases, SEBI proposes giving a person a 60-day opportunity to apply for settlement before issuing a show-cause notice. There would be exceptions, including certain prosecution and fast-track matters. SEBI could also change the proposed charges later. 12. Hearing Before Revocation Before revoking a settlement order, the applicant would get an opportunity to be heard. This is important because revocation could bring the underlying proceedings back into action, while amounts already paid would not be refunded. 13. Limited Relaxation of Timelines The draft would allow limited relaxation where a delay was caused by circumstances beyond the applicant's control. The power would apply only within the proposed limits and would not extend the main 90-day application period. A 1% increase in the settlement amount may apply in certain payment-related extensions. 14. Removal of Redundant Provisions SEBI proposes removing provisions it considers unnecessary because they have not been used in practice. These include provisions dealing with penalty calculations in adjudication matters and certain compounding matters that are handled under separate legal processes. 15. A Revised Settlement Application Form The application form would be simplified and clarified. Applicants would still need to provide details about the proceedings, alleged violations, proposed terms, disclosures and supporting documents. Missing key information could result in the application being returned. 16. New and Revised Definitions The draft proposes clearer definitions for terms such as alleged default, days, settlement term and specified proceeding. It also proposes treating “days” as calendar days, which would make the calculation of deadlines more consistent. 17. Settlement Terms for Applicants The draft generally seeks to prevent settlement terms from requiring someone other than the applicant to take or avoid a particular action, unless the regulations specifically allow it. This could provide greater clarity for directors and key personnel who are not themselves applicants. 18. Financial Misstatement and Fund Diversion The draft provides specific treatment for cases involving financial misstatements or diversion of funds. Depending on the circumstances, settlement terms may require public disclosure, corrections to financial statements or restoration of diverted funds with applicable interest. 19. “Days” to Mean Calendar Days The draft proposes using calendar days instead of having different references to working days and calendar days. This would make deadlines easier to interpret, although applicants would need to account for weekends and holidays when planning filings and payments. 20. Separate Calculation for Each Applicant Where multiple applicants are involved, the settlement amount would generally be calculated separately for each person. However, joint treatment may still apply to disgorgement, investor losses or other amounts where joint and several liability exists. 21. Transitional Treatment of Pending Applications The draft proposes different treatment depending on where a pending application stands when the new framework begins. Applications with approved terms could continue under the existing rules, while some applications would get an option to move to the new framework. Applications that have not yet received a recommendation could be processed under the proposed new regulations. How the Proposed Settlement Amount Would Be Calculated The proposed formula is: Settlement Amount (SA) = BA × (S + R + G + A - M) If the total of S + R + G + A - M is below one, the draft says it must be treated as one. 1. Base Amount (BA) The base amount would begin with the minimum penalty under the relevant securities law, multiplied by a factor based on the applicant category: Applicant category Proposed multiplier Independent director 2 Natural person 2.5 Non-executive director 3 Executive director, promoter in control or key managerial person 3.5 Company, intermediary, pooled investment vehicle and others 4 Market infrastructure institution 5.5 The draft contains additional rules for multiple defaults, overlapping violations, lead conspirators and independent directors alleged to have actively participated in or benefited from fraud. It also says the base amount should not be less than the penalty already imposed for the alleged default. 2. Stage-of-Proceeding Factor (S) Stage when application is filed Proposed S value Voluntary or suo motu 0.20 Before show-cause notice 0.40 After show-cause notice 0.60 Pending before specified Board/designated-member stage 0.80 Pending before Securities Appellate Tribunal 1.00 Pending before Supreme Court 1.50 Where several proceedings arise from the same cause of action, the factor for the most advanced proceeding would apply. 3. Regulatory Action Factor (R) The factor reflects the applicant's prior regulatory history: Prior action Proposed value No prior order 0 Administrative warning 0.10 per warning Settlement order 0.20 per order Adjudication, direction or disciplinary order 0.30 per order The draft says stayed orders would also be counted. It also appears to contain duplicate numbering for sub-regulation (3), which should be corrected in the final drafting. 4. Gravity Factor (G) An additional 0.25 is proposed for applications made without admitting the violation. Other specified gravity values include 0.25 for failure to make an open offer, 0.50 for certain offer-document violations, 0.50 for specified insider-trading violations and 1.50 for fraudulent and unfair trade-practice violations. 5. Aggravating Factor (A) An aggravating factor would increase the settlement amount. Each applicable factor carries a value of 0.20, with a maximum of five factors. These may include obstructing the investigation, giving incorrect information, continuing the violation for a long period, causing client losses above ₹5 crore, ignoring earlier regulatory directions, gaining financially from the violation, repeated defaults and serious internal control failures. 6. Mitigating Factor (M) A mitigating factor would work in the opposite direction and could reduce the settlement amount. Each factor carries a value of 0.20, with up to five factors considered. Examples include limited involvement, strong cooperation, accepting responsibility early, taking corrective action, compensating investors, financial difficulty and a change in management after the violation. 7. Minimum Amount and Other Additions The draft proposes a minimum settlement amount of: Rs 3 lakh for a first-time applicant, and Rs 7 lakh for other applicants. Legal costs may be added for proceedings defended by SEBI before the Securities Appellate Tribunal or Supreme Court. A 20% additional amount is proposed where settlement covers a proceeding under Section 12(3) of the SEBI Act together with another proceeding arising from the same cause of action. Disgorgement and interest are separate matters. Draft Regulation 20 proposes 9% annual interest from the transaction date to the application date where no final Board order exists. Where a final order exists, it proposes 9% until the final order and 12% thereafter until the application. Interest would be charged only on the principal disgorgement amount, not on accumulated interest. Because the calculation depends on the alleged defaults, statutory minimum penalty, applicant category, procedural stage and case-specific factors, a generic worked example could be misleading. A proper estimate should use the actual record and the final notified regulations. Who May Seek Settlement Under the Draft? The draft would allow an entity to apply for settlement of a “specified proceeding.” This expression broadly covers eligible proceedings that may be initiated by SEBI, proceedings pending before SEBI and appeals pending before the Securities Appellate Tribunal or the Supreme Court under the statutory provisions identified in the draft. The proposed scope is not unlimited. Settlement would generally be unavailable where an audit, investigation, inspection or examination concerning the cause of action is still pending, except for a confidentiality application. It would also exclude an applicant categorised as a wilful defaulter, fraudulent borrower or fugitive economic offender. Most importantly, Draft Regulation 6 preserves the Panel of Whole Time Members' authority to accept or reject an application in the interests of investors or development and regulation of the securities market. Eligibility to apply should not be confused with a right to obtain settlement. How the Proposed Process Would Work The ordinary process can be understood as follows: Application: The applicant files the prescribed form with the non-refundable fee, undertaking and waiver, proposed terms and settlement-amount calculation. Completeness review: An incomplete or non-conforming application may be returned. The draft allows 15 days to submit a complete revised application after communication from SEBI. Internal Committee: The committee considers whether the matter may be settled and what the terms should be. The applicant receives an opportunity for a physical or virtual hearing. Revised terms: The Internal Committee may permit revised settlement terms within up to 21 days. High Powered Advisory Committee: Except for qualifying threshold-based fast-track matters, the revised terms and Internal Committee recommendation go to the advisory committee. A matter involving non-monetary terms goes to this committee even if the amount is Rs 10 lakh or less. Panel of Whole Time Members: The panel considers the recommendation and may accept, reject, return or seek re-examination. Demand and compliance: If settlement is accepted, a notice of demand is proposed to be issued within ten days. The applicant must pay within 30 days of receiving it and comply with other terms within the specified time. Settlement order: After payment and compliance, the competent authority or panel passes the settlement order. Filing an application would not automatically stop the enforcement process. The draft says proceedings may continue, but the final enforcement order would be kept in abeyance until the settlement application is decided. Interim directions may still be issued to protect investors or market integrity. Fast-Track Settlement Explained The draft proposes two fast-track routes to make settlement quicker in certain lower-risk or lower-value matters, while keeping the required approvals and compliance checks in place. Violation-Based Fast Track Before initiating proceedings for specified, generally procedural defaults, SEBI could issue a fast-track notice stating the alleged violation, proposed amount and any non-monetary term. The recipient would generally have 30 days to file, pay and comply. A correction to the calculation could be requested when filing. This notice would not prevent SEBI from changing the enforcement action or charges. Failure to use the route within time may mean that a later settlement application is permitted only at the Tribunal or Supreme Court stage after the Board or adjudication proceeding ends. Monetary-Threshold Fast Track If the settlement amount worked out by the Internal Committee is up to Rs 10 lakh and no non-monetary term is involved, the matter could skip the High Powered Advisory Committee. The revised terms would go directly to the Panel of Whole Time Members for consideration. The proposed route may reduce processing layers for lower-value matters, but it still requires a decision by the appropriate authority and compliance with the approved terms. Non-Monetary Terms under the Draft The proposed regulations contain a broad, non-exhaustive list of possible non-monetary terms. These include improved internal procedures, employee training, enhanced audit and reporting, temporary suspension of business activity, exit from management, clawback, disgorgement, restrictions on acting as an officer or director, cancellation or lock-in of securities and temporary restraint from accessing the securities market. The selection of a non-monetary term would depend on the applicant's conduct, role, gravity of the alleged default, market impact, investor harm, gains, remedial measures and the need to prevent recurrence. Businesses should not assume that payment alone will conclude every matter. For serious governance, disclosure or investor-harm cases, corrective conduct may be as important as the monetary amount. Settlement with Confidentiality The draft retains a separate route under which an applicant may seek confidentiality in return for limited admission for settlement purposes and cooperation in relation to an alleged violation. An application would need to provide detailed information about the applicant, other participants, the arrangement, its duration, involved persons, other authorities approached and the evidence offered. Interim confidentiality and assurance may be available while SEBI evaluates cooperation. The draft proposes possible reductions in the calculated settlement amount based on priority status: up to 90% for first priority, up to 50% for second priority and up to 25% for third or later priority. These are maximum possible reductions, not automatic entitlements. Confidentiality should not be understood as blanket immunity. The applicant would need to provide full, true and continuing cooperation, and the draft contains conditions governing protection and disclosure. Forms, Undertakings and Records Document Main purpose Important point Settlement application Gives identity, case, facts, charges and proposed terms Full and true disclosure is required Processing-fee proof Shows payment of non-refundable fee Separate from settlement amount Undertaking and waiver Records jurisdictional, procedural and appellate waivers Continues to have consequences even after rejection or withdrawal in specified respects Settlement calculation statement Sets out BA, S, R, G, A and M Legal costs and disgorgement shown separately Fast-track notice Offers settlement for specified violations before proceedings Subject to strict filing and payment period Settlement notice Gives pre-show-cause settlement opportunity Does not freeze or guarantee the stated charges Confidentiality application Provides information and evidence for cooperation-based protection Must include prescribed particulars and supporting undertaking Applicants would also need the relevant show-cause notice or communication, authorisation or board resolution, identity and registration documents, details of related proceedings and supporting calculations. Material Drafting Issues and Points Requiring Clarification The draft still has a few areas that may need clarification before the final regulations are issued: Blank commencement date: Draft Regulation 1 does not specify an effective date yet. This is expected at the consultation stage, so the date cannot be confirmed at present. Draft notification number: The notification number contains blank placeholders and is not a final reference number. Inconsistent title style: The consultation discusses “Settlement of Proceedings” Regulations, while the existing regulations use “Settlement Proceedings.” The final instrument should use one consistent title. Undertaking cross-reference: Clause 10 of the proposed undertaking refers to the 2018 Regulations even though the form is part of the proposed 2026 Regulations. This appears to require correction or explanation. Duplicate numbering: Draft Regulation 13 appears to contain two sub-regulations numbered (3). Draft language: Several grammatical, punctuation and cross-reference issues should be cleaned up before notification because procedural regulations need precise wording. Discretion in the formula: The proposed formula gives more structure to the settlement amount, but the committees can still recommend a higher or lower amount with reasons. Stakeholders may want clearer guidance on how this discretion will work in different cases.  Settlement as the general rule: Draft Regulation 5 appears to treat settlement as the usual approach, while Draft Regulation 6 still gives SEBI wide discretion to accept or reject an application. The draft could clarify how these two provisions are meant to work together. Changes after the initial notice: The proposed pre-show-cause notice could help applicants settle matters early. However, SEBI can still change the charges later. The draft could explain what happens if those changes are significant after the applicant has already applied for settlement. These observations concern the drafting of the proposal. They do not amount to a conclusion that the provisions are invalid or that SEBI will adopt them without correction. Likely Impact if the Proposals Are Adopted The proposed changes could affect different applicants in different ways, depending on their role, the stage of the matter and the nature of the alleged violation. 1. Listed Companies and Market Intermediaries The longer 90-day application period may give larger organisations more time to assess their options. However, higher base amounts and possible disclosure or corrective terms could make serious matters more costly. 2. Directors, Promoters and Key Managerial Personnel The proposed framework gives importance to the person's actual role and involvement. Decision records and evidence showing who was responsible could become more important when determining the settlement amount. 3. Natural Persons and Smaller Applicants The proposed filing fee for natural persons would increase to Rs 25,000. The draft also provides for lower minimum settlement amounts in some cases, while factors such as limited involvement, cooperation and financial difficulty may be considered. 4. Applicants With Pending Matters Those with pending applications may need to compare the treatment available under the existing and proposed framework before deciding which route is more suitable. 5. Compliance, Legal and Finance Teams The changes would require these teams to work closely. They may need to assess eligibility, prepare disclosures, review financial exposure and gather documents before deciding whether settlement is the right option. Benefits and Possible Burdens The proposed changes could make the settlement process easier in some situations, but they may also increase the cost and work involved for applicants. The main points are: Potential benefits A clearer formula could make the settlement amount easier to understand. The 90-day application window would give applicants more time to decide and prepare. Lower-value matters could move through the fast-track process more quickly. A pre-show-cause settlement option could give applicants a chance to resolve a matter earlier. Applicants would get a hearing before a settlement order is revoked. The draft also sets out how pending applications would be handled under the new framework. Possible burdens Filing fees may rise. The final amount could depend on several facts specific to the case. Serious matters could still involve disclosure, restoration or other non-monetary conditions. Applicants would need to make full disclosures and give the required waivers. Since deadlines would generally be counted in calendar days, teams would need to keep a closer track of due dates. The final impact will depend on the wording of the final regulations and how the formula and available discretion are applied in actual cases. Questions Stakeholders Should Consider Before Commenting Does the new formula create enough predictability while preserving necessary regulatory discretion? Are the proposed applicant-category multipliers proportionate? Is the 90-day limitation sufficient for overseas and complex corporate applicants? Should the Rs 10 lakh fast-track threshold be adjusted or reviewed periodically? Are the proposed consequences of missing a fast-track opportunity too restrictive? Are the safeguards for changed charges after a settlement notice adequate? Are the transition options fair to applicants who have already participated in committee proceedings? Do the disclosure and fund-restoration provisions clearly distinguish alleged findings from established facts? Are the conditions for voluntary debarment, suspension and other non-monetary terms sufficiently objective? Should SEBI publish additional guidance on deviations from the calculated settlement amount? Are the forms and undertakings internally consistent and limited to information genuinely needed for settlement? Public Comment Deadline and Submission Process SEBI has invited comments on the draft regulations by 4 September 2026. Comments should be submitted through the SEBI public-comment portal. If a person faces a technical problem with the web-based form, the consultation paper provides the email address settle-help@sebi.gov.in. It specifies the subject line: “Public comments on Review of SEBI (Settlement Proceedings) Regulations, 2018”. Stakeholders should submit early enough to address portal errors or document-upload issues. The paper does not say that late comments will be accepted. What Businesses and Market Participants Should Do Next The consultation does not require immediate implementation. It does, however, justify a focused review by organisations that may be affected. Identify relevant exposure. Check whether the organisation or its officers are involved in an existing, expected or appellate-stage SEBI proceeding. Review pending applications. Map each application to the proposed transition categories. Compare financial outcomes carefully. Use actual alleged defaults, statutory penalty provisions, applicant category and proceeding stage. Do not rely on broad estimates. Review non-monetary consequences. Check whether the case could also involve disclosures, corrective steps, and changes in management or repayment of money. Get the paperwork in order. Keep the relevant notices, approvals, calculations, investor-loss details and case records ready before filing. Keep comments practical. Point out the exact provision that creates a problem, explain why it may be difficult to follow and suggest a clear alternative. Wait for the final rules. Do not base a compliance decision on the draft alone. Check the final notification and effective date once SEBI issues them. These are practical recommendations, not duties imposed by the consultation paper. What Happens After the Consultation? SEBI may review the public comments, conduct further internal analysis and modify the draft. It may accept some proposals, revise them or decide not to proceed with particular provisions. The consultation paper does not expressly specify when final regulations will be notified or brought into force. Businesses should therefore monitor SEBI's official legal and consultation pages rather than plan around an assumed date. How Corpseed Can Help The proposed framework combines securities-law interpretation, financial calculation, documentation and operational remediation. Corpseed can support businesses in understanding the proposal and preparing for the next regulatory step. Proposal-wise applicability and impact assessment Comparison of the 2018 framework with the proposed 2026 Regulations Review of settlement-application documentation and internal records Compliance-gap and process-readiness assessment Coordination of legal, compliance, finance and management inputs Review and organisation of supporting documents Assistance in preparing structured consultation comments Monitoring and analysis of the final notified framework Each SEBI enforcement matter has its own facts and procedural history. Professional support can help a business organise its records, understand the process and make an informed decision, but it cannot guarantee acceptance, settlement, a particular amount or any regulatory outcome.

Subject

Summary: The Securities and Exchange Board of India (SEBI) has changed the framework used by Infrastructure Investment Trusts (InvITs) to calculate Net Distributable Cash Flow, commonly called NDCF. The change allows payments made for major maintenance of eligible road projects to be added back while calculating NDCF, but only to the extent that those payments are funded through external borrowing. The amendment was issued through SEBI Circular No. HO/17/11/17(5)2026-DDHS-POD2/I/18791/2026, dated August 14, 2026. It took effect immediately. The circular modifies paragraph 3.19 in Section F of Chapter 3 of SEBI's July 11, 2025 Master Circular for InvITs. The relaxation is relevant mainly to road-focused InvITs, their investment managers, trustees, HoldCos, special purpose vehicles (SPVs), statutory auditors and unitholders. It may make more cash available for distribution or other uses during the years in which major maintenance is financed by debt. However, this flexibility comes with safeguards: project-wise unitholder approval, detailed disclosures, statutory-auditor certification and separate reporting of the related borrowing. Notification at a Glance Particular Verified details Issuing authority Securities and Exchange Board of India (SEBI) Document type Circular amending the InvIT NDCF framework Circular number HO/17/11/17(5)2026-DDHS-POD2/I/18791/2026 Date of issue August 14, 2026 Effective date Immediately from August 14, 2026 Provision amended Section F, paragraph 3.19 of Chapter 3 of the July 11, 2025 InvIT Master Circular Governing law SEBI Act, 1992 and SEBI (Infrastructure Investment Trusts) Regulations, 2014 Main change Addition of eligible debt-funded major maintenance payments for road projects to NDCF Main affected entities Road-project InvITs, investment managers, HoldCos, SPVs and related parties Core safeguards Unitholder approval, explanatory-statement disclosures, statutory-auditor certificate and periodic reporting Regulatory Framework An InvIT collects money from investors, and uses it to own, or run infrastructure assets. The cash earned from these assets is calculated under the Net Distributable Cash Flow framework to determine how much can be paid to unitholders. Paragraph 3.19 of the SEBI Master Circular for InvITs dated July 11, 2025 sets out separate NDCF calculations for: HoldCo and SPV level, and Trust level. The framework starts with relevant operating cash flows and makes specified additions and deductions. Before the new circular, expenditure paid toward major road maintenance would affect cash flow in the ordinary way. The framework did not contain the new, specific add-back for major maintenance payments funded by external borrowing. SEBI’s InvIT rules were last amended on April 17, 2026. The August 2026 circular has been issued under Section 11(1) of the SEBI Act, 1992 and Regulation 33 of the InvIT Regulations. The Master Circular also records the regulatory requirement that not less than 90% of the InvIT's NDCF must be distributed to unitholders. This makes the composition of NDCF commercially important. An item added to NDCF can affect the distributable base, even though actual distributions will continue to depend on the applicable regulations, the NDCF computation, the trust's distribution policy and the facts of the relevant reporting period. Why SEBI Introduced the Change SEBI states that it received a request from an industry association to review the NDCF framework so that debt-funded major maintenance expenditure could be added while calculating NDCF. The change followed recommendations from the Hybrid Securities Advisory Committee and a public consultation. Road projects often have significant maintenance obligations under their concession agreements. Some of this work is periodic and materially different from routine maintenance. If an InvIT pays for that work through a loan, the cash payment reduces operating cash in the period even though the project has separately raised debt to fund the expenditure. The revised rule changes how certain eligible expenses are treated. If the expense is paid using external debt, the eligible amount can be added back to NDCF. However, InvITs cannot use borrowed funds simply to increase the cash available for distribution. The benefit applies only in the specific cases covered by the circular. What Has Changed in the NDCF Framework SEBI has made four connected changes to paragraph 3.19 of the InvIT Master Circular. 1. New add-back at HoldCo or SPV level The HoldCo/SPV calculation now includes an additional positive line item: Payments made toward major maintenance expense for road projects, to the extent funded by external borrowing, subject to Note 12. In practical terms, an eligible HoldCo or SPV can add the qualifying payment back while arriving at its NDCF. The add-back cannot exceed the portion actually funded by external borrowing. 2. New add-back at Trust level The same type of line item has been inserted in the Trust-level NDCF calculation. This covers a situation in which qualifying major maintenance borrowing and payment are handled at the InvIT level rather than solely within an underlying SPV or HoldCo. 3. Changes to the rules on surplus cash and debt-funded distributions Note 4 now recognises that surplus cash resulting from externally funded major maintenance payments for road projects may be distributed if Note 12 is satisfied and adequate disclosures are made. Note 6 continues the general prohibition against a Trust or SPV distributing cash flows by taking external debt. It now expressly recognises the exceptions contained in Notes 2, 7 and the newly added Note 12. Working-capital or overdraft facilities used for treasury-management or working-capital purposes remain outside this restriction where they are squared off within the quarter, as specified in the circular. 4. Addition of Note 12 Note 12 contains the complete set of conditions governing the new add-back. These conditions deal with project eligibility, the meaning of major maintenance, unitholder approval, meeting disclosures, changes to approved borrowing, auditor certification and periodic reporting. Old Position and Revised Position Issue Position before the circular Position from August 14, 2026 Specific add-back for debt-funded road maintenance No specific line item under paragraph 3.19 Permitted at HoldCo/SPV and Trust level, subject to Note 12 Use of debt-related surplus cash Debt-raised surplus was generally excluded from distributable surplus, subject to existing exceptions Surplus linked to eligible debt-funded road maintenance may be distributed if Note 12 and disclosure conditions are met General restriction on debt-funded distributions Trusts and SPVs could not distribute cash flows by obtaining external debt, apart from existing exceptions General restriction continues, with Note 12 added as a limited exception Approval No approval mechanism for this specific add-back Project-wise unitholder approval required before the add-back is used Certification No certificate for this specific treatment Statutory-auditor certification required Separate borrowing disclosure No specific major-maintenance-debt segregation under this new framework Amount, percentage, outstanding debt and maturity profile must be separately disclosed The circular does not replace the complete NDCF framework. It inserts a targeted adjustment and related safeguards into the existing calculation. Scope: Which InvITs and Projects Are Covered? The change is meant for InvITs that have eligible road projects. It does not cover maintenance spending across all types of infrastructure.  Under Note 12, a project must fall under the “Roads and bridges” infrastructure sub-sector listed in the Ministry of Finance notification dated September 19, 2025, including any later changes to that classification. The treatment may operate at: InvIT or Trust level, HoldCo level, or SPV level. What matters is that the expenditure and borrowing relate to a qualifying project, the payment meets the definition of major maintenance, and every applicable condition is fulfilled. Routine road maintenance is not covered. Maintenance of infrastructure outside the referenced roads-and-bridges sub-sector is also not brought within the add-back merely because it involves a large cost. Key Definitions These definitions clarify which projects, maintenance costs and borrowings can qualify under the new framework and help avoid confusion during classification. Road Project A road project means a project falling within the “Roads and bridges” infrastructure sub-sector referred to in the Ministry of Finance notification dated September 19, 2025, along with any later amendment or addition. Major Maintenance Expense Major maintenance means expenditure on maintaining a road project that: is not routine maintenance, and is incurred in accordance with the obligations and requirements stated in the project's concession agreement. Both elements matter. A high-value payment does not automatically become major maintenance. The nature of the work and its connection to the concession agreement must support that classification. External Borrowing The circular uses the expressions “external debt” and “external borrowing” for funding raised for major maintenance. It does not prescribe a separate interest-rate limit, repayment period or lender category for the new NDCF treatment. Other applicable borrowing provisions, financing documents and InvIT leverage requirements therefore continue to matter. How the NDCF Add-Back Works The adjustment can be understood through three linked questions. 1. Was a qualifying payment made? The add-back relates to payments actually made toward eligible major maintenance. A proposed future expense or a general maintenance provision is not described as eligible merely because borrowing has been planned. 2. How much was funded by external borrowing? Only the debt-funded portion can be added back. If the expense is partly funded through external debt and partly through operating cash or another source, the circular permits the add-back only to the extent of the external borrowing. 3. Have all Note 12 safeguards been met? The InvIT must have the required unitholder approval, project-specific disclosures, statutory-auditor certification and ongoing reporting. The add-back is conditional, it is not an automatic accounting adjustment available simply because a loan, and maintenance payment exist. The circular does not provide a new numerical formula for allocating mixed funding sources. The InvIT should therefore maintain clear records capable of establishing the connection between the borrowing, the project and the payment. Unitholder Approval and the 60% Voting Requirement Before adding back the eligible payment, the InvIT must obtain unitholder approval under regulation 22(5) of the InvIT Regulations. The resolution must receive votes in favour equal to at least 60% of the total votes cast on that resolution. This is a threshold based on votes cast, not the total number of issued units. Approval must be obtained for each project for which the investment manager proposes to raise borrowing for major maintenance payments. This applies whether the project is held at the Trust, SPV or HoldCo level. The approval may be structured in either of two ways: A one-time approval for debt already raised or proposed to be raised for the project's complete life cycle, or Approval for a specific major maintenance expense. If the approved proposal later changes and the deviation requires additional debt, fresh unitholder approval must be obtained before the additional borrowing is taken. This project-wise approach prevents a broad approval for one asset from being treated as approval for unrelated maintenance borrowing across an entire InvIT portfolio. Information Required in the Explanatory Statement The explanatory statement accompanying the notice of the unitholder meeting must give investors enough information to understand the borrowing decision and its likely effect. It must disclose, among other matters: Project and borrowing details Names and details of the projects, SPVs or HoldCos concerned, Whether the major maintenance debt is proposed or has already been raised, and Whether borrowing is at Trust, HoldCo or SPV level. Expense categories The statement must identify every category of expenditure that will be treated as major maintenance. Estimated maintenance expenditure It must provide indicative year-wise and project-wise estimates of major maintenance expenditure for which borrowing is proposed. These estimates may need to be based on the latest available valuation report, as stated in the circular. Effect on growth capacity The statement should also mention whether this borrowing could limit the InvIT's ability to raise more debt later. Money borrowed for major maintenance adds to the InvIT's total debt, which may leave less borrowing capacity for new projects or expansion. Effect on unitholder distributions The present and future effects on distributions must be disclosed wherever applicable. The circular recognises two different stages: In the years before major maintenance is carried out, distributions may be higher if no maintenance reserve is built up. After the loan is taken, annual distributions may be lower to the extent that cash is needed for repayment under the lender-agreed schedule. Alternative funding arrangements The statement must explain what other funding options are available if debt cannot be raised in the future. Where relevant, unitholders should be told that operating cash may have to be used for major maintenance and that future distributions may be affected. These disclosures help investors understand what the change could mean. Any short-term increase in available cash should be looked at alongside the higher borrowing cost and the reduced room for taking on more debt later. Statutory Auditor Certification An InvIT cannot rely only on an internal classification of the expense. A certificate from the statutory auditor must confirm that: The maintenance expense is consistent with the major maintenance obligations and requirements in the concession agreement, and The relevant payments were funded through external borrowing. Only payments certified by the InvIT's statutory auditor may be added back for NDCF purposes under this framework. The statutory auditor may rely on an independent expert when assessing whether the work is consistent with the major maintenance obligations in the concession agreement. The circular permits such reliance but does not remove the need for the statutory auditor's certificate. This makes proper documentation important. The records should clearly show why the work was required, what work was carried out, the invoices and payments, the loan received and where the borrowed money was used. Periodic Reporting and Disclosure Requirements InvITs must continue reporting the borrowing after it has been approved and raised. The details have to be shown separately in the financial results and, where applicable, in the annual, half-yearly and quarterly reports. Disclosure Required presentation Net Borrowing Ratio Segregate the amount and percentage of borrowing taken for major maintenance expenses Notes to NDCF statement Show project/SPV/HoldCo/InvIT-level borrowing raised during the relevant period for major maintenance Notes to NDCF statement Show outstanding major maintenance debt as of the reporting date Debt maturity profile Separately segregate and highlight borrowing taken for major maintenance expenses The reporting obligation is not limited to the period in which unitholders approve the borrowing. Outstanding debt and its maturity profile continue to matter while the liability remains on the books. What Is Permitted and What Remains Restricted The circular should not be read as a general permission to borrow money for distributions. Permitted under the new exception An eligible payment for major maintenance of a qualifying road project may be added back to NDCF to the extent funded by external borrowing, provided every Note 12 condition is satisfied. Still restricted A Trust or SPV cannot ordinarily create distributable cash flow simply by raising external debt. Note 6 preserves that rule except for the specific situations identified in Notes 2, 7 and 12. Routine maintenance, non-road infrastructure maintenance, unsupported expense classifications and amounts not funded through external borrowing do not qualify under the new road-maintenance add-back. Impact on InvITs and Unitholders The new treatment can affect InvITs in several ways, from near-term cash availability to future borrowing capacity, and investor returns. Immediate impact on cash availability The add-back can prevent the eligible, debt-funded maintenance payment from reducing NDCF in the same way it otherwise would. This may leave more cash available for distribution or other permitted uses during the relevant period. The effect is conditional and fact-specific. It depends on the eligible amount, source of funding, NDCF calculation and satisfaction of Note 12. Impact on leverage headroom Major maintenance borrowing forms part of the InvIT's aggregate debt. A higher debt balance can reduce the capacity to borrow later for acquisitions, asset expansion or other growth plans. An InvIT evaluating the new treatment should therefore consider more than the immediate distribution effect. It must weigh the use of debt for maintenance against competing uses of its available leverage. Impact on future distributions Borrowing can help meet major maintenance costs when the InvIT has not kept enough funds aside. The loan and its financing costs will still need to be paid back. As a result, the cash available for distributions may be lower in later years. Impact on governance and administration Investment managers will have to keep proper records of project approvals, maintenance expenses, borrowings and audit documents. For InvITs managing several road projects, this may also require closer coordination between project companies, finance teams, trustees, auditors, and other advisers. Impact on unitholder decision-making Unitholders will vote on the proposed borrowing for major maintenance. The explanatory statement should give them enough information to assess the immediate cash benefit against the future repayment burden and the reduction in available borrowing capacity. What InvITs and Investment Managers Should Do Next For InvITs and investment managers, the next step is to translate the new framework into clear project-level checks, approvals, records and reporting processes. 1. Identify potentially eligible projects Map each asset against the “Roads and bridges” infrastructure sub-sector referenced in Note 12. Do not rely on a broad description such as transport infrastructure. 2. Review concession-agreement obligations Separate routine maintenance from contractual major maintenance. Document the clause, schedule, or technical requirement supporting the proposed classification. 3. Map the proposed funding route Identify whether borrowing will be raised at Trust, HoldCo or SPV level. Record how loan proceeds will be connected to the relevant project and payment. 4. Prepare project-wise financial estimates Compile year-wise and project-wise maintenance estimates, using the latest available valuation report where relevant. Assess debt maturity, repayment pressure and the effect on leverage headroom. 5. Obtain Unitholder Approval The required notice and explanatory statement should cover all disclosures specified under Note 12. Approval should be taken for the specific project before the add-back is used. If a later change requires additional borrowing, fresh approval should be obtained before taking the additional debt. 6. Keep Documents Ready for Audit Maintain the concession agreement, technical documents, expert reports where applicable, contracts, invoices, payment records and loan documents. The records should also show when the loan was drawn and how the funds were used so the statutory auditor can verify the transaction. 7. Update the NDCF Calculation The new add-back should be recorded at the appropriate Trust, HoldCo or SPV level. Only the eligible amount that has been certified and paid through external borrowing should be included. 8. Update periodic disclosure controls Revise financial-results and report templates so that the Net Borrowing Ratio, period borrowing, outstanding debt and maturity profile separately identify major maintenance debt. 9. Monitor approved limits and deviations Track actual borrowing and expense against the unitholder-approved proposal. Escalate any deviation that requires additional debt before the new borrowing is taken. Compliance Checklist The following checklist covers the main compliance steps InvITs should review before using the new treatment for major maintenance expenses. Confirm that the project falls under the specified roads-and-bridges sub-sector.  Check that the expense is non-routine maintenance required under the concession agreement.  Identify the portion of the payment funded through external borrowing.  Confirm whether the borrowing is at the Trust, HoldCo or SPV level.  Prepare project-wise and year-wise cost estimates.  Review the effect on leverage, future borrowing and distributions.  Explain other funding options if debt is not available.  Prepare the unitholder meeting notice and explanatory statement.  Obtain at least 60% approval of the votes cast on the resolution.  Obtain separate approval for each project.  Get fresh approval before taking additional debt due to a deviation.  Obtain the statutory auditor's certificate.  Keep records showing how the borrowed funds were used for maintenance. Add back only the eligible amount covered by the required certification. Reflect the borrowing in financial results and other required reports. Report major maintenance debt separately in the Net Borrowing Ratio and debt maturity details. How Corpseed Can Help Applying the revised NDCF framework requires coordination between regulatory, financial, contractual and disclosure workstreams. A weak link in project classification, approval documentation or the fund-flow record can create questions around the eligibility of the add-back. Corpseed can support affected entities with InvIT regulatory compliance services such as: Reviewing the circular and preparing an applicability note, Organising a project-wise compliance and responsibility matrix, Reviewing concession-agreement provisions relevant to major maintenance, Preparing approval and disclosure checklists for the unitholder process, Supporting compilation of regulatory and auditor documentation, Mapping recurring disclosures for financial results and periodic reports, and Establishing a tracker for approved borrowing, actual drawdowns, expenditure and outstanding debt. The investment manager, trustee, statutory auditor and legal or financial advisers will continue to perform their respective regulated and professional roles. Corpseed's support can help organise the compliance process and documentation so that the responsible parties have a clear, consistent record for review and decision-making. Key Takeaways SEBI has created a focused exception in the InvIT NDCF framework for major maintenance payments on eligible road projects. The qualifying payment can be added back at HoldCo/SPV or Trust level to the extent it is funded by external borrowing. The circular has applied since August 14, 2026. The relief is limited to qualifying road projects and non-routine maintenance required under the concession agreement. Project-wise unitholder approval must be obtained with at least 60% of votes cast supporting the resolution. The explanatory statement must disclose the borrowing, expense estimates, growth impact, distribution effect and funding alternatives. A statutory-auditor certificate is mandatory before the eligible payment is added back. Major maintenance borrowing must be separately disclosed in the Net Borrowing Ratio, NDCF notes and debt maturity profile. The change may support near-term cash availability, but it can reduce future leverage headroom and affect later distributions.

Subject

Summary: SEBI issued a new circular on July 21, 2026. It changes the certification rules for people who sell or distribute Specialized Investment Fund (SIF) products. The circular brings in a new certification called NISM Series-V-D - Mutual Fund - Specialized Investment Fund Distributors Certification. Anyone employed or engaged in SIF sale or distribution now needs this certificate. Here is some good news for distributors. If you hold NISM Series-V-D, you can distribute both Mutual Fund and SIF products. You do not need to hold NISM Series V-A separately. If you only distribute Mutual Fund products, nothing changes for you. You continue to follow the existing Series V-A rule. The rules also change how NISM Series XIII works for SIF distribution. This certificate will stop applying after September 21, 2026, though some existing holders get extra time. The revised rules took effect immediately on July 21, 2026. This article explains what SIFs are, what SEBI changed, who must comply, the important dates, and how distributors and AMCs can prepare. What Is the Specialized Investment Fund (SIF) Framework? What Are Specialized Investment Funds? A Specialized Investment Fund, or SIF, is a type of investment product regulated by SEBI. It sits between regular mutual funds and portfolio management services. SIFs allow fund managers to use more flexible investment strategies than a typical mutual fund scheme. Because SIF products can carry higher risk and more complex strategies, SEBI wants the people who sell them to have specific product knowledge. When Did SEBI Introduce the SIF Framework? SEBI first created the SIF framework through a circular dated February 27, 2025. Later, these rules were added to Chapter 21 of the SEBI Master Circular for Mutual Funds, dated March 20, 2026. Paragraph 21.10 of this Master Circular covers certification requirements for SIF distribution. Why Does SIF Distribution Need Specific Certification? SIF products are different from regular mutual funds. A distributor selling SIF products should understand these differences well. This is why SEBI wants a dedicated certification, separate from the standard mutual fund certification. Who Comes Under the SIF Distribution Rules? The rules apply to any person employed or engaged in the sale or distribution of SIF products. This includes distributors, sales staff, distribution personnel, agents, and other people involved in selling SIF products. We will look at each group in more detail later in this article. What Has SEBI Changed in the SIF Certification Requirements? New NISM Series-V-D Certification for SIF Distributors The circular introduces a new certificate: NISM Series-V-D - Mutual Fund - Specialized Investment Fund Distributors Certification. Under the revised paragraph 21.10.1 of the MF Master Circular, any person employed, engaged, or to be employed or engaged in the sale or distribution of SIF products must hold a valid Series-V-D certificate. This certificate matters because it becomes the main certification path for anyone selling SIF products in the future. Can Series-V-D Holders Distribute Both Mutual Funds and SIFs? Yes. The circular states that entities holding the Series-V-D certificate are eligible to distribute both Mutual Fund products and SIF products. They do not need to hold NISM Series V-A separately. In simple words, one certificate now covers both product types for these distributors. What Happens to Mutual Fund-Only Distributors? If a distributor sells only Mutual Fund products, and not SIF products, nothing changes. They continue to comply with NISM Series V-A - Mutual Fund Distributors Certification, as specified under the Gazette notification dated May 31, 2010. What Happens to NISM Series XIII? Before this circular, SIF distributors relied on NISM Series XIII - Common Derivatives Certification. The revised rule states that this requirement will not apply after September 21, 2026, for SIF distribution. Some existing Series XIII holders get transitional relief, which we explain in the next sections. Old vs New Certification Requirements for SIF Distributors The table below shows how the certification position has changed for different types of distributors. Distributor Type Earlier Position New Position SIF distributors Required NISM Series XIII (Common Derivatives Certification) Required NISM Series-V-D (Mutual Fund - Specialized Investment Fund Distributors Certification) Mutual Fund-only distributors Required NISM Series V-A Continue to require NISM Series V-A. No change. Existing Series XIII holders covered by transition rules Held Series XIII for SIF distribution Can continue on Series XIII until it expires, if obtained on or before September 21, 2026, while also holding valid Series V-A Distributors handling both Mutual Fund and SIF products Needed Series V-A and Series XIII separately Series-V-D alone is enough for both product types Two changes stand out here. First, SIF distribution now has its own dedicated certificate instead of relying on a derivatives certificate. Second, a distributor handling both Mutual Fund and SIF products no longer needs two separate certifications. Series-V-D covers both. Why Did SEBI Revise the SIF Certification Framework? Industry Participants Requested a Review According to the circular, SEBI received representations from industry participants about the SIF certification requirement. This means market participants raised concerns or suggestions with SEBI about how the earlier rule worked. SEBI Discussed the Requirement With NISM SEBI held discussions with the National Institute of Securities Markets (NISM). NISM is the body that designs and conducts certification exams for securities market professionals in India. Based on these discussions, SEBI reviewed the SIF certification requirement. Why a Dedicated SIF Certification Can Help This type of certification, tailor-made for SIF products, can take into consideration the issues, risks, and techniques related to SIF. This is unlike a generic derivatives certificate that has not been made with any consideration for the SIF products. Link With Investor Protection The circular states that it is issued to protect the interests of investors in securities and to promote the development of, and regulate, the securities market. This is SEBI's stated statutory purpose. The new certification requirement supports this goal, though it does not by itself guarantee investor protection outcomes. What Is the Implementation Timeline for the Revised SIF Certification? Date What Happens February 27, 2025 SEBI introduced the SIF regulatory framework March 20, 2026 SIF provisions included in the MF Master Circular (Chapter 21) July 21, 2026 Revised certification circular issued July 21, 2026 Revised provisions come into force immediately September 21, 2026 Revised provisions come into force immediately After existing Series XIII expiry Distributors using the transition move to the Series-V-D requirement July 21, 2026 - Circular Issued SEBI issued this circular to amend paragraph 21.10 of the MF Master Circular. July 21, 2026 - Revised Rules Take Effect It is clear from the circular that the provisions of the circular will become effective with immediate effect. This means the certification requirement came into effect from the date of issuance of the circular, not from some future date. September 21, 2026 - Important Cut-Off Date September 21, 2026 is an important cut-off date in one aspect only. After September 21, 2026, the requirement of Series XIII certification for SIF distribution ceases to apply, except where the transition provision applies to a particular distributor. Transitional Relief for Existing Series XIII Holders Where a SIF distributor already has a Series XIII certificate that was issued on or before September 21, 2026, then the distributor does not have to obtain Series-V-D immediately. He can continue with the Series XIII certification until the expiry of his certificate. What Must They Continue to Hold During the Transition? During this transition period, these distributors must continue to hold a valid NISM Series V-A certificate, as required under the earlier framework. So the transition benefit applies to Series XIII, but Series V-A must still stay valid. Who Needs to Comply with the Revised SIF Certification Rules? SIF Distributors Anyone employed or engaged in selling or distributing SIF products needs the NISM Series-V-D certificate, unless the Series XIII transition applies to them. Mutual Fund-Only Distributors Distributors who sell only Mutual Fund products are not affected. They continue with NISM Series V-A. Existing Series XIII Holders Those holding a valid Series XIII certificate obtained on or before September 21, 2026, can use it until expiry, while keeping their Series V-A valid. Employees and Sales Personnel The rule covers not just distributor firms but also individual employees and sales staff who are engaged in SIF sale or distribution. Asset Management Companies AMCs must make sure that their distributors and agents meet the certification requirement before allowing them to sell SIF products. AMFI and Agents Stakeholder What They Need SIF distributors (new) NISM Series-V-D Mutual Fund-only distributors NISM Series V-A Existing Series XIII holders (qualifying) Series XIII (till expiry) + valid Series V-A AMCs and AMFI Must verify and ensure distributor/agent compliance The circular places a clear responsibility on AMFI and AMCs to ensure compliance with these certification requirements by distributors and agents. How Can SIF Distributors Achieve Compliance? Step 1 - Check Whether SIF Products Are Being Distributed Start by confirming whether your firm or your staff sell SIF products, Mutual Fund products, or both. Step 2 - Review Existing NISM Certifications Next up is the review of existing NISM certifications. Series V-A and Series XIII along with dates of certification must be checked. Step 3 - Check Whether Transitional Relief Applies If your team holds a valid Series XIII certificate obtained on or before September 21, 2026, the transition rule may apply. Step 4 - Obtain Series-V-D Where Required In case the transition provision does not apply to you, or after the expiry of your Series XIII certificate, acquire Series-V-D certificate. Step 5 - Keep Certification Records Updated Make sure that you have updated records about which certificates are held by which of your employees and their dates of certification. Step 6 - Update Internal Compliance Records Update your internal compliance registers to match the changed categories of certificates. Step 7 - Coordinate With the AMC Since AMCs are responsible for checking distributor compliance, keep your AMC informed about your certification status. Step 8 - Track Expiry and Renewal Track certificate expiry dates closely, especially for staff relying on the Series XIII transition, so there is no compliance gap. The circular does not give details about the NISM exam process, application steps, fees, or certificate validity periods. Distributors should check the official NISM website for these specifics. What Is the Impact of the New SIF Certification Rules on Businesses? Impact on SIF Distributors SIF distributors now have a dedicated certification requirement. This may mean training and exam preparation for some staff, and better records of certification status. Impact on Mutual Fund Distributors Distributors who deal only in Mutual Fund products see no change. Those planning to expand into SIF distribution will need to plan for Series-V-D first. Impact on AMCs AMCs now need to check certification status more carefully. Since AMFI and AMCs must ensure distributor and agent compliance, this may mean stronger monitoring and updated records. Impact on Existing Series XIII Holders Distributors with a valid Series XIII certificate obtained on or before September 21, 2026 get breathing room, as long as Series V-A also stays valid. Impact on New SIF Distribution Businesses Any business planning to start SIF distribution should understand these requirements first, since Series-V-D is now the primary route. Is the New SIF Certification Requirement a Compliance Burden or a Positive Change? Aspect Compliance Burden Angle Positive Change Angle New certification exam Staff selling SIF products who don't qualify for the Series XIII transition must prepare for and pass NISM Series-V-D A dedicated SIF-focused exam may build stronger product knowledge than the earlier general derivatives certificate Training Distribution firms may need to organise or fund training for staff moving to Series-V-D Better-trained staff may be more confident explaining SIF products to investors Record keeping Firms must track who holds which certificate, when it was obtained, and when it expires Clear certification categories make records easier to structure than under the old overlapping V-A/XIII setup Renewal monitoring Ongoing tracking is needed, especially for staff on the Series XIII transition, to avoid a compliance gap when it expires The transition rule removes the need for sudden, forced renewals, expiry can be tracked and planned for in advance Number of certificates required None removed for MF-only distributors, they still need Series V-A as before For distributors handling both MF and SIF products, one certificate (Series-V-D) now replaces the earlier need for two (Series V-A + Series XIII) Cost and time Exam fees, study time, and possible re-training add cost for distributors who must newly obtain Series-V-D Distributors already covered by the Series XIII transition avoid immediate cost, since they can wait until their existing certificate expires Transition handling Distributors must correctly work out whether their Series XIII certificate qualifies (obtained on or before September 21, 2026), an added compliance check The transition avoids an abrupt cut-off; qualifying distributors get a clear, workable runway instead of an immediate switch AMC/AMFI oversight AMCs and AMFI now carry explicit responsibility to verify distributor and agent compliance, adding an oversight task A clearer certification structure makes it easier for AMCs and AMFI to check and confirm compliance Mutual Fund-only distributors No burden, this rule does not add any new requirement for them No change needed, they simply continue as before under Series V-A Overall effect Adds a certification task for distributors newly required to get Series-V-D Makes the certification structure clearer, especially for distributors covering both MF and SIF products Overall view: The new rule does add a certification step for some distributors, particularly those not covered by the Series XIII transition. But for distributors handling both Mutual Fund and SIF products, it simplifies things by replacing two certificates with one, and the transition provision softens the impact for existing Series XIII holders rather than forcing an immediate switch. What Are the Benefits of the Revised SIF Certification Framework? Dedicated SIF certification: Series-V-D is built specifically for SIF products, unlike the earlier derivatives-based certificate. Better product knowledge: A focused certificate can help distributors understand SIF products more clearly. Clearer certification requirements: Distributors now know exactly which certificate applies to them. One certification route for MF and SIF: Series-V-D holders do not need Series V-A separately. Better compliance tracking: AMCs and AMFI have a clearer structure to check compliance against. Better distributor preparedness: An examination on its own can equip distributors to deal with their specific SIF risks. Transitional support: Existing Series XIII holders are not forced into an abrupt change. Potential support for investor protection: The certification aligns with SEBI's stated goal of protecting investors, though it does not guarantee this outcome alone. What Business Opportunities Can the New SIF Framework Create? Certification and Training Support Distributors preparing for the Series-V-D exam may need study support. This may create demand for exam preparation services. Compliance Tracking Services AMCs and larger distribution networks may need systems to track certification status. This could increase the need for compliance tracking tools. Regulatory Advisory New businesses venturing into SIF distribution may need an advisory on relevant requirements. Documentation and Record Keeping Certification records and documentation for transition eligibility may be improved through proper record management. Technology for Compliance The companies may need technological support which automatically identifies when certificates expire and when they can transition. Support for Businesses Expanding into SIF Distribution Companies distributing only Mutual Fund products, but intending to distribute SIF products, may need assistance on how to go about obtaining certification. What Should SIF Distributors Do Before September 21, 2026? Check whether your firm or staff distributes SIF products Check current NISM certifications held by your team Verify the exact date the Series XIII certificate was obtained Check the Series XIII certificate's expiry date Confirm that Series V-A status is valid, where applicable Determine whether the transition rule applies to each staff member Understand exactly where the Series-V-D requirement applies Update internal certification records Coordinate with your AMC on compliance status Plan the next certification step for staff who need Series-V-D SIF Certification Compliance Checklist for Distributors This checklist can help distributors and compliance teams quickly review their certification position against the revised SEBI requirements. Compliance Area What to Check SIF distribution Is the person or entity distributing SIF products? Series-V-D Is the new certification required for this person or entity? Series XIII Is a valid existing Series XIII certificate held? Certification date Was Series XIII obtained on or before September 21, 2026? Series V-A Is the applicable Mutual Fund certification valid? Expiry date When does the existing certificate expire? Records Are certification documents maintained and updated? AMC/AMFI checks Has the required compliance verification been completed? NISM Series V-A vs Series XIII vs Series-V-D: What Is the Difference? NISM Series V-A - Mutual Fund Distributors Certification This is the standard certification for people who distribute only Mutual Fund products. It continues to apply exactly as before, under the Gazette notification dated May 31, 2010. NISM Series XIII - Common Derivatives Certification Under the earlier SIF framework, this certificate was used for SIF distribution. In the future, it will not apply to SIF distribution after September 21, 2026, except where the transition provision gives existing holders extra time until their certificate expires. NISM Series-V-D - Mutual Fund - Specialized Investment Fund Distributors Certification This is the new, dedicated certificate for anyone selling or distributing SIF products. It also allows Mutual Fund distribution without a separate Series V-A certificate. Which Certification Applies to Which Distributor? Certification Main Use MF Distribution SIF Distribution Status NISM Series V-A Mutual Fund distribution Yes No Continues, unchanged NISM Series XIII Derivatives (used earlier for SIF) No Only under transition rule, till expiry Being phased out for SIF after September 21, 2026 NISM Series-V-D Combined MF + SIF distribution Yes Yes New requirement How Can Corpseed Help With SIF Regulatory Compliance? Understanding a new SEBI certification requirement, along with a transition rule and cut-off date, can be confusing for distributors and AMCs. Corpseed can support businesses in working through these requirements. Understanding Applicable SIF Compliance Requirements Corpseed can help distributors understand which certification rule applies to their specific business, based on the products they distribute. Certification Requirement Assessment Corpseed can help review existing certification status against the new Series-V-D requirement and the Series XIII transition rule. Regulatory Compliance Advisory Corpseed offers advisory support on SEBI and mutual fund-related regulatory requirements. Documentation and Record Management Corpseed can help businesses set up and maintain proper certification and compliance documentation. Regulatory Update Monitoring Corpseed helps businesses stay informed about relevant SEBI circulars and regulatory changes that may affect their operations. Ongoing Compliance Support Corpseed provides continued support to help businesses track compliance requirements as regulations evolve. If your business needs help understanding and preparing for the applicable SIF certification requirements, Corpseed's team can walk you through the relevant SEBI compliance services and financial services compliance support available. Through this circular, SEBI has revised the certifications for SIF distributors. NISM Series-V-D certification will be mandatory for any person engaged in the sale or distribution of SIF products and will include Mutual Fund distribution without the need for Series V-A separately. SEBI has amended the certification criteria for SIF distributors by way of its circular dated July 21, 2026. The NISM Series-V-D Certification is the only path that is available to any individual who sells or distributes SIF products, as well as Mutual Funds without Series V-A certification. It is the responsibility of AMCs and AMFI to ensure that their distributors and agents conform to the above requirements. It will help distributors to analyze the certification requirement at present, determine if they fall within the transition rule, and plan their actions ahead of time.

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.