SEBI Extends Compliance Timeline for Merchant Bankers Under Amended Regulations 2026
SEBI extended merchant banker compliance deadlines to December 2026. Know the revised timelines, SBU rules, net worth requirements, and what businesses must do now
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What SEBI Has Extended and Why It Matters
The SEBI circular dated 11th June 2026 has deferred certain important compliance dates for the revolutionary SEBI (Merchant Bankers) (Amendment) Regulations, 2025, which came into effect from 3rd January 2026 and constitute the most significant revision of merchant banker regulations in about three decades. This deferment acknowledges that some compliance aspects, especially those related to the Separate Business Unit (SBU) and phased capital adequacy, were taking longer to be implemented than initially envisaged.
The amended regulations introduced an entirely new framework:
- Two-tier categorisation: Category I (full-service) and Category II (excluding mainboard public issues)
- Significantly enhanced net worth requirements with phased timelines
- Liquid net worth concept (new, with prescribed haircuts)
- Separate Business Units (SBUs) for non-SEBI-regulated activities
- NISM certifications for key employees
- Prohibition of outsourcing core merchant banking activities
- Minimum revenue thresholds (first assessed from April 2029)
- Independent compliance officers
- Data localisation, 8-year record-keeping, and conflict-of-interest restrictions
Revised Key Deadlines (Post June 2026 Extension)
| Requirement | Original Deadline | Extended Deadline |
| SBU framework implementation | 3 July 2026 | 31 December 2026 |
| Phase I Net Worth & Liquid Net Worth (Group 1: 25 Cr rupees NW, 6.25 Cr rupees LNW; Group 2: 7.5 Cr rupees NW, 1.875 Cr rupees LNW) | 2 January 2027 | 31 March 2027 |
| Phase II Net Worth & Liquid Net Worth (Group 1: 50 Cr rupees NW, 12.5 Cr rupees LNW; Group 2: 10 Cr rupees NW, 2.5 Cr rupees LNW) | 2 January 2028 | 31 March 2028 |
| Category intimation to SEBI with CA Certificate | 2 January 2027 | 31 March 2027 |
| Minimum Revenue requirement (first assessment) | April 2029 | Unchanged |
Benefits for Merchant Bankers from the Extension
1. Breathing Room for SBU Structural Reorganisation
Imagine a huge joint family living in a single hall. Now imagine that there is a sudden introduction of a house rule stating that there should be distinct and walled areas for studying, kitchen, and playing with children. This cannot happen overnight by shifting around some chairs.
That is exactly what the SBU rule feels like for merchant banking firms. A Separate Business Unit means that any work not covered under SEBI's rules - like merger advisory or financial consulting - must now live in its own clearly defined space inside the company. There must be strong boundaries between departments, known in the financial world as Chinese walls. Conflict-of-interest policies must be written down. Board-level oversight must be put in place. Systems must be redesigned from scratch.
The original deadline for all of this was 3 July 2026. SEBI pushed it to 31 December 2026, handing merchant bankers six additional months to get things right. Those six months matter in four big ways:
- Governance frameworks can be built properly: SBU policies, internal rules, and oversight structures deserve careful drafting, not rushed copy-paste jobs done the night before a deadline.
- Daily operations and live contracts can be fixed without chaos: many firms were in the middle of active client mandates, and a forced July restructuring would have created confusion right inside running transactions.
- Compliance and legal teams can be trained thoroughly: understanding what falls inside an SBU and what does not requires clear internal education, not a hurried memo.
- Old client agreements can be reviewed and renegotiated: several existing contracts straddle SEBI-regulated and non-SEBI-regulated work, and untangling them takes time, negotiation, and careful legal drafting.
A rushed SBU setup would have introduced the very operational and legal risks the regulation was designed to remove. The extension turns a potential compliance fire drill into a structured, well-planned transition.
2. Capital Mobilisation Time Without Market Disruption
Think of net worth like a piggy bank. The new rules say the piggy bank must be much bigger:
- Group 1 companies: Must grow their savings from 5 Crore rupees to 25 Crore rupees, then to 50 Crore rupees
- Group 2 companies: Must grow from 5 Crore rupees to 7.5 Crore rupees, then to 10 Crore rupees
That's a lot of money to collect! With the deadline now pushed to 31 March 2027, merchant bankers can:
- Plan smartly how to collect more money, instead of panicking
- Talk to investors and business owners calmly, getting fair deals
- Match their money-raising efforts with how their business is actually doing
- Avoid selling off things cheaply to meet a rushed deadline
There's also the new "liquid net worth" rule, which means part of their savings must stay in easy-to-use forms like cash. The extra time helps companies sort out their savings the right way.
3. Uninterrupted Business Operations and Transaction Continuity
The middle of 2026 is a very busy time in India's financial world. Many companies are launching IPOs (selling shares for the first time), raising money through other means, or doing big deals. If merchant bankers had to reorganise in July 2026 completely, it would have been like asking a chef to rebuild their kitchen while cooking a five-course meal.
By moving the SBU deadline to December 2026, SEBI allows:
- Companies to finish their current deals and projects safely
- A planned and calm transition to the new system
- Clients to feel safe and confident their work is in good hands
4. Time to Build Compliance Infrastructure
The new rules added many new jobs and systems that must be created inside merchant banking firms:
- A dedicated compliance officer (this rule started in April 2026 already)
- NISM-qualified staff for key roles
- Reports signed by a Chartered Accountant every six months
- New technology for better record-keeping and sharing information
With extra time, companies can now:
- Hire the right people with the right qualifications (these are not easy to find quickly)
- Build internal teams to do work that was earlier given to outsiders
- Set up proper technology for storing data and meeting reporting rules
5. Category Self-Assessment and Strategic Planning
Now that deadlines are stretched, merchant bankers can sit back. This thinking time allows:
- Smaller companies to think about joining hands with others to become stronger together
- Firms to plan their money and business goals over several years
- Everyone to pick the right category without being forced into a hasty decision
6. Protection for Mid-Sized and Regional Merchant Bankers
The original tight deadlines were especially hard on smaller and medium-sized merchant bankers - companies based in cities outside Mumbai, or boutique firms doing specialised work.
The extra time helps these companies:
- Find a realistic path to meet the new rules without shutting down
- Avoid forced shutdowns, giving up licences, or selling themselves off cheaply
- Keep serving clients in smaller cities and towns, which bigger firms often ignore
This protects healthy competition and makes sure good financial services reach businesses all across India.
Business Opportunities from the Amended Regulations and Extended Timeline
1. Capital Advisory and Fundraising Services for MBs
Merchant bankers now need much more money in their accounts. This creates a big demand for:
- Services that help companies raise funds or attract investors
- Advisors who help business promoters bring in fresh money
- Experts who can help sell shares or preference shares in the merchant banking firm itself
2. Compliance and Regulatory Advisory Services
The new rules are complex. Many merchant bankers will need outside experts to help them:
- Design SBUs and write proper policies
- Set up Chinese walls and conflict-of-interest rules
- Appoint the right compliance officers and prepare CA certificates
- Handle SEBI disclosures and reporting
- Coaching and training services for NISM exam preparation will also be in high demand.
3. Talent and Recruitment Services (Specialised)
There will be strong demand for:
- NISM-certified compliance officers with experience in merchant banking
- Experienced principal officers with at least 5 years in financial markets
- Professionals who can handle due diligence and prepare offer documents in-house
- Recruitment firms that know the SEBI world well will see a great surge in business.
4. Technology Infrastructure
Merchant bankers now need smart systems to:
- Keep all their data stored inside India
- Maintain records for 8 full years
- Share information about their SBU activities, roles, and CA certificates on their websites
This opens doors for technology and software companies to build tools specifically for SEBI-regulated firms.
5. M&A, Consolidation, and Restructuring Advisory
The new rules will push smaller merchant bankers to team up or merge with others. This means:
- Many merger and acquisition deals between merchant banking firms
- Larger groups buying smaller boutique firms to grow their services
- Restructuring of companies to meet net worth targets efficiently
- All of this needs advisors, lawyers, and SEBI filing experts.
6. New Business Lines Enabled by the SBU Framework
Here's the exciting part - the SBU framework actually opens new doors! If a merchant banker properly separates their work, they can now also offer:
- M&A advisory, business valuation, and financial due diligence
- Services regulated by other bodies like RBI, IRDAI, or PFRDA
- International deals and cross-border financial advisory
- Private equity advisory, pre-IPO fundraising, ESG advisory
With more time to plan their SBUs properly, smart merchant bankers can use this as a growth opportunity, not just a compliance burden.
7) Increased Deal Activity in the Extended Window
Now that deadlines are clearer and further away, merchant bankers feel more settled. This means:
- More IPOs and capital market deals in 2026 without disruption
- Mid-sized firms can now confidently take on new clients and mandates
- More SME IPOs (smaller company listings) by regional Group 2 merchant bankers
How Corpseed Helps Merchant Bankers Navigate SEBI's New Rules
The SEBI (Merchant Bankers) (Amendment) Regulations, 2025 brought the most sweeping changes to merchant banking compliance in over three decades. With revised deadlines now running through December 2026 and March 2027, merchant bankers across India are racing to restructure their operations, raise capital, and build new compliance systems - all at the same time. This is exactly where Corpseed steps in.
1. Merchant Banker Registration and Licence Management
For firms looking to enter the merchant banking space fresh, or for existing ones needing to upgrade their category from Group 2 to Group 1, Corpseed handles the entire registration process with SEBI. From preparing the application documents to ensuring all eligibility criteria are met before submission, the process is managed end-to-end - reducing errors, avoiding delays, and keeping the firm on the right side of the regulator from day one.
2. SBU Documentation and Governance Framework
The Separate Business Unit requirement is arguably the most operationally complex part of the new regulations. Setting up proper Chinese walls, conflict-of-interest policies, board oversight structures, and disclosure protocols demands both regulatory knowledge and practical experience. Corpseed assists merchant bankers in drafting these governance documents, designing internal workflows, and building the entire SBU framework in a way that satisfies SEBI's expectations well before the December 2026 deadline.
3. Net Worth Planning and CA Certificate Coordination
Meeting the phased net worth thresholds - 25 Crore rupees and then 50 Crore rupees for Group 1, 7.5 Crore rupees and then 10 Crore rupees for Group 2 - requires careful financial planning. Corpseed supports merchant bankers in mapping their current capital position, identifying gaps, and building a realistic roadmap to meet Phase I by March 2027 and Phase II by March 2028. Coordination with Chartered Accountants for the mandatory half-yearly net worth and liquid net worth certificates is also handled as part of the compliance support.
4. Ongoing SEBI Compliance Management
The amended regulations introduced several recurring compliance duties - half-yearly CA certifications, enhanced disclosures on company websites, NISM certification tracking for key personnel, and record-keeping systems that must retain data for eight full years. Managing all of this internally is a heavy load for most merchant banking firms, especially mid-sized and regional ones. Corpseed takes on this ongoing compliance management, ensuring nothing is missed and every deadline is met without last-minute scrambling.
5. Strategic Advisory for Mid-Sized and Regional Firms
Smaller merchant bankers - those operating between 5 Crore rupees and 20 Crore rupees in net worth - face a particularly difficult path under the new framework. Some may benefit from consolidation with another firm rather than trying to meet Group 1 thresholds alone. Others may find that staying in Group 2 is the smarter business call. Corpseed provides the kind of strategic guidance that helps these firms make that decision clearly and confidently, without being pressured by approaching deadlines into choices that don't serve their long-term interests.
The window between now and December 2026 is not just a compliance deadline - it is a genuine business opportunity for merchant bankers who move thoughtfully. Corpseed makes sure that window is used well.
About the Author
Mahek Sancheti
Content WriterMahek Sancheti, BAJMC graduate with a deep passion for writing. As a content writer, video content creator, creative content creator, and scriptwriter, I bring stories to life through words and visuals. I honed my skills by working with a prominent news agency, where I excelled in crafting compelling narratives and engaging content. Coming from a journalism and mass communication background I have skills to craft engaging narratives that captivate audiences. With a keen interest in writing and creativity, I aim to deliver impactful and meaningful content that resonates with diverse audiences.
https://www.linkedin.com/in/mahek-sancheti-837196212