SEBI Gets Phased Capital, Revenue and Compliance Timelines for Merchant Bankers

In December 2025, the Securities and Exchange Board of India (SEBI) notified phased rollout of a revised net worth requirement for existing Merchant Bankers (MBs) including higher capital adequacy, liquid net worth, underwriting limits, among others.

• The new framework was introduced by amending the SEBI (Merchant Bankers) Regulations, 1992.
• Following the amendment, the regulations are now called the SEBI (Merchant Bankers) (Amendment) Regulations, 2025.

Key Norms:

Net Worth and Liquid Worth requirement: The Category-I merchant bankers are required to maintain a minimum net worth of Rs 25 crore by January 02, 2027 and double of this amount (Rs 50 crore) by January 02, 2028. 

• In addition to that, they are also required to maintain Liquid Net Worth (LNW) of Rs 6.25 crore (by January 02, 2027) and Rs 12.5 crore (by January 02, 2028).
• Similarly, the Category-II merchant bankers are also required to maintain Rs 7.5 crore and Rs 10 crore in net worth across two phases, along with liquid net worth of Rs 1.875 crore and Rs 2.5 crore, respectively.

Defines LNW: SEBI has defined LNW as ‘unencumbered liquid assets’ like: cash, bank deposits, Government Securities (G-Secs), select Mutual Fund (MF) units, among others.

Underwriting Limits: SEBI has mandated that total underwriting obligations should not exceed 20 times  a merchant banker’s liquid net worth, while, it has given two years transition period to the existing bankers to comply with this new rule.

• SEBI has clarified that the MBs must comply with this new requirement within two years from the effective date (by January 02, 2028).
• Also, MBs are required to submit half-yearly certification from a Chartered Accountant (CA) confirming compliance.

Minimum Revenue Requirement: SEBI has mandated all MBs to generate minimum revenue requirement from permitted activities, for instance: Rs 25 crore for Category-I and Rs 5 crore for Category-II, over a period of 3 years, failing of which could result in the cancellation of registration.

• The 1st assessment will be conducted from April 01, 2029.

Mandatory NISM Certifications: As per SEBI’s directions, relevant employees and compliance officers are now required to pass specified National Institute of Securities Markets (NISM) certification exams within a stipulated time period.

• However, the existing MBs will have the time until January 02, 2027, while new appointees are required to obtain certification within 90 days.

Other Key Norms:

Governance and Personnel: As per the new regulations, MBs are required to appoint an independent compliance officer, separate from the principal officers and key operational staff, by April 03, 2026.

• Also, principal officers should have minimum 5 years experience in the financial markets, with existing firms given a one year time period to comply.

Prohibitions on Outsourcing and Non-SEBI Activities: SEBI has prohibited MBs from outsourcing core merchant banking activities. They have also been mandated to unwind existing outsourcing arrangements by April 03, 2026.

• Further, entities engaged in non-SEBI activities are required to segregate them through separate business units with Chinese walls, enhanced disclosures, and board-approved controls.

Other Key Restrictions on MBs: MBs have been restricted to manage any public issue, where its directors, other key managerial personnel or their relatives individually or in cumulatively hold more than 0.1% of the paid-up share capital or shares whose nominal value is over Rs 10 lakh, whichever is lower.

Recent Related News:

In October 2025, the SEBI-constituted working group headed by Rama Subramaniam (R.S.) Gandhi, former deputy Governor of the Reserve Bank of India (RBI), proposed to increase the transaction charges for clearing corporations such as: NSE Clearing Limited, a wholly-owned subsidiary of the National Stock Exchange Limited (NSE).