SEBI is raising the bar for India’s merchant bankers. New net‑worth and liquidity standards will kick in from January 2026, with higher targets by 2028. Here’s a plain‑English rundown of what’s changing and why it matters to investors.
Phased Net‑Worth Increase
Existing merchant bankers must meet higher capital levels in two steps:
- Category I: Rs 25 cr minimum net worth by Jan 2027, rising to Rs 50 cr by Jan 2028.
- Category II: Rs 7.5 cr by Jan 2027, increasing to Rs 10 cr by Jan 2028.
Alongside total net worth, firms must keep a liquid net‑worth buffer (cash or near‑cash assets) equal to 25 % of the required amount – Rs 6.25 cr and Rs 12.5 cr for Category I, Rs 1.875 cr and Rs 2.5 cr for Category II.
Liquidity and Underwriting Caps
To limit risk, SEBI will cap underwriting exposure at 20 times a firm’s liquid net worth. Existing players get two years to comply, i.e., by Jan 2028.
Governance and Certification Requirements
- Appointment of an independent compliance officer.
- Principal officers must have at least five years of market experience.
- Core merchant‑banking activities cannot be outsourced beyond a short transition period.
- Staff and compliance officers must pass specific NISM exams within set timelines.
- Half‑yearly certification by chartered accountants to prove ongoing compliance.
Revenue Benchmarks
SEBI also sets minimum revenue targets from permitted merchant‑banking work:
- Category I: Rs 25 cr over three years (first check in FY 2029).
- Category II: Rs 5 cr over three years.
If a firm fails to hit these numbers, SEBI can cancel its registration.
Why It Matters to Investors
India’s primary market is booming – it was the world’s second‑largest equity‑issuance hub in 2025, raising more than $21 bn. Stronger capital and governance rules aim to ensure that the banks handling IPOs and other fund‑raising activities are financially sound and less likely to cause market disruptions.
For investors, this means a more stable environment for new listings and less chance of a merchant banker collapsing mid‑transaction.
Disclaimer
Remember, this is my interpretation of the new rules, not a prediction of how they will affect any specific stock or investment. Do your own research and consider talking to a financial adviser before making decisions.