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Custodians play a crucial role in the Indian securities market. They essentially safeguard the securities and financial assets of investors and manage them in compliance with various regulatory norms. Large institutional investors, especially foreign portfolio investors (FPIs), mutual funds, alternative investment funds (AIFs), and portfolio managers, rely on custodians to properly manage their investments.
The Indian capital market is growing rapidly and is currently worth over $5 trillion. It is very important to keep investors’ assets safe and to properly manage transactions in this large market. So, SEBI has issued new guidelines for custodians on 4 March 2026. These guidelines are based on the SEBI (Custodian) Regulations, 1996, as amended on 18 September 2025.
The Key objectives of these new rules are-
SEBI has also increased the minimum net worth for custodians from ₹50 crore to ₹75 crore so that they can operate on a stronger financial footing.
A custodian is a SEBI-registered intermediary that safely stores the securities and financial assets of investors. They play a vital role in ensuring that transactions in the market are executed properly and in compliance with the rules.
Custodians play an important role in managing the assets and transactions of foreign investors, especially when they invest in the Indian market.
The rapid expansion of the Indian capital market has necessitated a strengthening of the regulatory framework. Ensuring risk management, data protection, and transparency has become very important with the increase in investment in the market.
Several key reasons behind the new guidelines:
In 2025, significant changes were made to the custodian regulations, and Regulation 19B was added. This new regulation has further strengthened the risk management and governance framework for custodians.
SEBI wants to modernize and make the custodian system efficient so that the assets of investors are safe and the confidence in the market increases.
Get expert assistance from EnterSlice to understand and comply with SEBI Custodian Guidelines 2026, regulatory requirements, and compliance frameworks to avoid penalties and ensure smooth operations.
The SEBI must operate different financial services separately in the new guidelines. Especially custodians who are not banks will have to keep their SEBI-regulated services and financial services outside SEBI, separate.
They will have to create separate units called Strategic Business Units (SBUs). Each service will be operated within a separate structure, and regulatory transparency will be maintained through this.
Several important conditions in this system-
Also, if a custodian offers services that are not regulated by SEBI, then it will have to be clearly disclosed to the clients. A written acknowledgement should also be taken from the clients that SEBI will not resolve any complaints regarding such services.
SEBI has provided facilities to custodians in some areas. They can share human resources, technology, and infrastructure between different financial services. This reduces the operational costs of the institutions and increases the efficiency of work.
However, some important safeguards should be in place while using this facility. For example, Chinese walls or a restricted flow of information should be ensured between separate teams. In addition, access to information will be given on a “Need-to-Know” basis so that no one can see sensitive information unnecessarily.
These guidelines have been prepared with SEBI’s circular. This aims to simplify operations and prevent misuse of investor information.
Custodian institutions often outsource some of their work to other organizations. SEBI has laid down clear rules in this regard.
According to the new rules, custodians will be able to outsource only non-core activities. Administrative or support-related work can be done through other organizations. However, core custodian services or important compliance-related work cannot be outsourced.
The Custodians and DDPs Standards Setting Forum (CDSSF) will divide various activities into core and non-core categories to bring clarity to this issue.
These rules aim to maintain control over the core work of custodian institutions and increase their work efficiency and operational convenience.
Earlier, it was mandatory for custodian institutions to maintain a secure vault for storing physical security. But SEBI has made some changes to this rule in the new guidelines.
If a custodian does not keep any physical securities, then it is not necessary to maintain a separate vault for them. This will reduce costs and make it easier for many institutions to work.
However, if a custodian stores physical securities, then they must use a secure vault or equivalent secure storage.
Also, information regarding the size and security of the vault will have to be submitted in the form of a quarterly report. Any other secure storage system recognized in the industry can also be used with the client’s consent.
In the new guidelines, SEBI has emphasized creating a strong corporate governance framework for custodian institutions. It will be possible to manage the institutions in a more transparent, accountable, and secure manner.
According to these rules, custodians will have to form some important committees at the board level. Such as:
The key responsibility of these committees will be to regularly monitor the activities of the institution and identify potential risks or problems in advance.
Also, the chief financial officer (CFO) of the institution will have to submit various information to the board or audit committee regularly. For example:
However, custodians who are part of the bank or a subsidiary of the bank can rely on the existing group-level governance structure of the bank.
SEBI has given special importance to creating a strong risk management framework for custodians. Because a huge volume of transactions is done in the securities market every day, and even a small mistake can create big risks.
So, custodians must create a written and clear risk management policy. This policy should have a plan to deal with various types of risks.
Another important rule is that the custodians’ technical systems must be designed so they can handle at least 1.2 times the average transaction load of the previous year. This aims to increase the service capacity with the rapidly growing capital market in India.
SEBI has made it mandatory for custodians to have a Business Continuity Plan (BCP). It will be possible to keep the service running even in the event of any technical problem, natural disaster, or other emergency.
As part of this plan, custodians will have to create a Disaster Recovery Site (DRS). In addition, DR drills will have to be conducted regularly, and the performance of the system will have to be monitored.
Another important thing is to regularly sync data between the Primary Data Centre (PDC) and the Disaster Recovery Site (DRS).
According to these rules, BCP should be implemented quickly. However, the deadline for completing full DR infrastructure compliance has been given till 23 March 2029.
This system keeps investors’ assets safe in the event of a disaster or major technical problem.
SEBI has directed the new guidelines to create an orderly wind-down framework for custodian institutions. The process should be completed in an orderly manner when the institution wants to close its business or is forced to close.
This framework should ensure several things:
If a custodian is closed due to financial problems or regulatory action, the entire process will be managed under the supervision of SEBI. The deadline for implementing this wind-down framework is 23rd September 2026.
SEBI has made some repetitive reporting obligations in the new guidelines to simplify the compliance process. Earlier, custodians had to submit many types of data separately that were already available from other sources.
The administrative burden will be reduced by eliminating such unnecessary reports. So, it will save time and money for custodians. Since this information is already stored with NSDL and CDSL, there is no need to submit separate reports. This will make the entire reporting process more efficient and easier.
Some of the discontinued reports are:
The reports can be discontinued because the information is already stored with NSDL and CDSL, or there is no need to submit the same information repeatedly.
So, the compliance costs will be reduced, administrative work will be simplified, and the reporting process will be more efficient.
SEBI’s new custodian guidelines 2026 are an important step towards enhancing transparency, accountability, and operational stability in the Indian capital markets. These rules ensure a strong governance framework and improved risk management for custodians. This will enable investors to invest in a safer environment. While some institutions may have to develop new technology or infrastructure, compliance costs may increase slightly. These rules will enhance market confidence and strengthen the Indian capital markets in the long run.
Complying with the new SEBI guidelines can be complex for custodian institutions. Enterslice provides professional support to institutions throughout the entire compliance process. Their team of experts assists at every step, from SEBI registration to creating a risk management framework, legal documentation, and regulatory reporting. So, institutions can easily conduct business in compliance and avoid potential legal issues.
SEBI’s new guidelines for 2026 are an important step towards strengthening governance, transparency, and operational stability in the custodian industry. These reforms allow custodians to expand their services responsibly. This will help increase confidence and stability in the Indian capital markets in the long run.
If your institution wants to register as a custodian or comply with the new SEBI regulations, Enterslice’s expert team can provide you with complete regulatory assistance, documentation support, and compliance advice so you can easily meet all legal requirements.
A custodian is a financial institution that safely stores investors' shares, bonds, or other securities in the securities market. So, it acts as a custodian of investors' assets. It maintains records of transactions, assists in the share transfer process, and handles corporate actions such as dividends or bonus shares. Their assets are safe and are being managed properly.
SEBI has introduced some new rules for custodian institutions. These rules aim to bring more transparency and security to the market. The new guidelines state that custodian institutions must have strong governance mechanisms. They must also follow clear rules for risk management, data protection, and service management. SEBI wants investors' assets to be better protected and confidence in the market to increase.
SBUs are separate departments of an organization where specific types of work are done. Creating SBUs in custodian services allows for a clear division of work for each department. For example, one department will handle transactions, and another department will handle risk management. This reduces confusion, and responsibilities are clear. This manages the organization's work more securely.
Yes, custodians can outsource certain tasks to other service providers. The key responsibility lies with the custodian according to SEBI rules. Its liability will remain with the custodian if the work is done by another organization. While outsourcing, the organization must ensure good quality of the service and that all regulatory rules are being followed.
Custodians must maintain a safe storage system in some cases. Physical securities or important documents are to be stored. So, a secure vault or secure storage is used. There is a high-level security system. As a result, important documents or securities are protected from theft, damage, or unauthorized access.
A BCP is a contingency plan. It is prepared for situations when an unexpected problem occurs. In the event of a natural disaster, technical problem, or cyberattack, it is planned how the organization will continue to operate. BCP is very important for custodian institutions. It reduces the risk of service interruption and protects the assets of investors.
Enterslice helps institutions comply with SEBI's Custodian Rules. Our expert team guides them through the entire registration process. We also provide compliance advice, help prepare the necessary documents, and create risk management frameworks. This allows organizations to comply with regulations easily and operate their services in a safe and orderly manner.
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