{"id":89901,"date":"2026-01-06T12:50:30","date_gmt":"2026-01-06T07:20:30","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=89901"},"modified":"2026-02-04T16:17:08","modified_gmt":"2026-02-04T10:47:08","slug":"sebi-merchant-banker-regulations","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/sebi-merchant-banker-regulations\/","title":{"rendered":"SEBI Overhauls Merchant Banker Regulations 2026: Higher Capital, Revenue &amp; Compliance Norms Explained\u00a0"},"content":{"rendered":"<p>SEBI, or the Securities and Exchange Board of India, is the primary regulatory body for the Indian stock <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a>. SEBI ensures that rules are properly followed when bringing IPOs to the market, issuing company shares, or conducting large financial transactions. Merchant bankers play a crucial role in this entire process, acting as a link between companies and investors.&nbsp;<\/p>\n\n\n\n<p>However, the rules are now quite outdated. The 1992 regulations were designed for the smaller market of that time. Now the market has grown significantly. The size of IPOs has increased with the risks.&nbsp;<\/p>\n\n\n\n<p>Therefore, SEBI has introduced new rules under the Merchant Banker Regulations 2026 that came into effect on January 3, 2026. This strengthens the financial capacity of merchant bankers, ensures investor protection, and&nbsp;maintains&nbsp;discipline in the market.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Overview of SEBI (Merchant Bankers) <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Amendment&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;An &amp;quot;amendment&amp;quot; refers to the formal change or correction of a legal document, often involving additions, variations, or deletions to address irregularities or clarify points in an agreement.(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/amendment\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Amendment<\/a> Regulations, 2026&nbsp;<\/h2>\n\n\n\n<p>The SEBI (Merchant Bankers) Amendment Regulations, 2026, have been introduced primarily to make the merchant banking sector strong, transparent, and accountable. Through these amendments, SEBI has moved beyond the concept of merely granting registration on paper.&nbsp;<\/p>\n\n\n\n<p>The new framework places greater emphasis on risk-based supervision alongside registration. The amount of risk a merchant banker can take is&nbsp;directly linked&nbsp;to its financial capacity.&nbsp;<\/p>\n\n\n\n<p>The&nbsp;main focus&nbsp;of these amendments is on four areas:&nbsp;<\/p>\n\n\n\n<ul>\n<li>Adequate capital and net worth&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Sufficient liquidity or cash flow capacity&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Achieving a specific minimum revenue&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Strict compliance and certification&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>These rules apply to both existing and new merchant bankers.&nbsp;Planning to go ahead for&nbsp;<a href=\"https:\/\/enterslice.com\/merchant-bankers-license-in-india\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>merchant banker registration<\/strong><\/a>? Well, in that case, you must understand the regulatory regime on SEBI Merchant Banker Regulations,&nbsp;2026.&nbsp;&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The Previous Regulatory Regime: Key Gaps and Challenges&nbsp;<\/h2>\n\n\n\n<p>Several major problems&nbsp;emerged&nbsp;over time while&nbsp;operating&nbsp;under the 1992 Merchant Bankers Regulations.&nbsp;<\/p>\n\n\n\n<p>The main limitations were:&nbsp;<\/p>\n\n\n\n<ul>\n<li>A net worth requirement of only &#8377;5 crore for Category I merchant bankers. This is extremely low in the current market.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Many merchant bankers were&nbsp;practically inactive. They held onto the licenses without conducting any core business.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Some entities used SEBI registration merely as a &ldquo;certificate of credibility.&rdquo;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In underwriting, the risks did not match the actual financial capacity.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>During the 2020-2025 SME IPO boom, weak due diligence and substandard issues entered the market.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>These problems increased market risk, so strengthening the regulatory framework became essential.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">New Two-Tier Classification of Merchant Bankers&nbsp;<\/h2>\n\n\n\n<p>SEBI has introduced a clear two-tier structure for merchant bankers under the new regulations. This separates the scope of work for large and small firms.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">1. Category I Merchant Bankers-&nbsp;Mainboard Focus&nbsp;&nbsp;<\/h3>\n\n\n\n<ul>\n<li>Permitted&nbsp;to manage large mainboard IPOs.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Can handle rights issues, QIPs, takeovers, and large corporate deals.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Maintaining high capital and liquid net worth is mandatory.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>This category is suitable for handling large-scale and complex transactions.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>The main&nbsp;objective&nbsp;is to allow strong and financially capable entities to&nbsp;operate&nbsp;in the mainboard market.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">2. Category II Merchant Bankers-&nbsp;SME and Boutique Segment&nbsp;&nbsp;<\/h3>\n\n\n\n<ul>\n<li>Not&nbsp;permitted&nbsp;to manage mainboard equity IPOs.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Can work on SME IPOs, rights issues, open offers, and private placements.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Requires comparatively lower capital but must&nbsp;maintain&nbsp;regulatory standards.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Maintains opportunities for providing services to MSMEs and small businesses.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>This allows smaller entities to survive without excessive regulatory burden.&nbsp;<\/li>\n<\/ul>\n\n\n\n<div style=\"margin:30px 0; padding:30px; background-color:#0b5ed7; border-radius:8px; direction:ltr; text-align:left;\">\n  <div style=\"max-width:900px; margin:0 auto; color:#ffffff;\">\n\n    <h3 style=\"color:#ffffff; font-size:22px; font-weight:600; margin-bottom:12px;\">\n      SEBI Overhauls Merchant Banker Regulations 2026: Key Changes Explained\n    <\/h3>\n\n    <p style=\"color:#ffffff; font-size:16px; margin-bottom:16px;\">\n      Consult our experts for a\n      <strong style=\"color:#ffffff;\">free consultation on SEBI merchant banker regulations<\/strong>,\n      including higher capital requirements, revenue norms, and enhanced compliance obligations.\n    <\/p>\n\n    <ul style=\"font-size:15px; margin-bottom:20px; padding-left:20px;\">\n      <li style=\"margin-bottom:8px; color:#ffffff;\">\n        <strong style=\"color:#ffffff;\">Higher capital and net worth requirements for merchant bankers<\/strong>\n      <\/li>\n      <li style=\"color:#ffffff;\">\n        <strong style=\"color:#ffffff;\">Impact of new SEBI compliance and revenue norms<\/strong>\n      <\/li>\n    <\/ul>\n\n    <a href=\"https:\/\/enterslice.com\/consultation?sid=d3ZMQzlwcjZLcXBYNWxjK1ZibEp6dz09\" target=\"_blank\" rel=\"noopener\" style=\"\n       display:inline-block;\n       padding:14px 28px;\n       background-color:#ffffff;\n       color:#0b5ed7;\n       text-decoration:none;\n       font-size:16px;\n       font-weight:600;\n       border-radius:6px;\">\n       Get Free SEBI Compliance Consultation\n    <\/a>\n\n  <\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">New Conditions for Higher Capital Adequacy and Liquid Net Worth&nbsp;for Merchant Bankers&nbsp;&nbsp;<\/h2>\n\n\n\n<p>SEBI has tightened the capital requirements for merchant bankers under the new regulations. The&nbsp;objective&nbsp;is to strengthen the financial stability of entities&nbsp;operating&nbsp;in the market.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Revised Net Worth Limits&nbsp;<\/h3>\n\n\n\n<p>The net worth for Category I merchant bankers has been increased in phases: First phase: &#8377;25 crore, and Subsequent phase: &#8377;50 crore&nbsp;<\/p>\n\n\n\n<p>The net worth for Category II merchant bankers has been set at an increase from &#8377;7.5 crore to &#8377;10 crore.&nbsp;<\/p>\n\n\n\n<p>This phased approach has been adopted to prevent existing entities from facing sudden pressure.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Liquid Net Worth (LNW)&nbsp;<\/h3>\n\n\n\n<p>Liquid Net Worth refers to assets that can be easily converted into cash. This includes cash, bank deposits, government securities, and money market instruments. Having actual cash on hand is now more important than just showing net worth on paper. This prevents a shortage of funds during underwriting or market risks. Consequently, merchant bankers will need to adjust their investment and treasury planning.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><br>Phased Implementation Timeline&nbsp;&nbsp;<\/h3>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td>Category&nbsp;<\/td><td>By&nbsp;2&nbsp;January,&nbsp;2027&nbsp;<\/td><td>By&nbsp;2&nbsp;January,&nbsp;2028&nbsp;<\/td><td>Final Condition&nbsp;<\/td><\/tr><tr><td>Category I&nbsp;<\/td><td>&#8377;25 Cr NW + &#8377;6.25 Cr LNW&nbsp;<\/td><td>&#8377;50 Cr NW + &#8377;12.5 Cr LNW&nbsp;<\/td><td>Mandatory&nbsp;<\/td><\/tr><tr><td>Category II&nbsp;<\/td><td>&#8377;7.5 Cr NW + &#8377;1.875 Cr LNW&nbsp;<\/td><td>&#8377;10 Cr NW + &#8377;2.5 Cr LNW&nbsp;<\/td><td>Mandatory&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Reclassification and Consequences of Non-Compliance&nbsp;with Merchant Banker Regulations&nbsp;&nbsp;<\/h2>\n\n\n\n<p>According to the new rules, if a Category I merchant banker&nbsp;fails to&nbsp;maintain&nbsp;the prescribed net worth or liquid net worth, it will be automatically downgraded to Category II. Similarly, if Category II entities&nbsp;fail to&nbsp;meet the requirements, they will be prohibited from undertaking any new assignments.&nbsp;&nbsp;<\/p>\n\n\n\n<p>In extreme cases, SEBI can even cancel their registration. This prevents market instability caused by risky issues introduced at the last minute. SEBI has clearly&nbsp;demonstrated&nbsp;that compliance with regulations is no longer optional but mandatory.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Underwriting Limits Linked to Liquid Net Worth&nbsp;&nbsp;<\/h2>\n\n\n\n<p>The total underwriting liability of a merchant banker is now limited to a maximum of 20 times its liquid net worth. So,&nbsp;let&rsquo;s&nbsp;check the more limitations-&nbsp;&nbsp;<\/p>\n\n\n\n<ul>\n<li>This will prevent companies from&nbsp;taking on&nbsp;excessive risks beyond their financial capacity.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>This control leverages and&nbsp;maintains&nbsp;financial discipline in the market.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>The new rules have been aligned with SEBI&rsquo;s ICDR Regulations.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>A compliance certificate must be&nbsp;submitted&nbsp;every six months through a chartered accountant.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>The deadline for full compliance with this rule is January 2, 2028.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Mandatory NISM Certification and Governance Reforms&nbsp;<\/h2>\n\n\n\n<p>SEBI has also introduced significant changes to the internal management of merchant bankers. The main goal is to increase efficiency and accountability.&nbsp;<\/p>\n\n\n\n<p>The key changes are-&nbsp;<\/p>\n\n\n\n<ul>\n<li>NISM Series IX certification is mandatory for key personnel.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Additional&nbsp;certification is required for compliance officers.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>The compliance officer must be independent of the principal officer and other key personnel.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>The principal officer must have at least 5 years of experience in the financial markets.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>Deadline:&nbsp;<\/p>\n\n\n\n<ul>\n<li>For existing employees: January 2, 2027.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>For new employees: Certification is mandatory within 90 days of appointment.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Minimum Revenue Condition&nbsp;for Merchant Bankers: &ldquo;Active Player&rdquo; Policy&nbsp;<\/h2>\n\n\n\n<p>SEBI has introduced a minimum revenue condition for merchant bankers. The&nbsp;objective&nbsp;is to&nbsp;eliminate&nbsp;inactive companies or those merely holding licenses from the market.&nbsp;<\/p>\n\n\n\n<p>According to the new rules, for three consecutive financial years-&nbsp;<\/p>\n\n\n\n<ul>\n<li>Category I&nbsp;merchant bankers&nbsp;minimum&nbsp;earning&nbsp;revenue-&nbsp;&#8377;25 crore.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Category II merchant&nbsp;bankers&rsquo; minimum earning revenue&nbsp;&ndash;&nbsp;&#8377;5 crore.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>This assessment will begin on April 1, 2029. Revenue-related information must be&nbsp;submitted&nbsp;to SEBI within a specified period at the end of each&nbsp;financial year.&nbsp;<\/p>\n\n\n\n<p>However, exceptions have been made for&nbsp;special circumstances. For example, this requirement may be relaxed during pandemics, natural disasters, or global economic crises.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What are the&nbsp;Restrictions on Outsourcing Core Merchant Banking Activities&nbsp;in 2026?&nbsp;<\/h2>\n\n\n\n<p>SEBI has prohibited&nbsp;complete&nbsp;outsourcing of core merchant banking activities. Critical functions such as IPO management, due diligence, or underwriting cannot be outsourced to third parties.&nbsp;Merchant bankers who are already engaged in such outsourcing must&nbsp;discontinue&nbsp;these arrangements by April 3, 2026.&nbsp;<\/p>\n\n\n\n<p>The main&nbsp;objective&nbsp;of this decision is to ensure accountability. This will protect confidential information and&nbsp;maintain&nbsp;the quality of the due diligence process. SEBI wants the responsibility for every critical function to rest directly with the merchant banker.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Segregation of Non-SEBI Regulated Activities and Chinese Walls&nbsp;<\/h2>\n\n\n\n<p>SEBI has not prohibited merchant bankers from engaging in non-SEBI-regulated activities. However, such activities must be conducted through a Separate Business Unit (SBU).&nbsp;<\/p>\n\n\n\n<p>These SBUs must be kept completely separate from the core merchant banking activities.&nbsp;This is referred to as a &ldquo;ring-fencing&rdquo; arrangement.&nbsp;<\/p>\n\n\n\n<p>Several conditions must be met for this-&nbsp;<\/p>\n\n\n\n<ul>\n<li>There must be separate staff and management structures.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Accounts, documents, and data must be kept completely separate.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>There must be an independent grievance redressal mechanism for complaint resolution.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Customers must be clearly informed that SEBI&rsquo;s investor protection does not apply to these non-SEBI-regulated activities.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Board approval is&nbsp;required&nbsp;for all these arrangements.&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>In addition, a compliance report must be&nbsp;submitted&nbsp;to SEBI every six months.&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\">Stricter Rules Regarding Conflicts of Interest in Public Issues&nbsp;<\/h2>\n\n\n\n<p>SEBI has tightened the rules&nbsp;regarding&nbsp;public issues to prevent conflicts of interest.&nbsp;<\/p>\n\n\n\n<p>According to the new rules-&nbsp;<\/p>\n\n\n\n<p>A merchant banker cannot be the lead manager if its directors, employees, or their relatives hold more than 0.1% or &#8377;10 lakh worth of shares in the issuing company.&nbsp;<\/p>\n\n\n\n<p>In this situation, the merchant banker can&nbsp;participate&nbsp;in the marketing activities of the issue.&nbsp;<\/p>\n\n\n\n<p>However, it is mandatory to&nbsp;disclose&nbsp;detailed information about the shareholding and relationships in the offer document. These rules will apply to issues&nbsp;submitted&nbsp;on or after January 3, 2026.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What&nbsp;are&nbsp;the&nbsp;Exclusion of Valuation Services from the Scope of Merchant Bankers&rsquo; Activities?&nbsp;<\/h2>\n\n\n\n<p>According to the new rules, merchant bankers will no longer be able to provide valuation services. The valuation of shares or companies must be done through IBBI-registered valuers.&nbsp;<\/p>\n\n\n\n<p>It&nbsp;avoids conflicts of interest.&nbsp;If the same entity structures the deal and also determines the valuation, there is a risk of bias.&nbsp;SEBI wants the valuation process to be completely independent and impartial.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Comparative Overview of Old and New Merchant Banker Regulations&nbsp;2026&nbsp;<\/h2>\n\n\n\n<p>The new rules&nbsp;under merchant banker regulations 2026&nbsp;are significantly more robust than the&nbsp;previous&nbsp;1992 framework.&nbsp;&nbsp;<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Aspect<\/strong>&nbsp;<\/td><td><strong>Old Regime<\/strong>&nbsp;<\/td><td><strong>New Regime<\/strong>&nbsp;<\/td><td><strong>Impact<\/strong>&nbsp;<\/td><\/tr><tr><td>Net Worth&nbsp;<\/td><td>&#8377;5 Cr&nbsp;<\/td><td>Up to &#8377;50 Cr&nbsp;<\/td><td>Higher resilience&nbsp;<\/td><\/tr><tr><td>Liquidity&nbsp;<\/td><td>Not required&nbsp;<\/td><td>Mandatory LNW&nbsp;<\/td><td>Better solvency&nbsp;<\/td><\/tr><tr><td>Underwriting&nbsp;<\/td><td>Open-ended&nbsp;<\/td><td>20&times; LNW cap&nbsp;<\/td><td>Risk control&nbsp;<\/td><\/tr><tr><td>Revenue&nbsp;<\/td><td>Not applicable&nbsp;<\/td><td>Minimum&nbsp;threshold&nbsp;<\/td><td>Active participation&nbsp;<\/td><\/tr><tr><td>Valuation&nbsp;<\/td><td>Allowed&nbsp;<\/td><td>Prohibited&nbsp;<\/td><td>Conflict reduction&nbsp;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<p>This comparison clearly shows that SEBI aims to bring more discipline to the market.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Impact of SEBI 2026 Reforms on Merchant Bankers &amp; Capital Markets&nbsp;<\/h2>\n\n\n\n<p>The number of small and weak firms will decrease, leading to consolidation in the industry.&nbsp;<\/p>\n\n\n\n<ul>\n<li>Compliance costs will increase, but the quality will also improve.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>The quality of IPOs and other issues will improve.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Investor confidence will be further strengthened.&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul>\n<li>Risky and opaque transactions will decrease.&nbsp;<\/li>\n<\/ul>\n\n\n\n<p>In the long term, the Indian capital market will become more stable and credible.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Conclusion&nbsp;<\/h2>\n\n\n\n<p>SEBI&rsquo;s new 2026 rules&nbsp;represent&nbsp;a major change for merchant bankers. Therefore, it is crucial to prepare now without waiting until the last moment. It is necessary to assess the capital and liquidity position. Fund restructuring may be&nbsp;required&nbsp;if necessary. In addition, certification, governance structure, and internal control systems must be aligned with the new rules.&nbsp;<\/p>\n\n\n\n<p>Seeking professional advice throughout this entire process is&nbsp;very important. SEBI&rsquo;s revised merchant banker regulations are complex and time-consuming.&nbsp;<a href=\"https:\/\/enterslice.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Enterslice<\/strong><\/a>&nbsp;provides complete&nbsp;assistance&nbsp;with SEBI registration, compliance restructuring, capital planning, and regular filings. Contact&nbsp;Enterslice&nbsp;today to ensure your merchant banking business&nbsp;remains&nbsp;fully compliant and&nbsp;future ready.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">FAQs Related To SEBI Merchant Banker Regulations 2026<\/h2>\n\n\n<div class=\"saswp-faq-block-section\"><ol style=\"list-style-type:none\"><li style=\"list-style-type: none\"><h3>What significant changes has SEBI introduced for merchant bankers in 2026?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">SEBI&nbsp;introduced&nbsp;several significant changes for merchant bankers in&nbsp;2026. The biggest change is the tightening of net worth and liquid net worth requirements. In addition, limits on underwriting, minimum revenue requirements, mandatory NISM certification, and governance reforms have been introduced. Rules limiting outsourcing and separating non-SEBI activities have also been added. The goal of these changes is to increase transparency and investor protection in the market.&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>What is liquid net worth, and why has SEBI made it mandatory?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">Liquid net worth refers to assets that can be easily converted into cash. Examples include cash, bank deposits, government securities, and money market instruments.&nbsp;Previously, many merchant bankers showed high net worth on paper but lacked sufficient liquidity in reality.&nbsp;SEBI has made liquid net worth mandatory to mitigate this risk, ensuring that the organization has sufficient cash on hand in emergencies.&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>What will happen if a merchant banker&nbsp;fails to&nbsp;meet the Category I requirements?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">If a&nbsp;merchant's&nbsp;banker&nbsp;fails to&nbsp;maintain&nbsp;the prescribed net worth or liquid net worth for Category I, they will be automatically downgraded to Category II. This will prevent them from managing mainboard IPOs. If they also&nbsp;fail to&nbsp;meet the Category II requirements, they will not be allowed to take on any new assignments.&nbsp;&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>How will the new underwriting limits affect merchant bankers?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">According to the new rules, the total underwriting liability of merchant bankers must be within a maximum of 20 times their liquid net worth. This will reduce the opportunity for taking excessive risks. Previously, large&nbsp;underwriting was&nbsp;undertaken compared to the financial capacity. Now, that risk will be controlled. This will increase market stability and further strengthen investor protection.&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>Is NISM certification mandatory for all merchant&nbsp;banker&nbsp;employees?&nbsp;&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">NISM certification has been made mandatory not for all employees, but for key personnel. Specifically, principal officers, key employees, and compliance officers&nbsp;require&nbsp;NISM Series IX certification. Existing employees have until January 2,&nbsp;2027,&nbsp;and new employees must obtain this certification within&nbsp;90 days&nbsp;of their appointment.&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>What are the minimum revenue requirements under the new rules?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">SEBI has introduced minimum revenue requirements for merchant bankers under the new rules. Category I merchant bankers must achieve a minimum revenue of &#8377;25 crore and Category II merchant bankers &#8377;5 crore for three consecutive&nbsp;financial years. This revenue must come solely from approved activities. The assessment of this condition will begin on April 1, 2029.&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>Are there any exemptions or exceptions to the revenue requirements?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">Yes, exemptions from the revenue requirements may be granted in&nbsp;special circumstances&nbsp;like a pandemic, natural disaster, global economic recession, or war. However, the merchant banker must&nbsp;submit&nbsp;relevant information and explanations to SEBI.&nbsp;&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>Can merchant bankers still engage in non-SEBI-regulated activities?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">Yes, merchant bankers can still engage in non-SEBI-regulated activities. However, these activities must be conducted through a Separate Business Unit (SBU).&nbsp;This unit must be kept completely separate from the core merchant banking business.&nbsp;It must have separate staff, separate accounts, and a separate grievance redressal mechanism. Customers must be informed that SEBI's investor protection does not apply to these activities.&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>Why has SEBI prohibited valuation services by merchant bankers?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">SEBI has prohibited valuation services primarily to avoid conflicts of interest. Previously, merchant bankers simultaneously structured deals and determined valuations. This posed a risk of bias. Valuations must be conducted only by IBBI-registered Registered Valuers.&nbsp;&nbsp;<\/p><\/li><li style=\"list-style-type: none\"><h3>How can merchant bankers prepare for SEBI's 2026 compliance framework?&nbsp;<\/h3><p class=\"saswp-faq-answer-text\">Merchant bankers should first review their current capital and liquidity positions. Fund restructuring should be&nbsp;undertaken,&nbsp;when&nbsp;necessary,&nbsp;like certifications, governance structures, and internal control systems must be updated according to the new regulations. Seeking&nbsp;assistance&nbsp;from experienced professional firms like&nbsp;Enterslice&nbsp;is crucial in this process.&nbsp;&nbsp;<\/p><\/li><\/ol><\/div>\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n\n\n\n<p><\/p>\n","protected":false},"excerpt":{"rendered":"<p>SEBI, or the Securities and Exchange Board of India, is the primary regulatory body for the Indian stock <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\" href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a>. SEBI ensures that rules are properly followed when bringing IPOs to the <a class=\"glossaryLink\"  aria-describedby=\"tt\"  data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Market&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;A market is a structured environment, either physical or virtual, where buyers and sellers convene to trade goods and services. This trading hub operates based on the principles of supply and(...)&lt;\/div&gt;\"  href=\"https:\/\/enterslice.com\/learning\/terms\/market\/\"  data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>market<\/a>, issuing company shares, or conducting large financial transactions. Merchant bankers play a crucial role in this entire process, acting as a link between [&hellip;]<\/p>\n","protected":false},"author":103,"featured_media":89902,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[2828,1599],"tags":[377,12402],"acf":{"service_id":"996"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v14.6.1 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>SEBI Merchant Banker Rules: Capital &amp; Compliance Explained<\/title>\n<meta name=\"description\" content=\"Understand SEBI\u2019s merchant banker rules: higher capital, revenue thresholds, and stricter compliance norms for financial professionals.\" \/>\n<meta name=\"robots\" content=\"index, follow\" \/>\n<meta name=\"googlebot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<meta name=\"bingbot\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/enterslice.com\/learning\/sebi-merchant-banker-regulations\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"SEBI Merchant Banker Rules: Capital &amp; Compliance Explained\" \/>\n<meta property=\"og:description\" content=\"Understand SEBI\u2019s merchant banker rules: higher capital, revenue thresholds, and stricter compliance norms for financial professionals.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/enterslice.com\/learning\/sebi-merchant-banker-regulations\/\" \/>\n<meta property=\"og:site_name\" content=\"Enterslice\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/enterslice\" \/>\n<meta property=\"article:published_time\" content=\"2026-01-06T07:20:30+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-02-04T10:47:08+00:00\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:image\" content=\"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2026\/01\/SEBI-Overhauls-Merchant-Banker-Regulations-2026-Higher-Capital-Revenue-Compliance-Norms-Explained.webp\" \/>\n<meta name=\"twitter:creator\" content=\"@enterslice\" \/>\n<meta name=\"twitter:site\" content=\"@enterslice\" \/>\n<!-- \/ Yoast SEO plugin. -->","authorName":"Vaibhav Rathi","authorImageUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2024\/03\/vaibhav.rathi_.png","authorDescription":"With a successful journey of 20+ years in the legal and fintech segment, Vaibhav Rathi has proved his mettle as a seasoned advocate. Currently, he is serving as Managing Partner cum COO at Enterslice. His writeups on Tax, PMLA, the Black Money Act, and IT Laws reflect his subject matter grip.","postViews":242,"readingTime":8,"nextPost":{"id":89905,"slug":"e-commerce-british-virgin-islands-payments-tax-logistics"},"prevPost":{"id":89896,"slug":"sebi-reclassifies-reits-as-equity-impact-on-sifs-mfs-real-estate"},"featuredMediaUrl":"https:\/\/enterslice.com\/learning\/wp-content\/uploads\/2026\/01\/SEBI-Overhauls-Merchant-Banker-Regulations-2026-Higher-Capital-Revenue-Compliance-Norms-Explained.webp","postTerms":"SEBI","_links":{"self":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/89901"}],"collection":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/comments?post=89901"}],"version-history":[{"count":3,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/89901\/revisions"}],"predecessor-version":[{"id":90180,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/posts\/89901\/revisions\/90180"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media\/89902"}],"wp:attachment":[{"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/media?parent=89901"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/categories?post=89901"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enterslice.com\/learning\/wp-json\/wp\/v2\/tags?post=89901"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}