New Delhi: Sebi has revamped merchant banker regulations by introducing a new capital adequacy framework, mandating liquid net worth levels, and setting minimum revenue requirements to strengthen financial stability and risk management while improving ease of doing business.
Under the revised rules, merchant bankers may now conduct activities outside Sebi’s regulatory pur-view within the same entity, subject to conditions.
According to Sebi’s December 3 notification, these activities must either fall under another financial sector regulator or be fee-based, non-fund-based services related to the financial sector.
The move marks a shift from the regulator’s earlier plan—approved in December 2024—to hive off non-regulated activities into a separate legal entity. Following internal review and industry feedback, Sebi dropped that requirement and opted for a more flexible framework.
Merchant bankers have now been classified into two categories. Category I entities must maintain a minimum net worth of Rs 50 crore and can undertake all permitted activities. Category II must maintain at least Rs 10 crore in net worth and may engage in all activities except managing equity issues on the main board. All merchant bankers must keep liquid net worth equal to at least 25 per cent of their minimum required net worth, and their underwriting obligations are capped at 20 times their liquid net worth.
Sebi set minimum revenue norms of Rs 12.5 crore for Category I and Rs 2.5 crore for Category II merchant bankers, excluding those handling only debt and similar instruments. It also replaced merchant bankers with independent valuers for ESOP and sweat equity valuations.