The Securities and Exchange Board of India issued a circular setting out how merchant bankers must implement the Securities and Exchange Board of India (Merchant Bankers) Amendment Regulations, 2025, which apply from 3 January 2026. The measures introduce higher net worth thresholds and a new “liquid net worth” metric, cap underwriting exposure relative to liquid net worth, and add requirements covering staff certifications, compliance and principal officer roles, outsourcing of core activities, revenue thresholds, conflict disclosures in public issues and ring-fencing of non-SEBI regulated activities. For applications made on or after 3 January 2026, applicants must meet the revised net worth and new liquid net worth requirements at the application date, while existing merchant bankers, including those registered after that date on applications filed earlier, transition on a phased basis. By 2 January 2027 Category I firms must have net worth of INR 25 crore and liquid net worth of INR 6.25 crore, rising by 2 January 2028 to INR 50 crore and INR 12.5 crore, while Category II thresholds rise from INR 7.5 crore and INR 1.875 crore to INR 10 crore and INR 2.5 crore. Liquid net worth is defined as net worth deployed in unencumbered liquid assets after specified haircuts, including 10 percent for government securities and eligible mutual funds and 30 percent for listed Nifty 500 securities. Existing firms must confirm by 2 January 2027 which category they will operate in from 3 January 2027 and provide a chartered accountant certified net worth certificate, with automatic re-designation to Category II if Category I thresholds are not met and a restriction on undertaking fresh permitted activities if Category II thresholds are missed. Underwriting obligations must not exceed 20 times liquid net worth, with existing merchant bankers required to comply by 2 January 2028, and half-yearly reports must include chartered accountant certificates on net worth and liquid net worth maintenance and on underwriting exposure. Staffing requirements are tightened through mandatory NISM certifications for specified employees and compliance officers, with existing staff required to qualify by 2 January 2027 and new hires required to qualify within 90 days; the compliance officer must be independent from the principal officer and relevant employees by 3 April 2026, and existing outsourcing arrangements for core merchant banking activities must be closed by the same date. Merchant bankers must also meet minimum cumulative revenue from permitted activities over the three immediately preceding financial years of INR 25 crore for Category I or INR 5 crore for Category II, with potential cancellation under summary proceedings for non-compliance and the first assessment to be carried out from 1 April 2029; annual revenue submissions begin from FY 2026-27. Additional requirements include disclosures in offer documents and marketing materials where a merchant banker is only marketing an issue due to specified shareholding conflicts, and conditions for conducting non-SEBI regulated activities through ring-fenced separate business units, including website disclosures by 2 February 2026 and operational segregation and reporting by 3 July 2026.

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