SEBI Proposes Merchant Banker Exemption for Small-Value Debt

The Securities and Exchange Board of India proposed a rule change to exempt listed entities from the mandatory appointment of a merchant banker when issuing small-value debt through private placements. The proposal specifically targets debt securities or non-convertible redeemable preference shares with a face value of Rs 10,000.

Regulators introduced the measure to reduce compliance costs and eliminate delays caused by a limited number of merchant bankers in the debt segment. The board noted that the appointment costs often create a disproportionate burden for these specific types of issuances.

To qualify for the exemption, issuers must be regulated by a financial sector regulator, have been listed for at least one year, and have no pending fines or penalties. Eligible entities must provide an auditor's certificate confirming no defaults on deposits, interest, dividends, or term loans over the last three financial years and the current year. Additionally, the debt must be senior or unsubordinated, secured by a first or pari passu charge on identifiable assets, and carry a credit rating of at least AA-.

Public comments on the draft circular are open until September 17, 2026. If finalized, the provisions will take effect immediately.