Summary: SEBI has issued a consultation paper dated August 27, 2026 seeking public comments on a proposal to exempt certain listed issuers from the mandatory appointment of a merchant banker for “Small-value debt” issued through private placement. The proposal concerns debt securities or non-convertible redeemable preference shares issued on a private placement basis at a face value of Rs.10,000. The existing requirement is contained in Clause 1.3 of Chapter V of the SEBI NCS Master Circular dated October 15, 2025.
SEBI states that market participants have sought an exemption because mandatory merchant banker appointment can create a disproportionate cost burden, particularly for small-value offerings, while the limited availability of merchant bankers in the debt segment can cause delays in private placement execution. According to the consultation paper, such delays can affect price discovery in a market where yields and prices may change dynamically, increasing the cost of capital and reducing the economic viability of frequent small-value debt issuances.
The proposal is directed at issuers that are already subject to regulatory oversight and whose information is available in the public domain. SEBI notes that listed issuers are governed by the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, which provide governance, continuous disclosure and regulatory requirements. SEBI also notes that many listed-debt issuers are RBI-regulated NBFCs subject to additional prudential oversight.
Under the proposal, exemption from merchant banker appointment would be available only if specified conditions are fulfilled. First, the issuer must be registered with or regulated by a financial sector regulator in India. The draft circular specifically identifies SEBI, RBI, IRDAI and PFRDA. Second, the issuer must have been listed in any segment on a recognised stock exchange for at least one year. At the time of granting in-principle approval, the stock exchange would also have to ensure that there are no pending fines or penalties imposed by SEBI or the stock exchanges for non-compliance with applicable LODR provisions.
Third, the issuer must not have defaulted during the last three financial years or the current financial year in relation to repayment of deposits or interest, redemption of non-convertible preference shares or debt securities and interest thereon, declaration and payment of dividend, or repayment of term loans or interest. An auditor’s certificate would have to be submitted to the stock exchange confirming this position. Fourth, the debt security would have to be unsubordinated/senior, secured by a first or pari passu charge over identifiable assets of the issuer, and rated at least AA- or above on the date of private placement.
The draft circular proposes modifying Clause 1.3 of Chapter V of the NCS Master Circular. The existing requirement that the issuer appoint at least one merchant banker would remain, but an issuer satisfying the proposed conditions could be exempted from that requirement. The proposal states that all other provisions of Chapter V would remain unchanged.
The draft circular further proposes that its provisions would apply with immediate effect once issued. Stock exchanges and depositories would be required to amend relevant bye-laws, rules and regulations where necessary, make system changes, disseminate the provisions, communicate implementation status to SEBI and monitor compliance by issuer companies. The draft states that the circular would be issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 55(1) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021.
The consultation paper does not itself constitute the final amendment. SEBI has invited comments and suggestions on the draft circular up to September 17, 2026. Accordingly, the proposed exemption and its conditions remain subject to SEBI’s consideration of public feedback and issuance of the final regulatory instrument. The supplied material does not state that the proposed amendment has already been finally adopted.
Securities and Exchange Board of India
CONSULTATION PAPER FOR PUBLIC COMMENTS
Exemption from the requirement of mandatory merchant banker appointment for Small-value debt through private placement by certain listed issuers
SEBI- Aug 27, 2026 | Reports : Reports for Public Comments
Click here to provide your comments
1. Background:
1.1. Clause 1.3 of Chapter V of SEBI NCS Master Circular dated October 15, 2025, inter-alia, requires appointment of at least one merchant banker for issuance of debt security or non-convertible redeemable preference share on private placement basis at a face value of Rs. Ten Thousand (hereinafter referred to as “Small-value debt”).
1.2. SEBI has received feedback from various market participants to grant exemption from the requirement of mandatory merchant banker appointment for Small-value debt through private placement by listed issuers to address several operational challenges and also to facilitate market development.
1.3. The mandate for merchant banker appointment in all debt issuances creates several challenges for “Small-value debt” offerings. For instance:
i. Disproportionate burden of the appointment cost of merchant bankers reducing the economic viability of such offerings
ii. Limited number of merchant bankers in the debt segment
iii. Significant delays in private placement execution, acting as a hindrance in the Small-value debt market where price discovery is highly time-sensitive, since prices change dynamically and issuers face substantial challenges due to adverse shifts in the prevailing market yields.
The above increases the cost of capital for issuers, eroding economic viability of planned issuances, thereby, discouraging frequent Small-value debt issuances.
1.4. Listed issuers operate under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), wherein regulatory oversight of SEBI and Stock Exchanges includes various governance-related requirements, continuous disclosure obligations and regulatory scrutiny, potentially eliminating the need for merchant banker oversight in private placements. Further, a large number of the issuers of listed debt in the market are RBI registered/ regulated NBFCs having additional regulatory oversight with prudential norms on capital adequacy, asset classification and debt issuance. Therefore, this impacts regulatory efficiency and potentially restricts the development/ deepening of the corporate bond market.
2. Proposal:
2.1. Based on the examination of the recommendations made by the Working Group, and in view of the fact that sufficient information about the issuer is already available in public domain and the issuer is also under regulatory oversight, it is proposed to exempt “Small-value debt” issues from the requirement to appoint merchant banker, subject to the following conditions:
2.1.1. The Issuer is registered/ regulated by a financial sector regulator in India. [Rationale: Financial sector regulators ensure comprehensive on-site and off-site oversight of regulated entities and the extant regulatory frameworks provide for investor protection mechanisms.]
2.1.2. The Issuer is listed in any segment on any of the recognized Stock Exchange(s) for a period of at least one year. Stock Exchange(s), at the time of granting in-principle approval, shall ensure that there are no pending fines or penalties levied by SEBI/ Stock Exchanges for non-compliance with any of the applicable provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
[Rationale: Listed issuers operate under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”), wherein regulatory oversight of SEBI and Stock Exchanges includes various governance-related requirements, continuous disclosure obligations and regulatory scrutiny, potentially eliminating the need for merchant banker oversight in private placements.]
2.1.3. The Issuer has not defaulted in the last three financial years and the current financial year in respect of the repayment of deposits or interest payable thereon, redemption of non-convertible preference shares or debt securities and interest payable thereon, declaration and payment of dividend to shareholders and repayment of any term loan or interest payable thereon. The Issuer shall submit an auditor’s certificate to this effect to the Stock Exchange.
[Rationale: This restricts the exemption to Issuers with demonstrated capacity to service debt on time.]
2.1.4. The debt security issued shall be unsubordinated/ senior and “secured” by a first or pari passu charge on the identifiable assets of the issuer and rated at least AA- or above on the date of private placement.
[Rationale: This restricts the exemption to relatively low-risk instruments in terms of investors’ claim on assets and cash flows in the event of bankruptcy/ liquidation and probability of default.]
3. Public Comments
3.1. SEBI invites feedback from the public on the draft circular titled “Exemption from the requirement of mandatory merchant banker appointment for Small-value debt through private placement by listed issuers” placed at Annexure A.
3.2. The comments/ suggestions should be submitted latest by September 17, 2026, through the online web-based form at the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicCo mments=yes
3.3. In case of any technical issue in submitting your comment through web based public comments form, you may contact the following through email with the subject: “Consultation paper on Exemption from the requirement of mandatory merchant banker appointment for Small-value debt through private placement by certain listed issuers”.
i. Mr. Rohit Dubey, GM ([email protected])
ii. Ms. Nishtha Tewari, AGM ([email protected])
Issued on: August 27, 2026
Annexure A
DRAFT CIRCULAR
SEBI/HO/DDHS/DDHS-PoD-1/P/CIR/2025/XXX Date……
To,
Issuers of listed debt securities;
Recognised Stock Exchanges;
Registered Depositories
Registered Merchant Bankers
Sub: Exemption from the requirement of mandatory merchant banker appointment for Small-value debt through private placement by listed issuers
1. Clause 1.3 of Chapter V of SEBI Master Circular for issue and listing of Non-Convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper dated October 15, 2025 (“NCS Master Circular”), inter-alia, states the following:
“1.3. The Issuer may issue debt security or non-convertible redeemable preference share on private placement basis at a face value of Rs. Ten Thousand,
i) Subject to the following conditions:
a. The issuer shall appoint at least one Merchant Banker.
Provided that the role, responsibilities and obligations of the Merchant Banker(s) shall be same as they would be in case of public issue of debt security or non-convertible redeemable preference share.
b. Such debt security or non-convertible redeemable preference share shall be interest/ dividend bearing security paying coupon/ dividend at regular intervals with a fixed maturity without any structured obligations. ”
2. Based on the feedback received from market participants, in order to facilitate fund raising by issuers of debt security/ non-convertible redeemable preference share on private placement basis at a face value of Rs. Ten Thousand (i.e. “Small-value debt”), it has been decided to exempt such issues from the requirement of merchant banker appointment, subject to certain conditions.
3. Accordingly, para 1.3 of the NCS Master Circular shall be modified as under:
“1.3. The Issuer may issue debt security or non-convertible redeemable preference share on private placement basis at a face value of Rs. Ten Thousand,
i) Subject to the following conditions:
a) The issuer shall appoint at least one Merchant Banker.
Provided that the role, responsibilities and obligations of the Merchant Banker(s) shall be same as they would be in case of public issue of debt security or non- convertible redeemable preference share.
However, the Issuer may be exempted from the requirement to appoint a Merchant Banker, subject to fulfilment of the following conditions:
i. The Issuer is registered/ regulated by a financial sector regulator in India, viz. SEBI, RBI, IRDAI or PFRDA.
ii. The Issuer is listed in any segment on any of the recognized Stock Exchange(s) for a period of at least one year. Stock Exchange(s), at the time of granting in-principle approval, shall ensure that there are no pending fines or penalties levied by SEBI/ Stock Exchanges for non¬compliance with any of the applicable provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
iii. The Issuer has not defaulted in the last three financial years and the current financial year in respect of the repayment of deposits or interest payable thereon, redemption of non-convertible preference shares or debt securities and interest payable thereon, declaration and payment of dividend to shareholders and repayment of any term loan or interest payable thereon. The Issuer shall submit an auditor’s certificate to this effect to the Stock Exchange.
iv. The debt security issued shall be unsubordinated/ senior and “secured” by a first or pari passu charge on the identifiable assets of the issuer and rated at least AA- or above on the date of private placement.”
4. All other provisions of Chapter V of the NCS Master Circular shall remain unchanged.
5. The provisions of this circular shall be applicable with immediate effect.
6. The Stock Exchanges and Depositories are advised to:
6.1. Make amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision, as may be applicable/ necessary;
6.2. Carry out system changes, if any, to implement the above;
6.3. Disseminate the provisions of this circular on their website;
6.4. Communicate to SEBI the status of implementation of the provisions of this circular;
6.5. Monitor the compliance of this circular by issuer companies.
7. The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 55 (1) of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.
8. This Circular is available at www.sebi.gov.in under the link “Legal → Circulars”.
Yours faithfully,
XXXXXX
