SEBI Relaxes Merchant Banker Appointment Requirements for Certain Private Placements of Debt Securities 

Introduction

The Securities and Exchange Board of India (“SEBI”) has relaxed the mandatory requirement to appoint a merchant banker for certain private placements of debt securities and non-convertible redeemable preference shares with a face value of ₹10,000. The exemption is intended to facilitate the issuance of eligible debt securities by qualifying listed issuers while maintaining prescribed safeguards relating to regulatory status, listing history, repayment track record, security and credit rating. 

The relaxation was introduced through SEBI’s circular dated October 7, 2026, titled Exemption from the requirement of mandatory merchant banker appointment for debt issued through private placement by certain listed issuers. The circular amends paragraph 1.3 of Chapter V of SEBI’s 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. 

Background to the Amendment

Under the existing framework, an issuer undertaking a private placement of debt securities or non-convertible redeemable preference shares with a face value of ₹10,000 was required to appoint at least one merchant banker. The merchant banker’s role, responsibilities and obligations were aligned with those applicable to a public issue of debt securities or non-convertible redeemable preference shares. 

Following feedback from market participants, SEBI decided to relax this requirement for qualifying issuers, subject to specified eligibility conditions. The relaxation seeks to facilitate the issuance of eligible debt securities and expand access to such securities for retail investors. The exemption is not automatic and is available only where all the prescribed conditions are satisfied. 

Key Conditions for Availing the Exemption

1. Regulatory Status of the Issuer

The issuer must be registered with or regulated by a financial sector regulator in India, namely: 

• SEBI; 
• the Reserve Bank of India (“RBI”); 
• the Insurance Regulatory and Development Authority of India (“IRDAI”); or 
• the Pension Fund Regulatory and Development Authority (“PFRDA”). 

Issuers outside these specified categories would not qualify for the exemption on the basis of this condition. 

2. Minimum Listing Period and Compliance Record

The issuer must have been listed on any segment of a recognised stock exchange for at least one year. Additionally, there must be no pending fines or penalties levied by SEBI or the stock exchanges for non-compliance with applicable provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”) in respect of the issuer. 

The relevant stock exchange or exchanges are required to confirm compliance with this condition when granting in-principle approval for the issue. Accordingly, an issuer should review its listing history and outstanding regulatory or exchange-related matters before seeking to rely on the exemption. 

3. Absence of Defaults in Specified Financial Obligations

The issuer must not have defaulted during the preceding three financial years and the current financial year in respect of redemption or repayment obligations, or interest or dividend payments, relating to the following: 

• Debt securities; 
• Non-convertible redeemable preference shares; 
• Securitised debt instruments; 
• Commercial papers; 
• Deposits; or 
• Loans. 

The issuer must submit a certificate from its statutory auditor confirming compliance with this condition to the stock exchange. The requirement makes the issuer’s repayment track record an important eligibility criterion. Businesses considering the exemption should therefore verify their historical payment records across the specified categories of financial obligations. 

4. Security and Ranking of the Debt Securities

The debt security must be unsubordinated or senior and secured by a first or pari passu charge over identifiable assets of the issuer. An exception is provided for Central Public Sector Enterprises (“CPSEs”), Public Sector Undertakings (“PSUs”) and statutory bodies, which may issue securities that are either secured or unsecured. 

The security and ranking requirements should be assessed in the context of the proposed issue structure and the assets available for creating the requisite charge. 

5. Minimum Credit Rating

The debt security must have a credit rating of at least AA- on the date of private placement. Where the security has multiple credit ratings, the lowest rating must be considered when determining eligibility for the exemption. 

Consequently, an issuer should confirm the applicable rating position on the date of the private placement and ensure that the prescribed threshold is met. 

Role of Stock Exchanges and Continuing Compliance

SEBI has directed stock exchanges to specify appropriate operational requirements, including the disclosure formats and submissions that issuers must make to demonstrate compliance with the conditions. Stock exchanges and depositories are also required to take the necessary implementation measures, including amendments to relevant rules and procedures and any required system changes. 

The exemption does not remove the other applicable requirements under Chapter V of the Master Circular. Issuers must continue to comply with the provisions that remain applicable to the issue and listing of the relevant securities. The circular came into force with immediate effect from October 7, 2026. 

Practical Implications for Listed Issuers

The relaxation may provide eligible issuers with greater flexibility in structuring private placements of debt securities and non-convertible redeemable preference shares. 

However, issuers should undertake an eligibility assessment before proceeding without appointing a merchant banker. This assessment should cover the issuer’s regulatory status, listing history, pending SEBI or stock exchange fines and penalties, repayment record, statutory auditor certification, security structure and credit rating. 

Companies should also coordinate with the relevant stock exchange regarding the prescribed documentation and disclosure formats and confirm that the proposed issue satisfies all applicable conditions. 

The exemption should not be interpreted as a general waiver of merchant banker appointment requirements for all private placements. Where any of the specified conditions is not satisfied, the issuer must assess the applicable appointment requirement under the prevailing regulatory framework. 

Conclusion

SEBI’s October 7, 2026 circular introduces a conditional exemption from mandatory merchant banker appointment for certain private placements of debt securities and non-convertible redeemable preference shares with a face value of ₹10,000. 

The exemption is available to qualifying listed issuers that satisfy the prescribed regulatory, listing, repayment, security and credit-rating conditions. Issuers should carefully assess their eligibility and complete the required certifications and stock exchange procedures before relying on the relaxation. 

Primary regulatory instrument: SEBI circular dated October 7, 2026, Exemption from the requirement of mandatory merchant banker appointment for debt issued through private placement by certain listed issuers, Circular No. HO/17/11/24(7)2026-DDHS-POD1/I/23122/2026. 

Last Updated on 27 October, 2026