India’s market regulator, Sebi, has announced significant reforms, including the re-introduction of open-market share buybacks, easing debt listing for RBI-regulated entities, and streamlining rules for mutual funds and alternative investment funds to boost market efficiency and capital deployment.
Photograph: Hemanshi Kamani/Reuters
Key Points
- Sebi has approved the re-introduction of open-market share buybacks through stock exchanges, effective from August 1, 2026, with specific safeguards and completion timelines.
- The market regulator has aligned securitised debt instrument norms with the RBI’s framework, aiming to facilitate more listing and trading of debt by RBI-regulated entities.
- Intraday borrowing rules for mutual funds have been eased to bridge settlement timing differences, with asset management companies responsible for same-day repayment.
- A ‘green channel’ (GARUDA) has been approved for Alternative Investment Funds (AIFs) to expedite capital deployment, reducing timelines for new scheme launches.
- Sebi also approved relaxations for the municipal bond market, enabling municipalities to raise funds for refinancing and offering incentives to certain investor categories.
The Securities and Exchange Board of India (Sebi) on Friday approved the re-introduction of open-market buybacks through stock exchanges, alignment of securitised debt instrument norms with the Reserve Bank of India’s (RBI) securitisation framework, easing of intraday borrowing rules for mutual funds, and faster approvals for alternative investment funds.
The decision by the board of the markets regulator to reintroduce the open-market buyback comes just a year after it was phased out.
The move follows the revised taxation framework applicable for buybacks.
This route will be reintroduced from August 1, 2026.
New Buyback Regulations
Buybacks through stock exchanges will have to be completed within 66 working days from the opening, with at least 40 per cent of the funds earmarked being utilised during the first half of the buyback period.
At present, buyback can be undertaken through the tender offer route and the open-market route through book-building.
The markets regulator has specified certain safeguards, including a freeze on promoter shares and compliance with minimum public shareholding requirements.
Further, the interval between two buybacks has been aligned with the Companies Act, 2013.
Easing Debt Listing and Securitisation
In another major reform, Sebi’s board approved amendments to the Issue and Listing of Securitised Debt Instruments and Security Receipts (SDI norms), allowing alignment with the RBI’s framework on securitisation.
Sebi Chairman Tuhin Kanta Pandey said the changes would facilitate RBI-regulated entities to list and grow.
The markets regulator also approved exempting RBI-regulated entities such as banks and NBFCs from the 25 per cent obligor concentration limit when undertaking securitisation, albeit with additional disclosures.
An obligor is the borrower of the original loans or assets — or the entities making payments on the underlying debt.
“Of the Rs 5 trillion outstanding debt, only about Rs 54,000 crore is listed.
“Our hope is that what we have done today will lead to more listing and trading of debt,” said Amarjeet Singh, Sebi whole-time member.
Sebi’s board cleared measures to facilitate continuity of securitisation structures in the event of suspension or cancellation of trustee registration.
It approved simplification of the framework for transmission of securities to ease claims on securities for heirs of a deceased investor.
These include removing requirements such as PAN and probate of Will in certain cases.
Other Key Approvals and Initiatives
On settlement applications by the National Stock Exchange (NSE) on colocation and dark fibre, Pandey said the application had cleared “some levels” such as the high-powered advisory committee (HPAC), adding that it was a “matter of time before it is sorted”.
The regulator is also undertaking a study on the impact of measures introduced in the derivatives market, with the report expected in July.
The Sebi chairman also said the regulator was considering measures to remove any barriers, if any, in bringing longer-tenor derivatives contracts.
Further, a working group of Sebi is deliberating on measures to review the securities lending and borrowing framework (SLB).
Based on the recommendations of the external expert advisory committee, the board also approved an assessment of the framework for capital raising by small and medium enterprises.
It cleared a new code of conduct for members of Sebi — the 2026 Code — based on the recommendations of the high-level committee formed to address concerns on conflict of interest and disclosures by Sebi officials.
Mutual Funds and AIFs
The board also greenlit amendments to allow mutual funds (MF) to avail intraday borrowing for bridging differences arising out of pay-in and pay-out settlement timings within asset classes, forex settlements and others.
This is in addition to the current borrowing permitted — up to 20 per cent of net assets of a scheme — for meeting unit-holder payouts such as redemptions.
The asset management companies will be responsible for repaying the borrowings by the end of the day and complying with MF regulations for conversion to overnight borrowing.
Additionally, intraday borrowings will not be used as a source of leverage.
The market regulator also approved a green channel for alternative investment fund (AIF) rollout, called GARUDA (Green-Channel: AIF Rollout Upon Document Acknowledgement), for faster and more efficient deployment of capital by AIFs.
For non-accredited investor schemes, the timeline for launching new schemes by AIFs has been reduced to 10 working days.
Further, schemes meant only for accredited investors and angel funds have been exempted from filing private placement memorandum through merchant bankers and allowed to launch immediately upon Sebi registration or filing of PPM.
Municipal Bond Market Development
Among other key changes, Sebi approved relaxations to develop the municipal bond market, including enabling municipalities to raise funds for refinancing existing debt of specific projects, allowing two or more municipalities to raise funds through a pooled finance vehicle, and timeline relaxations for compliance post-issuance.
Sebi’s board further permitted issuers to offer incentives such as additional interest or discounts on the issue price to certain categories of investors such as senior citizens, retail investors, women and defence personnel, among others, in a bid to promote municipal (or muni) bonds.
Among other approvals was the transfer of funds, administration and management of the capacity-building fund to a Section 8 company in respect of the social stock exchange.