Sebi to Unveil Major Reforms for Market Participants
The Securities and Exchange Board of India (Sebi) is set to introduce a series of regulatory reforms and relaxations at its upcoming board meeting. These changes aim to streamline compliance, enhance investment opportunities, and improve market efficiency.
SebiRegulatory ReformsMarket ParticipantsFpisSme ListingsReal EstateJun 16, 2025
Among the key regulatory changes, Sebi is expected to align its Know Your Customer (KYC) norms with those of the Reserve Bank of India (RBI). This move aims to simplify the KYC process for investors, making it easier for foreign funds and retail investors, including residents and Non-Resident Indians (NRIs), to invest in government securities. Additionally, the board is likely to facilitate co-investments in alternative investment funds (AIFs) through a separate co-investment vehicle.
The regulator is also expected to introduce a new category for foreign portfolio investors (FPIs) called Government of India Bonds (IGB-FPIs). This category will allow FPIs to invest in government securities through the voluntary retention route and fully accessible route, with eased KYC norms aligned with the RBI’s standards. Another significant move is the removal of investment caps for overseas citizens of India, NRIs, and local residents, making it easier for them to invest in government securities.
Sebi is also expected to discuss the demerger or ownership cap for clearing corporations by stock exchanges. This proposal aims to make clearing corporations independent, reducing the need for exchanges to infuse capital. However, exchanges have a different view and prefer the existing structure to continue.
The board meeting is also likely to address tighter regulations for Small and Medium Enterprises (SME) listings. Sebi may extend the promoter’s lock-in period, raise operational profit thresholds, and enhance disclosure norms. These changes are designed to raise the bar for SME listings, ensuring that only credible and sustainable businesses access public markets. This move comes in response to the numerous issues that have plagued SME listings in recent years.
Another significant proposal on the agenda is the reclassification of real estate investment trusts (Reits) and infrastructure investment trusts (Invits) as equity. This reclassification, coupled with a higher investment limit for mutual funds in Reits and Invits, is expected to boost the real estate and infrastructure sectors by attracting more investment.
Sebi is also considering a separate delisting mechanism for public sector units (PSUs). This mechanism would include a fixed premium over the floor price and relaxation of the two-thirds public shareholder approval requirement. This change could expedite the delisting process for government companies, which often have low public shareholding and face financial burdens when delisting.
Amendments to employee stock options (Esops) are also on the table. These changes aim to help the founders of startups retain Esops even after an Initial Public Offering (IPO), thereby ensuring continuity and stability in these companies.
The proposal for a separate delisting mechanism for voluntary delisting of government companies is another key point of discussion. Many state-run companies have low public shareholding, outdated business models, or weak future outlooks, making it financially burdensome for the government to delist them. Sebi’s proposal for a separate carve-out for voluntary delisting aims to address these issues and facilitate the delisting process for such companies.
Overall, these reforms and relaxations are expected to enhance market efficiency, simplify compliance, and foster a more robust and transparent investment environment in India.
Frequently Asked Questions
What are some key regulatory changes expected from Sebi's upcoming board meeting?
Sebi is expected to introduce reforms such as aligning KYC norms with the RBI, easing investment in government securities, and tightening SME listing norms. Other changes include reclassifying Reits and Invits as equity and introducing a new category for FPIs called IGB-FPIs.
How will the new KYC norms benefit investors?
The new KYC norms, aligned with the RBI’s standards, will simplify the process for investors, making it easier for foreign funds, retail investors, residents, and NRIs to invest in government securities.
What is the proposed change for SME listings?
Sebi is expected to extend the promoter’s lock-in period, raise operational profit thresholds, and enhance disclosure norms for SME listings. These changes aim to ensure only credible and sustainable businesses access public markets.
What is the significance of reclassifying Reits and Invits as equity?
Reclassifying Reits and Invits as equity, along with a higher investment limit for mutual funds, is expected to boost the real estate and infrastructure sectors by attracting more investment.
What is the proposed delisting mechanism for public sector units?
Sebi is considering a separate delisting mechanism for PSUs with a fixed premium over the floor price and relaxation of the two-thirds public shareholder approval requirement. This could expedite the delisting process for government companies.
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