SEBI Proposes Merchant Banker Exemption for Certain Small-Value Private Debt Placements
The Securities and Exchange Board of India (SEBI) on 27 August 2026 released a consultation paper on exemption from the requirement of mandatory merchant banker appointment for small-value debt through private placement by certain listed issuers. The proposal would let a narrow class of regulated, listed, well-rated issuers place small-value debt privately without appointing a merchant banker. Comments were invited up to 17 September 2026. It remains a proposal until SEBI issues a final circular.
The current requirement
As the SEBI consultation paper (PDF) explains, under clause 1.3 of Chapter V of the SEBI Master Circular for non-convertible securities (NCS) dated 15 October 2025, an issuer must appoint at least one merchant banker for private placement of debt securities issued at a face value of ₹10,000, referred to as small-value debt.
Why SEBI wants to change it
The paper lists three problems raised with the current rule:
- the cost of appointing a merchant banker is a disproportionate burden on small issues and reduces their viability;
- there are a limited number of merchant bankers active in the debt segment; and
- appointment causes significant delays in executing private placements, which matters because price discovery depends on market yields that can move quickly.
According to SEBI, these factors discourage frequent small-value issuances and raise the cost of capital. It argues that listed issuers are already subject to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, that entities regulated by a financial sector regulator face on-site and off-site supervision, and that the conditions restrict the relief to relatively low-risk instruments.
Who would qualify
An issuer would be exempt from appointing a merchant banker for a small-value private placement only if all four conditions are met:
| Condition | Proposed requirement |
|---|---|
| Regulated entity | Registered with or regulated by a financial sector regulator in India, such as SEBI, RBI, IRDAI or PFRDA |
| Listing track record | Listed on a recognised stock exchange for at least one year, with no fine or penalty imposed by SEBI or the stock exchanges under the LODR Regulations pending payment |
| No defaults | No default in the last three financial years and the current financial year on deposits, preference shares, debt securities, dividends or term loans, certified by the auditor |
| Instrument quality | Debt must be unsubordinated or senior, secured by a first or pari passu charge on identifiable assets, and rated AA- or above on the date of private placement |
What it means for issuers and advisers
For regulated listed issuers that raise money often through small-ticket privately placed debt, removing the merchant-banker step could cut cost and shorten the time between pricing and allotment. Issuers that are not regulated by a financial sector regulator, that have been listed for less than a year, or whose paper is unsecured, subordinated or rated below AA- would stay under the current rule even if the proposal is adopted.
Until SEBI publishes a final circular, every small-value private placement must continue to follow the existing merchant-banker requirement. Treasury and secretarial teams can prepare in the meantime by checking their eligibility on each condition: confirming the regulator registration, tracking any unpaid LODR fines, getting the auditor's default-free certificate process in place and reviewing whether proposed issues will meet the security and rating tests.
The final framework may change the conditions after public feedback, so any change to issuance documents or engagement letters should wait for the operative circular and its effective date.
How comments were submitted
SEBI accepted comments through its online public comments facility on the SEBI website, with the last date set at 17 September 2026.
Updated on 27 September 2026: added the current requirement under the NCS Master Circular, SEBI's reasons, the four proposed eligibility conditions, the 17 September 2026 comment deadline and links to the consultation paper.
