Extending facility of creating standing instructions for SWP/STP for Mutual Fund units held in demat form

SEBI circular dated 17 July 2026 concerning the extension of standing instructions for SWP/STP in respect of mutual fund units held in demat form.

Professional Analysis

1. Executive Summary

The circular issued by the Securities and Exchange Board of India (SEBI) on 17 July 2026 introduces a significant operational facilitation for mutual fund investors who hold their units in dematerialised (demat) form. The circular extends the facility of creating standing instructions for Systematic Withdrawal Plans (SWP) and Systematic Transfer Plans (STP) to such units.

The facility is proposed to be implemented in two phases. The first phase will cover unit-based SWP/STP, while the second phase will extend the facility to amount-based SWP/STP. The depositories have been designated as the nodal facilitators and have been given specific implementation deadlines extending up to 30 April 2027.

2. Background and Existing Position

Under the arrangement described in the circular, mutual fund investors can establish standing instructions with the mutual fund or its Registrar and Transfer Agent (RTA) for:

• Periodic redemption of a specified number of mutual fund units or a specified amount under an SWP; and
• Periodic transfer of investments from one scheme to another scheme of the same mutual fund under an STP.

However, this facility was not available where the mutual fund units were held in demat form. The circular seeks to address this gap by extending the standing-instruction facility to dematerialised mutual fund holdings.

3. Key Regulatory Change

The principal regulatory change is the extension of the facility to mutual fund units held in demat form.

The implementation will take place in two stages:

Phase I – Unit-based SWP/STP

Investors will be able to create standing instructions based on a fixed number of mutual fund units to be redeemed at a specified frequency, either for withdrawal or for investment into another scheme of the same mutual fund.

Phase II – Amount-based SWP/STP

The facility will subsequently permit standing instructions based on a fixed monetary amount, either as a periodic payout or for purchasing units of another scheme of the same mutual fund.

This phased approach appears designed to enable market infrastructure institutions and intermediaries to progressively establish the necessary operational and technological framework.

4. Implementation Timeline

The circular establishes the following important milestones:

Activity	Deadline
Circular comes into force	Immediate effect
Depositories to jointly publish standard operational framework	31 October 2026
Implementation of Phase I – Unit-based SWP/STP	31 January 2027
Implementation of Phase II – Amount-based SWP/STP	30 April 2027

The depositories are specifically tasked with facilitating implementation and are required to undertake necessary regulatory, operational and technological measures.

5. Stakeholder-wise Impact

Depositories:
The principal responsibility rests with the depositories, which have been designated as the nodal facilitators. They must jointly develop and publish the standard framework, amend relevant bye-laws, rules and regulations where necessary, implement system changes and disseminate the provisions of the circular.

Stock Exchanges:
Although the circular is addressed to recognised stock exchanges, the immediate operational responsibility appears to lie primarily with the depositories. Exchanges may nevertheless need to assess any consequential changes to their systems, processes or regulatory framework.

RTAs, Mutual Funds and AMCs:
Mutual funds and RTAs will be important participants in operationalising the facility, particularly in ensuring coordination between the demat ecosystem and mutual fund transaction infrastructure. Their systems and processes may require modifications once the standard framework is finalised.

Depository Participants (DPs):
DPs are likely to form an important interface for investors holding mutual fund units in demat accounts. Their operational processes may consequently need to be aligned with the framework developed by the depositories.

Investors:
The change is expected to improve convenience for investors who prefer to hold mutual fund investments in dematerialised form while also using systematic withdrawal or transfer mechanisms.

6. Regulatory Significance

The circular represents an effort to bridge the operational gap between the mutual fund and securities dematerialisation ecosystems. Investors holding mutual fund units directly with AMCs or RTAs could already access SWP/STP facilities, whereas those holding units in demat form did not have equivalent access to standing instructions.

By extending the facility to dematerialised holdings, SEBI is seeking to promote greater functional parity and ease of doing business across different modes of holding mutual fund units. The circular expressly states that the decision has been taken after considering representations from the depositories and recommendations of a SEBI Working Group and the Secondary Market Advisory Committee.

7. Compliance and Operational Considerations

From a compliance perspective, the circular does not appear to impose an immediate filing or reporting obligation on mutual funds, AMCs, RTAs, DPs or investors. Instead, it creates an implementation framework under which the relevant market infrastructure and intermediaries must prepare for operationalisation.

The immediate action points for stakeholders would therefore include:

1. Monitoring the standard framework to be jointly published by the depositories by 31 October 2026.
2. Assessing required amendments to applicable bye-laws, rules, regulations and internal operating procedures.
3. Identifying technology and system changes necessary for processing SWP/STP mandates involving demat-held mutual fund units.
4. Reviewing investor communication and documentation requirements.
5. Coordinating across depositories, AMCs, RTAs, DPs and other intermediaries to ensure seamless execution.
6. Preparing for Phase I implementation by 31 January 2027 and Phase II implementation by 30 April 2027.

8. Key Risk Areas

The principal implementation risks are likely to be operational and technological rather than substantive regulatory risks. These may include:

• Synchronisation between depository systems and mutual fund/RTA systems;
• Authentication and registration of standing instructions;
• Processing of periodic redemption and transfer instructions;
• Handling of failed or rejected mandates;
• Investor consent and mandate modification or cancellation;
• Reconciliation of units and transaction records;
• Treatment of corporate actions affecting units subject to standing instructions;
• Investor communication and grievance redressal mechanisms; and
• Ensuring consistency of processes across different intermediaries.

The final operational framework to be issued by the depositories will therefore be critical in determining the precise compliance and technology requirements.

9. Overall Assessment

The circular is a facilitative and investor-centric regulatory measure aimed at improving the usability of dematerialised mutual fund holdings. Its most important impact is that investors holding mutual fund units in demat accounts will progressively be able to access systematic withdrawal and transfer arrangements through standing instructions, bringing their functionality closer to that available for units held through conventional mutual fund/RTA channels.

For AMCs, RTAs, depositories and DPs, the circular should be viewed primarily as an implementation and systems-readiness requirement. While the circular itself is effective immediately, the substantive operational changes will occur progressively through the two implementation phases.

From a corporate compliance perspective, no immediate statutory filing obligation is expressly prescribed in the circular itself. The immediate priority for regulated entities and intermediaries should instead be to monitor the standard framework expected by 31 October 2026, assess its applicability to their operations, and ensure timely readiness for the 31 January 2027 and 30 April 2027 implementation deadlines. The circular derives its authority from Section 11(1) of the SEBI Act, 1992, Section 26(3) of the Depositories Act, 1996, and Regulation 97 of the SEBI (Depositories and Participants) Regulations, 2018

RBI (Payments Banks – Governance) Amendment Directions, 2026

RBI/2026-27/179 dated 14 July 2026, titled “Reserve Bank of India (Payments Banks – Governance) Amendment Directions, 2026.” The amendment is primarily aimed at rationalising the matters required to be placed before the Board of a Payments Bank, thereby enabling the Board to devote greater time to strategy, financial soundness, risk governance and other matters of material importance. The amendments will come into effect from 1 October 2026.

Professional Analysis

1. Executive Summary

The Amendment Directions represent a significant shift from a high-frequency, prescriptive Board-agenda model towards a principles-based governance framework. Rather than requiring the Board to deal with every operational or regulatory matter directly, the RBI has introduced a structured framework that distinguishes between:

1. Policies that must be approved by the Board;
2. Policies whose review may be delegated to Board Committees, subject to Board approval of material amendments;
3. Non-policy matters requiring Board approval, review or information/reporting; and
4. Matters that the Board may, at its discretion, delegate to appropriate Board or Management Committees.

The fundamental principle remains that the Board retains ultimate responsibility for business strategy, financial soundness, key personnel decisions, internal organisation, governance, risk management and compliance. Delegation is therefore intended to improve governance efficiency and not to dilute the Board's overarching accountability.

---

2. Core Governance Change

A key amendment is the insertion of Paragraph 16A, which expressly requires the Board to exercise oversight over:

• the bank's risk management system, policy and strategy;
• exposures to related entities; and
• conformity with corporate governance standards, including committee composition, roles and functions, meeting periodicity, compliance coverage and review functions.

This is an important governance clarification. While the RBI is seeking to reduce the volume of routine matters reaching the Board, it simultaneously reinforces the Board's responsibility for oversight rather than operational micromanagement.

The amendment therefore appears to promote a more mature governance model in which the Board focuses on "what" and "why", while appropriately constituted committees and management structures deal with "how" and "when", within clearly defined delegated authority.

---

3. Rationalisation of Board Agenda

The newly inserted Paragraph 27A establishes a consolidated framework for matters to be placed before the Board. The Board must now distinguish between:

• policies requiring Board approval;
• policies where review may be delegated;
• non-policy matters requiring approval/review/information; and
• matters that may be delegated at the Board's discretion.

This is perhaps the most consequential operational change introduced by the amendment.

For Payments Banks, this should result in a more structured Board calendar, with routine regulatory matters capable of being handled by appropriately empowered committees, allowing Board meeting time to be concentrated on matters involving material risk, strategy, capital, liquidity, cyber security, compliance and governance.

---

4. Board Delegation – Important Qualification

The amendment does not amount to unrestricted delegation.

Paragraph 27B makes it clear that the Board must:

• clearly identify matters reserved for its approval;
• specify matters that are to be brought to its attention;
• consider statutory and regulatory responsibilities while determining delegation;
• ensure adequate information is received from management; and
• periodically review both the matters placed before the Board and those delegated to committees.

The Board Chairperson is also assigned the primary responsibility for setting the meeting agenda.

In practical terms, the amendment strengthens the importance of the Board's agenda-setting process. The agenda should no longer be viewed merely as a compilation of regulatory reporting requirements; it should become a deliberate governance instrument reflecting the Board's priorities.

---

5. Key Impact of Appendix I – Policies

Appendix I provides a comprehensive classification of policies that must be placed before the Board and identifies whether delegation is permissible.

A significant number of core risk and governance policies remain non-delegable, including:

• Investment Policy;
• Risk Management Policy;
• Cyber Security Policy;
• Fraud Risk Management roles and responsibilities;
• Chief Risk Officer roles and responsibilities;
• Digital Banking Policy;
• IT and Information Security-related policies;
• Policy relating to customer appropriateness, suitability and grievance redressal;
• Fit and Proper assessment of major shareholders;
• Compensation Policy;
• CSR Policy;
• Compliance Policy;
• Protected Disclosure Scheme;
• Code of Conduct/Ethics Policy.

This demonstrates that the RBI's approach is not to dilute Board responsibility in areas involving systemic, financial, regulatory or reputational risk.

At the same time, certain areas permit delegation. For example, aspects of:

• operational risk;
• liquidity risk/ALM;
• outsourcing;
• responsible business conduct;
• debit card issuance;
• KYC;
• interest rates on deposits; and
• certain banking-channel or outlet matters

may be delegated, subject to the specific conditions and committee structures prescribed in the Appendix.

---

6. Matters Requiring Board Approval, Review or Information

Appendix II-A identifies matters other than policies that continue to require Board-level attention.

These include significant matters such as:

• acquisition of shares or voting rights;
• issuance of regulatory capital;
• investment portfolio reclassification;
• declaration of dividend;
• voluntary amalgamation;
• RTGS membership;
• appointment/reappointment of MD & CEO/Principal Executive;
• remuneration of Whole-Time Directors;
• appointment of CRO and CCO; and
• undertaking certain regulated businesses.

The framework also retains Board review or reporting requirements in areas such as:

• customer service;
• major shareholder fit and proper status;
• information security governance;
• operational resilience;
• shareholding monitoring;
• encumbrance of shares; and
• stress-test outcomes.

This indicates that the RBI has sought to rationalise Board involvement without compromising oversight of high-impact regulatory and risk matters.

---

7. Greater Role for Board Committees

One of the most important practical implications is the increased significance of Board Committees.

Appendix II-B specifically permits delegation, at the discretion of the Board, of matters such as:

• Risk-Based Internal Audit methodology and annual audit plan;
• operational manuals;
• special audit assignments;
• annual banking outlet expansion plans;
• correspondent banking relationships;
• service providers connected with directors or KMPs;
• LFAR review;
• investment portfolio matters;
• Business Correspondent model;
• banking outlet transactions;
• doorstep banking;
• material outsourcing;
• effectiveness of RBIA;
• cyber-security risk reviews;
• customer service matters; and
• several operational and compliance reviews.

This effectively elevates the importance of the Audit Committee, Risk Management Committee, Customer Service Committee and other appropriately constituted committees.

The delegation framework, however, requires a clear reporting architecture. Delegated authority should be accompanied by defined reporting frequency, escalation thresholds and exception reporting, so that the Board remains fully informed of material developments.

---

8. Implications for Board and Committee Processes

In my view, the amendment will require Payments Banks to undertake a comprehensive review of their existing Board and Committee governance framework before 1 October 2026.

The following areas should be reviewed:

A. Board Charter

The Board Charter should clearly specify:

• matters reserved exclusively for the Board;
• matters delegated to individual committees;
• matters delegated to management committees;
• matters requiring periodic reporting;
• matters requiring immediate escalation.

B. Committee Charters

The Terms of Reference of each Board Committee should be reviewed to ensure that delegated responsibilities are clearly documented and aligned with the RBI framework.

C. Delegation Matrix

A formal Board Delegation of Powers Matrix should be prepared, clearly identifying:

Matter → Regulatory Reference → Authority → Committee → Frequency of Reporting → Escalation Trigger.

D. Board Agenda

The Board agenda should be redesigned to distinguish clearly between:

• approval items;
• review items;
• information/reporting items; and
• matters dealt with under delegated authority.

E. Information Flow

Management should establish a structured reporting mechanism to ensure that the Board receives adequate, timely and decision-useful information. The RBI specifically expects the Board to determine the nature and frequency of information required from management and permits the Board to seek external reports where necessary.

---

9. Specific Action Points for the Company Secretary

From a Company Secretarial and Board Governance perspective, the following actions would be advisable:

1. Prepare a detailed comparative matrix of the existing Board agenda requirements against the new Appendix I, Appendix II-A and Appendix II-B framework.
2. Identify all matters currently placed before the Board which may, from 1 October 2026, be delegated to Board Committees or Management Committees.
3. Review the Articles of Association and Board-approved delegation framework to ensure that the proposed delegation is legally and procedurally permissible.
4. Review the Terms of Reference of all Board Committees, particularly the Audit Committee, Risk Management Committee, Customer Service Committee and IT/Cyber-related committees.
5. Prepare a revised Board Agenda Matrix categorising each item as:
   • Board approval;
   • Board review;
   • Board information/reporting;
   • Committee approval;
   • Committee review; or
   • Management Committee/management-level matter.
6. Review the frequency of Board meetings and committee meetings to ensure that delegation does not result in fragmented or inadequate oversight.
7. Establish an escalation mechanism whereby significant exceptions, breaches, emerging risks and adverse trends are automatically brought to the Board.
8. Review Board reporting formats to ensure that delegated matters are reported to the Board in a meaningful and consolidated manner.
9. Update Board and Committee calendars with effect from 1 October 2026.
10. Place the revised governance and delegation framework before the Board for approval before the effective date.

---

10. Overall Assessment

The Amendment Directions should be viewed as a governance rationalisation exercise rather than a relaxation of regulatory oversight.

The RBI is essentially moving away from a model in which the Board's time is consumed by an extensive list of recurring regulatory agenda items, towards a model where the Board exercises strategic oversight, risk governance and accountability, while allowing appropriately constituted committees to handle matters that can be effectively delegated.

The key message for Payments Banks is therefore "delegation with accountability." The Board may delegate authority, but it cannot delegate away its ultimate responsibility for the bank's strategy, financial soundness, governance, risk management and compliance. The Board is also expected to periodically reassess whether the delegation framework remains appropriate and whether the information reaching it is timely and adequate.

Conclusion

The Amendment Directions are likely to have a material impact on Board governance architecture, committee functioning and Board agenda management of Payments Banks. The immediate priority should be to undertake a governance gap analysis and create a revised Board–Committee–Management responsibility matrix before the provisions become effective on 1 October 2026.

The amendment presents an opportunity for Payments Banks to make Board meetings less compliance-heavy and more strategically focused, but its success will depend upon the quality of delegation, the robustness of committee oversight, the adequacy of management reporting and the effectiveness of escalation mechanisms. The objective should not merely be to reduce the number of items on the Board agenda, but to ensure that the right matters reach the right governance forum at the right time.

SEBI (AIF) (Second Amendment) Regulations, 2026

 SEBI notification dated 10 July 2026, titled SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026.

1. Executive Summary

The amendment represents a procedural and regulatory rationalisation of the framework governing the launch of schemes by Alternative Investment Funds (AIFs). The principal thrust appears to be to:

1. Revise the scheme filing and fee framework under Regulation 12.
2. Extend the prescribed period for filing scheme-related documents from thirty days to ten working days, as reflected in the amendment.
3. Remove the scheme fee requirement for the first scheme launched by an AIF.
4. Replace the earlier reference to fees under the Second Schedule with documents specified by SEBI, indicating a shift towards a more flexible, document-based filing framework.
5. Provide a formal mechanism for SEBI to communicate comments on documents filed with it.
6. Place an explicit responsibility on the merchant banker or Manager to ensure compliance with SEBI's comments.
7. Make specific modifications for Large Value Funds for Accredited Investors (LVF) and Accredited Investor-only Funds.
8. Remove certain requirements relating to merchant banker involvement under Regulation 19D and omit Regulation 19D(5).

Overall, the amendment appears intended to streamline AIF scheme launches, reduce procedural friction and costs, and create a more differentiated regulatory framework for sophisticated investor structures, particularly Accredited Investor-focused funds.

---

2. Key Amendments at a Glance

Area	Position after amendment	Likely significance
Scheme filing requirement	Regulation 12(1) wording revised to refer to filing along with applicable fees as specified in the Second Schedule	Clarifies the filing/fee framework
First scheme of an AIF	Scheme fee not payable	Reduces initial launch cost
Filing timeline	"Thirty days" replaced with "ten working days"	Potentially accelerates scheme launch process
Filing documents	Reference to Second Schedule fees replaced with documents specified by SEBI	Greater flexibility for SEBI-prescribed documentation
SEBI comments	Board may communicate comments to merchant banker or Manager	Formalises regulatory feedback mechanism
Compliance with comments	Merchant banker/Manager must ensure comments are complied with	Creates explicit accountability
LVF	Certain provisions modified/replaced by reference to Accredited Investor-only Fund	Tailors framework to sophisticated-investor structures
Merchant banker requirement	Certain references removed from Regulation 19D	Reduces merchant banker-related procedural requirements

---

3. Detailed Analysis

A. Exemption from Scheme Fee for the First Scheme

One of the most significant amendments is the insertion of a proviso after Regulation 12(1), providing that payment of scheme fees will not apply in the case of the launch of the first scheme by an Alternative Investment Fund.

Regulatory significance

This is a meaningful cost-relief measure for a newly registered or newly operational AIF launching its first scheme. The first scheme is often the stage at which an AIF Manager incurs substantial establishment and fundraising expenses. Exemption from the scheme fee may therefore:

• Reduce the initial cost of commencing operations;
• Facilitate quicker operationalisation of newly registered AIFs;
• Encourage new fund managers to enter the AIF ecosystem;
• Reduce the regulatory cost associated with the initial scheme launch.

Practical implication

AIF Managers should distinguish between:

• The first scheme launched by the AIF, for which the fee exemption applies; and
• Subsequent schemes, where the applicable scheme fee requirements would continue to apply, subject to the prevailing regulatory framework.

The amendment therefore appears to provide a one-time benefit rather than a blanket exemption from scheme fees.

---

B. Change in the Timeline from "Thirty Days" to "Ten Working Days"

The amendment substitutes the words "thirty" with "ten working" in Regulation 12(2).

This is potentially one of the most consequential operational changes.

Impact

The change indicates a move towards a shorter, business-day-based regulatory process. For AIF Managers, this may have the effect of:

• Accelerating scheme launch timelines;
• Reducing uncertainty around regulatory processing;
• Improving fundraising and deployment planning;
• Enabling fund managers to respond more rapidly to market opportunities.

However, the practical effect will depend on the precise point from which the ten-working-day period is calculated and whether the documents submitted are complete and compliant.

Important compliance consideration

The reduction in the prescribed period should not be interpreted as an automatic approval mechanism. AIF Managers should continue to ensure that all prescribed documents are complete and accurate before filing.

In practice, the compliance team should maintain:

• A scheme launch checklist;
• A document submission tracker;
• Evidence of the date of filing;
• Confirmation of completeness of documents;
• A mechanism for tracking SEBI comments and their resolution.

---

C. Introduction of a Formal SEBI Comment Mechanism

The substituted Regulation 12(3) provides that:

After the specified documents are filed with the Board, the Board may communicate its comments, if any, to the merchant banker or the Manager.

This creates a clearer regulatory interface between SEBI and the AIF ecosystem.

Significance

The amendment recognises that SEBI's review may result in comments requiring clarification, modification or rectification.

The key change is that the communication of regulatory comments is now expressly contemplated within the regulatory framework.

This should help establish a more structured process for:

Filing → SEBI review → Comments → Compliance → Scheme launch

---

4. Increased Accountability of Merchant Banker / Manager

A new Regulation 12(3A) provides that:

"The merchant banker or the Manager shall ensure that the comments provided under sub-regulation (3) are complied with."

This is an important governance enhancement.

Earlier position

The regulatory framework appears to have contemplated SEBI review and comments but did not expressly place the same degree of responsibility on the merchant banker or Manager to ensure compliance.

Position after amendment

The responsibility is now expressly imposed on:

• The merchant banker, where applicable; or
• The Manager.

This creates a clear accountability framework.

Practical implications for AIF Managers

The Manager should establish a formal process for:

1. Receiving SEBI comments;
2. Reviewing each comment;
3. Assigning responsibility for action;
4. Making necessary changes;
5. Obtaining internal approval;
6. Confirming compliance;
7. Maintaining documentary evidence of compliance.

The Manager should also ensure that fund marketing documents, placement memoranda and other scheme documents are consistent with the changes made in response to SEBI comments.

---

5. Special Treatment for Accredited Investor-Only Funds

The amendment makes a specific modification in the proviso after Regulation 12(3), replacing references to "Large Value Fund for Accredited Investors" with "Accredited Investors only fund" in the relevant provision.

This appears to reflect a broader regulatory movement towards differentiating the compliance framework based on the sophistication and financial capacity of investors.

Regulatory rationale

Accredited Investors are generally regarded as investors capable of understanding and assuming higher levels of investment risk.

A framework specifically designed for Accredited Investor-only funds can therefore permit:

• Greater flexibility;
• Reduced procedural requirements;
• Faster fund establishment;
• Lower regulatory friction.

The amendment should therefore be viewed as part of the continuing trend towards risk-based and investor-segmented regulation.

---

6. Removal of Certain Merchant Banker Requirements under Regulation 19D

The amendment provides that in Regulation 19D(4), the words "through a merchant banker" shall be omitted.

Further, Regulation 19D(5) is omitted.

Significance

This appears to reduce the mandatory role of merchant bankers in the relevant process under Regulation 19D.

The broader implication may be a move towards simplification of compliance requirements for certain AIF structures, particularly those involving sophisticated investors.

However, the precise impact should be assessed by reference to the underlying provisions of Regulation 19D and the specific category of AIF to which the provision applies.

For AIF Managers, the key point is that the amendment may reduce dependence on merchant bankers for certain regulatory processes, potentially resulting in:

• Lower transaction costs;
• Faster execution;
• Simplification of procedural requirements;
• Greater direct responsibility on the AIF Manager.

---

7. Governance and Compliance Implications

The amendment appears to shift the regulatory framework towards greater Manager accountability.

While merchant bankers continue to have a role where specifically prescribed, the Manager is increasingly becoming the central point of responsibility for ensuring that:

• Scheme documentation is complete;
• Regulatory comments are addressed;
• Necessary amendments are incorporated;
• Scheme documents remain compliant;
• The fund launch process is properly documented.

This makes it advisable for AIF Managers to strengthen their internal regulatory governance framework.

---

8. Recommended Action Points for AIF Managers

In view of the amendment, AIF Managers should consider the following actions:

Immediate Actions

1. Review existing scheme launch SOPs

The internal scheme launch process should be updated to reflect the revised Regulation 12 framework.

2. Update regulatory filing checklists

The compliance checklist should specifically capture:

• Applicable scheme fees;
• Whether the scheme is the first scheme of the AIF;
• Documents prescribed by SEBI;
• Filing date;
• Ten-working-day timeline;
• SEBI comments;
• Date of receipt of comments;
• Date of compliance.

3. Review first-scheme fee exemption

New AIFs preparing to launch their first scheme should assess whether they qualify for the fee exemption.

4. Establish a SEBI comment tracker

Every SEBI comment should be recorded, assigned, resolved and formally closed.

5. Review agreements with merchant bankers

Existing arrangements should be examined to determine whether any merchant banker functions have become unnecessary following the amendment.

6. Review Accredited Investor fund structures

Managers operating or proposing to operate funds exclusively for Accredited Investors should examine whether the amended provisions provide additional regulatory flexibility.

---

9. Overall Assessment

The SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026 can broadly be viewed as a facilitative and process-oriented amendment aimed at making the AIF regulatory framework more efficient.

The most notable features are:

• Fee exemption for the first scheme of an AIF;
• Reduction of the prescribed period from thirty days to ten working days;
• Formalisation of SEBI's comment process;
• Express responsibility of the merchant banker/Manager to ensure compliance with SEBI comments;
• Regulatory differentiation for Accredited Investor-only funds; and
• Reduction of certain merchant banker-related requirements.

From a compliance perspective, the amendment is likely to be positive for AIF Managers, particularly new fund managers and managers catering to sophisticated investors. At the same time, the increased emphasis on the Manager's responsibility for responding to SEBI comments means that internal compliance controls and documentation will become even more important.

Key takeaway

The amendment appears to pursue a dual objective: facilitating faster and more cost-efficient AIF scheme launches while simultaneously making the AIF Manager more directly accountable for regulatory compliance and the resolution of SEBI's comments.

For professional advisory purposes, I would recommend treating this notification as a regulatory update requiring an impact assessment rather than merely a procedural amendment, particularly for new AIFs, first-time scheme launches, Accredited Investor-only funds, and existing AIFs that use merchant bankers in processes covered by Regulation 19D.

RBI (Small Finance Banks – Governance) Amendment Directions, 2026

 

1. Executive Summary

The RBI's amendment represents a significant governance rationalisation exercise for Small Finance Banks. It seeks to address the longstanding concern that Boards may spend disproportionate time reviewing routine operational and regulatory matters at the expense of their core responsibilities relating to strategy, risk management, financial soundness, governance and oversight.

The amendment introduces a structured framework under which matters are categorised into three broad groups:

1. Policies requiring Board approval, with limited scope for delegation;
2. Non-policy matters that must be placed before the Board for approval, review or information; and
3. Matters that may be delegated by the Board to appropriate Board or Management Committees.

The framework does not dilute the ultimate responsibility of the Board. Instead, it seeks to distinguish between matters that require direct Board oversight and those that can appropriately be dealt with by specialised committees, subject to suitable reporting and oversight mechanisms.

---

2. Core Governance Change

A key feature of the amendment is the insertion of paragraphs 33A and 33B, which establish the new architecture for Board agenda management.

The Board is required to determine matters based on the principle that it retains ultimate responsibility for:

• Business strategy;
• Financial soundness;
• Key personnel decisions;
• Internal organisation;
• Governance structures and practices;
• Risk management; and
• Compliance obligations.

At the same time, the Board is expressly permitted to delegate appropriate matters to Board Committees or Management Committees, together with necessary reporting requirements.

This is an important distinction: delegation of decision-making does not amount to abdication of accountability.

The amendment also places greater responsibility on the Chairperson of the Board to determine the agenda and requires the Board to ensure that management provides adequate and timely information. The Board is further expected to periodically review not only the matters placed before it but also the matters delegated to committees.

---

3. Rationalisation of Board-Approved Policies

Appendix I provides a consolidated framework of policies that are required to be placed before the Board.

The important policy areas include:

• Credit Policy;
• Investment Policy;
• Risk Management Policy;
• Outsourcing Policy;
• Digital Banking Policy;
• IT and Information Security Policy;
• Responsible Business/Lending Conduct Policy;
• Policy relating to Banking Outlets;
• Deposits and Liability Products Policy;
• Auditor Appointment and Remuneration Policy;
• Fit and Proper Policy for Major Shareholders;
• Compensation Policy;
• CSR Policy;
• Compliance Policy;
• Protected Disclosure Policy;
• Disclosure Policy;
• Code of Conduct/Ethics Policy;
• KYC Policy; and
• Interest Rate Policy.

The overall approach is that core prudential, risk, governance, compliance and conduct policies generally remain within the Board's direct ambit. Delegation is permitted only in specifically identified areas.

This is particularly significant because it prevents the rationalisation exercise from becoming a mechanism for excessive delegation of fundamental governance responsibilities.

---

4. Greater Role for Board Committees

One of the most consequential changes is the explicit recognition of the role of Board Committees in dealing with matters that need not necessarily consume the full Board's time.

For example, certain matters relating to:

• Risk-Based Internal Audit;
• Annual Audit Plan;
• Lending to related parties;
• Annual Banking Outlet Expansion Plan;
• Correspondent banking relationships;
• Outsourcing;
• Investment portfolio;
• Cybersecurity;
• Customer service;
• Liquidity and ALM;
• Green deposits; and
• Certain operational and risk matters

may be delegated to appropriate committees, including the Audit Committee, Risk Management Committee, Customer Service Committee, Asset Liability Management Committee or other committees specifically authorised by the Board.

The amendment therefore promotes a committee-centric governance model, where technically specialised matters are dealt with by the committee best equipped to handle them, while the Board retains overall supervision.

---

5. Matters That Cannot Be Delegated

The framework also identifies several matters that continue to require direct Board involvement.

These include, among others:

• ICAAP structural design and contents;
• Capital Plan;
• Acquisition of shares or voting rights in specified circumstances;
• Issuance of regulatory capital;
• Reclassification of investment portfolio categories;
• Declaration of dividend;
• Voluntary amalgamation;
• Appointment/reappointment of MD & CEO;
• Remuneration of Whole-Time Directors;
• Appointment of CRO;
• Appointment of CCO.

This demonstrates that RBI continues to regard capital adequacy, ownership structure, senior management appointments and fundamental corporate actions as matters requiring direct Board oversight.

---

6. Risk Management Implications

From a risk governance perspective, the amendment is particularly important.

The Board's oversight responsibility expressly extends to:

• The risk management system;
• Risk management policy and strategy;
• Exposures to related entities;
• Corporate governance standards;
• Committee composition and functioning; and
• Compliance with governance and review requirements.

Thus, although routine risk matters may be delegated, the risk appetite, risk architecture and overall risk governance framework remain fundamentally Board responsibilities.

The framework also requires the Board to receive sufficient information from management and to determine the nature and frequency of information required. This effectively shifts the focus from merely receiving voluminous Board papers to receiving decision-useful management information.

---

7. Impact on Board Meetings

The amendment is likely to have a meaningful impact on the structure and conduct of Board meetings.

Boards should move away from an agenda dominated by repetitive statutory and regulatory reporting and towards a more strategic agenda covering:

• Business performance;
• Capital and liquidity;
• Emerging risks;
• Stress scenarios;
• Cyber and operational resilience;
• Regulatory developments;
• Technology risks;
• Customer and conduct risks;
• Governance effectiveness; and
• Long-term strategy.

The Chairperson's role becomes particularly important, as the amendment places primary responsibility for setting the Board agenda with the Chairperson.

---

8. Key Compliance and Governance Actions for SFBs

In my view, every Small Finance Bank should undertake the following exercise before 1 October 2026:

A. Conduct a Board Agenda Mapping Exercise

Prepare a comprehensive inventory of all matters currently placed before the Board and classify each as:

• Mandatory Board approval;
• Mandatory Board review;
• Mandatory Board information/reporting;
• Delegable to Board Committee; or
• Delegable to Management Committee.

B. Review the Delegation of Authority Matrix

The existing delegation matrix should be compared with Appendix II-B. Appropriate amendments should be made to clearly identify:

• The delegated authority;
• The committee/person to whom authority is delegated;
• Monetary and other thresholds;
• Reporting requirements;
• Frequency of reporting; and
• Escalation triggers.

C. Review Board Committee Charters

The terms of reference of the:

• Audit Committee;
• Risk Management Committee;
• Customer Service Committee;
• ALCO;
• Committee on Lending to Related Parties; and
• Other relevant committees

should be reviewed and aligned with the new delegation framework.

D. Review Board and Committee Calendars

The annual Board calendar should be redesigned to ensure that matters continue to reach the Board at the frequency mandated by RBI, while matters eligible for delegation are appropriately routed to committees.

E. Update Board Policies

The Bank should review its policy architecture to ensure that all policies listed in Appendix I are appropriately consolidated or regrouped.

The RBI expressly permits banks to regroup policies, provided all specified aspects are adequately covered in one or more policies.

F. Strengthen Management Information Systems

The Board must receive adequate information to discharge its responsibilities effectively. Consequently, Board reporting formats should be reviewed to ensure that information is:

• Relevant;
• Concise;
• Timely;
• Risk-focused;
• Exception-oriented; and
• Capable of supporting informed decision-making.

---

9. Key Governance Risk

The principal risk arising from the amendment is over-delegation.

There is a possibility that, in an attempt to reduce Board workload, matters of strategic importance may be pushed down to committees without adequate Board-level visibility.

The RBI framework itself mitigates this risk by requiring the Board to clearly articulate matters reserved for its approval or information and to periodically review both the matters placed before it and those delegated to committees.

Therefore, SFBs should adopt the principle:

"Delegate execution and detailed review, but retain strategic oversight and accountability."

---

10. Overall Assessment

The amendment should be viewed as a governance enhancement rather than merely a reduction in Board workload.

Its underlying philosophy is that an effective Board should not function as a clearing house for every regulatory or operational matter. Instead, it should focus its collective expertise on matters that genuinely require Board-level judgement.

The success of the framework, however, will depend heavily on how individual SFBs implement it. Merely transferring matters from the Board agenda to committee agendas will not achieve the intended objective. The real benefit will arise only if the Bank simultaneously strengthens:

• Committee effectiveness;
• Delegation frameworks;
• Management reporting;
• Risk dashboards;
• Escalation mechanisms;
• Board information systems; and
• Periodic review of delegated authorities.

Conclusion

The RBI's Small Finance Banks – Governance Amendment Directions, 2026 mark a substantive shift towards a more principles-based, risk-focused and strategically oriented Board governance model. Effective from 1 October 2026, the amendment provides SFBs with greater flexibility to allocate regulatory and operational responsibilities between the Board and its committees while preserving the Board's ultimate accountability for strategy, financial soundness, risk management, governance and compliance.

For Company Secretaries and governance professionals, the immediate priority should be to undertake a comprehensive Board and Committee Agenda Rationalisation Exercise, followed by a review of Board policies, committee terms of reference, delegation matrices, annual calendars and reporting protocols. This would ensure that the Bank is fully prepared for implementation from 1 October 2026 and, more importantly, that the revised framework results in better governance rather than simply fewer items on the Board agenda.

SEBI (LODR) (Second Amendment) Regulations, 2026

 Notification No.: SEBI/LAD-NRO/GN/2026/312

Date: 10 July 2026
Published in: Extraordinary Gazette of India

---

Executive Summary

SEBI has issued the Listing Obligations and Disclosure Requirements (Second Amendment) Regulations, 2026, introducing a significant procedural change relating to the transfer and transmission of securities.

The amendment removes detailed procedural prescriptions from the LODR Regulations and instead empowers SEBI to prescribe such requirements through directions, circulars or other instructions issued from time to time. This provides the regulator with greater flexibility to modify operational procedures without undertaking formal amendments to the Regulations on every occasion.

The amendments came into force on 10 July 2026, the date of publication in the Official Gazette.

---

Key Amendments

1. Amendment to Regulation 40(7)

Earlier Position

Regulation 40(7) required listed entities to comply with procedural requirements prescribed under the LODR Regulations, including those contained in Schedule VII.

Amended Provision

Regulation 40(7) has been substituted to provide that:

The listed entity shall comply with all procedural requirements relating to transfer and transmission of securities as specified by SEBI from time to time.

Practical Effect

Instead of relying solely upon provisions contained in the Regulations, listed entities must now monitor:

• SEBI circulars;
• Master Circulars;
• Operational guidelines;
• Future directions issued by SEBI.

This significantly increases the importance of keeping track of regulatory updates issued outside the Regulations themselves.

---

2. Amendment to Regulation 61(4)

The reference to compliance with requirements specified in Schedule VII has been substituted.

The revised regulation now requires compliance with requirements specified by the Board from time to time.

Significance

This ensures consistency with the revised Regulation 40(7) and provides SEBI flexibility to revise operational procedures without amending the principal Regulations.

---

3. Amendment to Schedule VII

Clause C of Schedule VII has been omitted.

Since procedural requirements are now intended to be prescribed by SEBI separately, retaining Clause C within the Schedule became unnecessary.

---

Regulatory Intent

The amendment reflects SEBI's broader regulatory approach of:

• reducing rigid procedural provisions in subordinate legislation;
• enabling quicker regulatory responses;
• allowing operational requirements to evolve through circulars instead of formal regulatory amendments;
• ensuring uniformity across depositories, RTAs and listed entities.

---

Impact on Listed Companies

Listed entities should now:

• periodically review SEBI circulars governing transfer and transmission of securities;
• ensure that their Registrar & Share Transfer Agent (RTA) implements revised procedures promptly;
• update internal SOPs and compliance manuals;
• avoid relying exclusively on the text of the LODR Regulations for procedural compliance.

---

Impact on Company Secretaries

For Company Secretaries, this amendment means:

• greater responsibility to continuously monitor SEBI circulars;
• periodic review of transfer and transmission procedures;
• updating Board and stakeholder compliance checklists;
• ensuring secretarial and investor service teams are aligned with the latest SEBI directions.

---

Practical Implications

The amendment does not substantially alter the substantive rights of shareholders regarding transfer or transmission of securities. Instead, it changes where the procedural requirements are housed:

• Earlier: Detailed procedures were embedded within the LODR Regulations (particularly Schedule VII).
• Now: Procedures will be prescribed by SEBI through regulatory directions and circulars, allowing greater flexibility and quicker updates.

---

Conclusion

The SEBI (LODR) (Second Amendment) Regulations, 2026 represent a procedural rationalisation rather than a substantive policy shift. By replacing references to Schedule VII with the broader phrase "as specified by the Board from time to time", SEBI has created a more agile regulatory framework for transfer and transmission of securities.

For listed entities, the amendment underscores the need for continuous monitoring of SEBI's operational circulars, as regulatory compliance will increasingly depend on directions issued by the Board rather than solely on the text of the LODR Regulations. This approach is expected to facilitate faster regulatory updates while reducing the need for frequent amendments to the principal Regulations.