The Securities and Exchange Board of India (Custodian) (Amendment) Regulations, 2026, notified on 3 July 2026, introduce a significant change in the fee payment framework applicable to SEBI-registered custodians. The amendments replace the existing annual fee mechanism with a monthly fee regime, effective 1 October 2026.
The objective of the amendment appears to be to align regulatory fee collection with the periodic reporting of Assets Under Custody (AUC), improve cash flow management for custodians, facilitate more frequent regulatory oversight, and ensure proportional fee liability for newly registered custodians.
Background
The SEBI (Custodian) Regulations, 1996 govern entities registered as custodians of securities, who hold securities and related assets on behalf of institutional investors such as:
- Mutual Funds
- Foreign Portfolio Investors (FPIs)
- Alternative Investment Funds (AIFs)
- Insurance Companies
- Pension Funds
- Other institutional investors
Prior to this amendment, custodians were required to pay annual registration fees, calculated as:
- ₹10,00,000 annually; or
- 0.0005% of Assets Under Custody (AUC),
whichever was higher.
Effective Date
The amendment comes into force on:
1 October 2026.
Major Amendments
1. Annual Fee replaced by Monthly Fee
The most significant amendment is the substitution of the expression "annual fee" with "monthly fee" throughout the Regulations.
Accordingly:
- Regulation 9(d)
- Regulation 26(i)
- Second Schedule
have all been amended.
2. Revision of Fee Structure
The revised fee is now:
Monthly Fee
- ₹85,000; or
- 0.0000416% of Assets Under Custody,
whichever is higher.
Practical Observation
The revised percentage is essentially the annual rate divided into monthly instalments:
| Earlier | Revised |
|---|---|
| ₹10,00,000 annually | ₹85,000 monthly |
| 0.0005% annually | 0.0000416% monthly |
Thus, the overall economic burden remains substantially unchanged, while the payment frequency changes.
3. Monthly Payment Timeline
Every custodian must pay the monthly fee:
within 15 days from the end of each month.
Example
| Month | Due Date |
|---|---|
| October 2026 | 15 November 2026 |
| November 2026 | 15 December 2026 |
4. New Custodians
Custodians receiving registration after 1 October 2026 will:
- pay proportionate monthly fee for the month in which registration is granted; and
- thereafter pay the full monthly fee for every month during which registration remains valid.
This ensures equitable treatment by charging only for the relevant portion of the initial month.
5. Existing Custodians – Transitional Arrangement
Custodians already registered before 1 October 2026 must:
- pay proportionate annual fees for the portion of FY 2026–27 up to the commencement of the amended regime; and
- thereafter shift to monthly fee payments.
6. Adjustment of Annual Fee Already Paid
Where an existing custodian has already paid annual fees covering a period beyond 1 October 2026, the amount relating to the post-commencement period will be adjusted against future fee liabilities.
Significance
This avoids:
- double payment,
- unjust enrichment of the regulator, and
- administrative disputes regarding refunds.
7. Monthly Reporting of Assets Under Custody
The amendment also changes the reporting requirement.
Instead of furnishing AUC details annually, custodians must now submit Assets Under Custody details every month in the format specified by SEBI. The statement must be certified by the Functional Head of Custody Services regarding its correctness and completeness.
Practical Impact
The amendment is expected to have several operational implications:
Better Regulatory Oversight
Monthly reporting enables SEBI to monitor changes in Assets Under Custody more frequently and detect unusual movements sooner.
Improved Cash Flow
Monthly fee payments spread the financial outflow over the year instead of requiring a single annual payment.
Enhanced Compliance Requirements
Custodians will need to:
- compute monthly fees accurately,
- track due dates,
- prepare monthly AUC statements, and
- obtain timely internal certification.
System Changes
Custodians may need to update:
- finance systems,
- compliance calendars,
- billing processes,
- internal controls, and
- reporting software.
Compliance Action Points
Before 1 October 2026, custodians should:
- Revise internal compliance calendars to reflect monthly fee obligations.
- Modify accounting and ERP systems for monthly fee computation and payment.
- Establish a process for preparing monthly AUC statements.
- Designate responsible officers for certification and timely submission.
- Review annual fees already paid and reconcile transitional adjustments.
- Train finance and compliance teams on the revised framework.
Key Takeaways
- Effective Date: 1 October 2026.
- Annual fees are replaced by monthly fees across the regulatory framework.
- Monthly fee: ₹85,000 or 0.0000416% of Assets Under Custody, whichever is higher.
- Fees are payable within 15 days after the end of each month.
- New custodians pay proportionate fees for the month of registration.
- Existing custodians transition through a proportionate annual fee mechanism with adjustments for fees already paid.
- Monthly submission of certified AUC details becomes mandatory.
Conclusion
The SEBI (Custodian) (Amendment) Regulations, 2026 represent a procedural modernization rather than a substantive increase in regulatory costs. By replacing annual payments with a monthly fee and reporting regime, SEBI aims to enhance supervisory oversight, improve the timeliness of compliance information, and create a more streamlined fee collection mechanism. While the overall financial liability for custodians remains broadly unchanged, the amendments will require updates to internal systems, compliance workflows, and reporting practices to ensure timely monthly payments and certified disclosure of Assets Under Custody.
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