The Securities and Exchange Board of India (Sebi) has proposed scrapping the mandatory appointment of merchant bankers for small-value debt issued through private placement by listed entities. According to reports from The Hindu BusinessLine, the current rule requires issuers to appoint at least one merchant banker for private placements of debt securities or non-convertible redeemable preference shares with a face value of ₹10,000. The mandatory appointment of merchant bankers increases costs, causes delays and hurts price-sensitive debt issuances where market yields can move quickly. Sebi has now proposed to exempt "small-value debt" issues from the requirement of merchant banker appointment, subject to certain conditions. The move is aimed at reducing compliance costs and boosting market development, addressing the limited availability of merchant bankers in the debt segment and the delays involved in appointing them that can hinder small-value debt issuance. As per The Hindu BusinessLine, the proposal was issued on August 28, 2026, with the draft circular stating that the proposed provisions would be "applicable with immediate effect" if finalised.
Market experts believe Sebi's proposal will significantly enhance small-value bond issuances and retail investor participation. Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap LLP, noted that the ₹10,000 face-value private placement route was so far not attractive to issuers, as the mandatory merchant banker requirement added to costs and made such issues less viable. He expects "more frequent and smaller bond issuances, which over time should help deepen the corporate bond market. Online bond portals could particularly benefit as a wider range of smaller bond issues becomes available to investors." Nikhil Aggarwal, founder and group CEO of Grip Invest, highlighted that most AA and AAA-rated bonds are currently issued at a face value of ₹1 lakh and above, restricting participation from retail investors due to the ticket size. With this relaxation, high-rated issuers can now consider doing small-size bond issuances just for retail investors at ₹10,000 face value. As per The Hindu BusinessLine, the move aims to spur small-value issuances, boost online bond platforms, and increase investment avenues for retail investors.
As reported by The Hindu BusinessLine, Sebi has proposed specific conditions for the exemption to be applicable. The issuer must be registered or regulated by a financial sector regulator in India and listed on any segment of a recognised stock exchange for at least one year. Additionally, stock exchanges must ensure the issuer has no pending fines or penalties levied by Sebi or the bourses when granting in-principle approval. The exemption also requires that the issuer has not defaulted in the last three financial years and the current financial year regarding repayment of deposits, interest on deposits, redemption of non-convertible preference shares or debt securities, interest on them, declaration and payment of dividends to shareholders, and repayment of term loans or interest on them. The issuer must submit an auditor's certificate confirming compliance with these conditions to the stock exchange. Under the proposed framework, the debt being issued must be senior or unsubordinated and secured by a first or pari passu charge on identifiable assets of the issuer, and it must carry a credit rating of at least AA- at the time of private placement. The exemption is restricted to issuers meeting four conditions, such as being registered with or regulated by a financial sector regulator in India, including SEBI, the Reserve Bank of India, the Insurance Regulatory and Development Authority of India or the Pension Fund Regulatory and Development Authority.
According to Sebi's consultation paper and The Hindu BusinessLine reports, the move is aimed at reducing compliance costs and boosting market development. As reported by The Hindu BusinessLine, Sebi has invited public comments by September 17, 2026 on these proposals. The exemption will facilitate fund raising by issuers of debt security/non-convertible redeemable preference share on a private placement basis at a face value of ₹10,000. Sebi emphasizes that these conditions are intended to limit the exemption to relatively lower-risk instruments and issuers with demonstrated repayment capacity, addressing the market need for faster, more cost-effective debt issuance in a rapidly changing yield environment. The proposal follows an examination of the recommendations of a Working Group and takes into account the availability of sufficient information about issuers in the public domain, as well as their regulatory oversight.
