The Securities and Exchange Board of India (SEBI) is considering sweeping changes to SME listing rules that could fundamentally alter the small and medium-enterprise segment. According to media reports citing sources familiar with the matter, companies with a market value of up to ₹4,000 crore could use SME platforms for initial public offerings, marking the biggest overhaul of India's SME market since dedicated platforms were introduced in 2012. The regulator is also considering raising the paid-up capital threshold for SME listings to ₹100 crore from ₹25 crore, which would allow companies valued between ₹1,000 crore and ₹4,000 crore to choose between SME platforms and mainboard listings. As reported by multiple sources, these proposed reforms come as activity in the SME IPO segment has increased sharply, with India recording nearly 100 SME listings so far in 2026, compared with 267 listings during the whole of 2025. SEBI Chairman Tuhin Kanta Pandey confirmed that the regulator is examining several shortcomings in the SME framework, including difficulties in trading, market making, underwriting and migration to the main board, stating that "issues such as market making were adding to the cost for small-company IPOs".
The proposed reforms would significantly expand market accessibility for both issuers and investors. SEBI is also considering removing the minimum trade-size requirement for SME shares, which currently requires investors to place bids in multiples of ₹2 lakh. This move could allow investors to buy and sell smaller quantities, potentially lowering the entry barrier for retail participation in SME markets. The regulatory changes are designed to strengthen onshore trading strategies and provide better support for decision-makers operating from within the country, representing SEBI's strategic approach to enhancing India's financial services ecosystem. Pandey emphasized that increasing the trading lot size and application size to control retail participation has not achieved the intended purpose, with the regulator expected to issue a consultation paper seeking public comments soon.
Speaking on the sidelines of the Ficci Annual Capital Markets Conference in Mumbai on Wednesday, SEBI Chairman Tuhin Kanta Pandey confirmed the regulator was examining several shortcomings in the SME framework, including difficulties in trading, market making, underwriting and migration to the main board. As reported by The Hindu BusinessLine, Pandey said there are certain things about the SME framework which are actually curbing the organisations and enterprises that are on the SME platform, they are curbing their growth, and there are difficulties in their trading as well. The chairman emphasized that the regulator has observed a lot of odd lots being created, which has made it difficult for investors to trade, with measures aimed at controlling retail participation not delivering the intended outcome. "If someone is on the SME platform, obviously we do not want them to incur higher costs. But the cost is significantly higher compared with the mainboard," Pandey stated. The market-making and underwriting frameworks mandated for SMEs are not working properly, and are only adding to the costs, making SME IPOs costlier than mainboard, according to The Hindu BusinessLine. Pandey said the migration to mainboard has been linked to the paid up capital of companies, which is creating issues and needs to be delinked and rethought in a new way, with a consultation paper on the same to be issued.
SEBI is preparing comprehensive guidelines for the responsible use of artificial intelligence and machine learning in securities markets, with Chairman Tuhin Kanta Pandey confirming the regulator is preparing guidelines for responsible use of AI and ML technology. According to The Hindu BusinessLine, Pandey said every SEBI-regulated entity would remain fully responsible for any AI or ML tool it uses, whether developed internally or procured from a third party, with this responsibility extending to the privacy, security and integrity of investor data, as well as the outputs generated by such systems. The proposed guidelines will follow a tiered approach with clear accountability and governance controls, requiring safeguards such as 'kill switches' and 'humans in the loop' alongside data controls to balance technological innovation with investor protection. An earlier consultation on AI had not yet been concluded, but developments since then have prompted the regulator to incorporate newer issues into the proposed framework.
SEBI is conducting a comprehensive review of rules governing initial public offerings by small companies, with market making activities adding to costs for small company IPOs prompting the regulatory action. The regulator is considering removing the mandatory market-making requirement for SME-listed companies, which currently requires market-makers to continuously provide buy and sell quotes to support liquidity. Additionally, mandatory underwriting requirements for SME IPOs could be removed, where investment bankers are required to cover any shortfall in demand. Investment bankers currently charge an average 5.3% of the amount raised for SME IPOs, compared with around 2.2% for mainboard offerings, according to Prime Database. The proposed changes are aimed at reducing the cost burden associated with SME listings and making the segment more accessible to issuers, with the proposals remaining under consideration and potentially being revised before SEBI issues its consultation paper. A working group formed by SEBI to examine issues related to the SME platform has recently submitted its report to the regulator, with SEBI planning to release a consultation paper soon on the SME platform.
