The Securities and Exchange Board of India (SEBI) has officially notified the SEBI (Custodian) (Amendment) Regulations, 2026 on 3 July 2026, replacing the existing annual fee mechanism with a monthly payment system effective 1 October 2026. According to the latest regulatory notification, this change aims to ensure smoother payments and improved compliance for custodians operating in the Indian securities market. The notification was published in the Gazette of India, Part III—Section 4, as Notification No. 435 dated 3rd July 2026, and replaces the existing SEBI (Custodian of Securities) Regulations, 1996 that were originally published on 16th May 1996 and most recently amended on 23rd September 2025.
Under the new system, custodians will pay ₹85,000 per month or 0.0000416 per cent of their assets under custody, whichever is higher. This represents a significant increase from the existing annual fee of ₹10 lakh or 0.0005 per cent of assets under custody. As reported in the latest regulatory amendments, custodians must pay the monthly fee within 15 days from the end of each month to maintain compliance with the new regulations. The amendment makes direct terminology substitutions in Regulation 9(d) and Regulation 26(i), replacing "annual" with "monthly" to convert the underlying obligation from a once-a-year payment to a recurring monthly one.
SEBI has provided a structured transition mechanism for custodians registered before 1 October 2026. According to the regulatory amendments, these custodians will pay a proportionate annual fee up to 30 September 2026 and then shift to monthly fee payments from 1 October 2026. For custodians registered on or after 1 October 2026, the transition involves paying a proportionate monthly fee for the month of registration followed by the full monthly fee from the subsequent month. The most operationally significant provision is sub-clause (3), which requires already-registered custodians to pay a proportionate annual fee for FY 2026-27 within 15 days of commencement, while also adjusting for any annual fee already paid that overlaps the post-commencement period.
The regulatory framework requires custodians to implement significant operational changes to comply with the new monthly payment system. As reported by industry experts, firms should rework internal billing systems and MIS to calculate and process fees on a monthly basis from October 2026 onward. Custodians must build a recurring internal process to compute and remit the monthly fee within 15 days of each month-end and update their periodic asset-under-custody reporting process to match the new monthly cadence. The shift represents more than a cosmetic word swap, as moving from a single annual payment to twelve monthly payments changes how custodians budget for regulatory costs. Practitioners advising custodians should flag the shift in reporting cadence, since asset-under-custody details tied to fee payment now need to be furnished monthly rather than annually, creating a meaningfully higher-frequency compliance obligation.
