MCA Notifies Companies (Indian Accounting Standards) Amendment Rules, 2026

 

Overview

The Ministry of Corporate Affairs, in exercise of powers conferred by Section 133 read with Section 469 of the Companies Act, 2013, and in consultation with the National Financial Reporting Authority, has notified the Companies (Indian Accounting Standards) Amendment Rules, 2026 vide G.S.R. 725(E), dated 12th August 2026. The amendment rules come into force from the date of their publication in the Official Gazette and amend the Companies (Indian Accounting Standards) Rules, 2015.

The amendments touch five standards — Ind AS 101, Ind AS 107, Ind AS 109, Ind AS 110, and Ind AS 7 — and are primarily aimed at aligning Indian accounting standards with recent IFRS developments, including IFRS 18 consequential changes, the Annual Improvements to Ind AS (2024), and a new IFRS-aligned framework for contracts referencing nature-dependent electricity.

Ind AS 101 — First-time Adoption of Indian Accounting Standards

A new paragraph 39AK has been inserted, requiring entities to apply the amended paragraphs B5–B6 of Appendix 1 for annual reporting periods beginning on or after 1 April 2026. Appendix B paragraphs B5 and B6, dealing with hedge accounting exemptions at the date of transition to Ind AS, have been substituted with revised text clarifying treatment of hedging relationships that do not qualify for hedge accounting under Ind AS 109, and transactions that fail to meet qualifying criteria under paragraphs 6.4.1(b)–(c) of Ind AS 109.

Appendix 1, paragraph 14 has also been revised to note that paragraph 39AJ of IFRS 1 has not been incorporated into Ind AS 101, since it pertains to amendments arising from IFRS 18 (Presentation and Disclosure in Financial Statements), for which a corresponding Ind AS is still under formulation.

Ind AS 107 — Financial Instruments: Disclosures

This standard sees the most extensive changes, largely relating to disclosure obligations for contracts referencing nature-dependent electricity — i.e., power purchase arrangements where generation depends on uncontrollable natural conditions such as weather (solar, wind).

Key insertions include:

• Paragraphs 5B–5D: Scope conditions linking such contracts to paragraph 2.3A of Ind AS 109.
• Paragraph 11A: Disclosure requirements now apply "for each class of investment," with a substituted item (c) requiring disclosure of fair value at period end, and a new item (f) requiring disclosure of fair value gains/losses recognised in other comprehensive income, split between derecognised and continuing investments.
• Paragraph 11B: A new item (d) requiring disclosure of transfers of cumulative gain or loss within equity relating to derecognised investments.
• Paragraphs 20B–20D: New disclosure requirements for financial assets and liabilities whose contractual cash flows are contingent on events unrelated to basic lending risk (for example, loans linked to carbon-emission reduction targets), including qualitative description of the contingent event, quantitative range of possible cash flow changes, and gross carrying/amortised cost amounts affected.
• Paragraphs 30A–30C: A new disclosure regime requiring a single note covering contractual features exposing entities to electricity volume variability and take-or-pay risk, unrecognised commitments, and financial performance effects — including costs of unused electricity and related purchases/sales.
• Paragraphs 44KK–44PP: Transition and effective date provisions, tying application to the corresponding amendments in Ind AS 109.
• Appendix B, paragraph B38: Substituted to expand disclosure requirements on gains or losses arising from derecognition involving continuing involvement, including whether fair value measurements involved significant unobservable inputs under Ind AS 113.

Ind AS 109 — Financial Instruments

Ind AS 109 carries the substantive recognition and measurement changes underpinning the Ind AS 107 disclosures above.

Contracts referencing nature-dependent electricity: New paragraphs 2.3A–2.3B define the scope of such contracts and restrict analogous application to other transactions. Paragraph 2.6 has been revised, and a new paragraph 2.8 requires entities to apply paragraphs B2.7–B2.8 to assess whether such contracts are held in line with expected usage requirements. New paragraphs 6.10.1–6.10.2 permit designation of a variable nominal amount of forecast electricity transactions as a hedged item in specified hedging relationships. Appendix B introduces paragraphs B2.7–B2.8, setting out a "net purchaser" test — assessed over a period not exceeding 12 months — to determine whether an entity's sales of unused electricity are consistent with the contract being held for expected usage requirements.

Classification and measurement of financial instruments: Paragraph 2.1(b)(ii) has been substituted to clarify that lease liabilities recognised by a lessee are subject to derecognition requirements under paragraphs 3.3.1 and 3.3.3. Paragraph 5.1.3 has been revised regarding initial measurement of trade receivables under Ind AS 115. New paragraphs B4.1.8A and B4.1.10A introduce a refined framework for assessing contingent contractual cash flow features — particularly ESG or carbon-linked adjustments — against a "not significantly different from a benchmark instrument" test. A new worked example (Instrument EA) has been added to paragraph B4.1.13 illustrating this assessment for a carbon-linked interest rate adjustment, and a new example (Instrument I) has been added to paragraph B4.1.14 illustrating cash flows indexed to a carbon price index that fail the basic lending test. Paragraphs B4.1.16, B4.1.16A, B4.1.17, B4.1.20, B4.1.20A, B4.1.21 and B4.1.23 have been revised to refine the treatment of non-recourse financial assets and contractually linked (tranched) instruments.

Electronic payment settlement: New paragraph B3.1.2A sets out the general recognition and derecognition principles for financial assets and liabilities. New paragraphs B3.3.8–B3.3.10 permit an entity to treat a financial liability settled through an electronic payment system as discharged before the actual settlement date, provided the entity has no practical ability to withdraw or stop the payment instruction, has no practical ability to access the cash used for settlement, and the settlement risk associated with the payment system is insignificant.

Transition provisions: New paragraphs 7.1.11 to 7.1.15 and 7.2.47 to 7.2.53 set out effective dates and transition mechanics for the above changes, generally applicable to annual reporting periods beginning on or after 1 April 2026, with an option for prospective application of hedge designations and irrevocable fair-value-through-profit-or-loss designation for contracts falling outside Ind AS 109 scope under the new electricity contract test.

Ind AS 110 — Consolidated Financial Statements

Appendix B, paragraph B74 has been substituted to clarify that a de facto agency relationship for control assessment purposes need not involve a contractual arrangement, and may arise where an investor — or those who direct the investor's activities — has the ability to direct another party to act on the investor's behalf. Appendix C (Effective Date and Transition) has been substituted to insert paragraph C1E, applying the Annual Improvements to Ind AS (2024) amendment to paragraph B74 for annual reporting periods beginning on or after 1 April 2026. A new Appendix D has also been inserted, cross-referencing related provisions in Ind AS 10 and Ind AS 37.

Ind AS 7 — Statement of Cash Flows

Paragraph 37 has been substituted to restrict an investor's reporting, when accounting for an investment in an associate, joint venture, or subsidiary at cost, to cash flows between the investor and the investee (such as dividends and advances). This change is accompanied by a new paragraph 65, applicable to annual reporting periods beginning on or after 1 April 2026, and new explanatory paragraphs 7 and 8 in Appendix 1 clarifying that the reference to the equity method in paragraph 37 of IAS 7 has been deliberately omitted, since Ind AS 27 (Separate Financial Statements) does not permit use of the equity method in separate financial statements.

Effective Date and Applicability

The amendment rules take effect from the date of publication in the Official Gazette. However, the substantive standard-level amendments — including those relating to nature-dependent electricity contracts, financial instrument classification and measurement, and the Ind AS 7 and Ind AS 110 changes — are generally applicable to annual reporting periods beginning on or after 1 April 2026, with specified transition reliefs from full retrospective restatement.

Practical Implications

Entities with exposure to renewable energy power purchase agreements, sustainability-linked or carbon-indexed financial instruments, or electronic payment settlement mechanisms for financial liabilities will need to reassess classification, hedge documentation, and disclosure processes well ahead of the FY 2026–27 reporting cycle. Finance and accounting teams should begin evaluating the impact of the "net purchaser" test on existing electricity contracts and the "not significantly different" cash flow test on ESG-linked lending arrangements, given the transition reliefs are optional rather than mandatory retrospective restatement.

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Source: Ministry of Corporate Affairs, G.S.R. 725(E), dated 12th August 2026.

SEBI Amends Operational Framework for Municipal Debt Securities: Key Changes Effective August 11, 2026

 Background

The Securities and Exchange Board of India ("SEBI"), vide Circular No. HO/17/11/24(1)2026-DDHS-POD1/I/18526/2026 dated August 11, 2026, has notified certain operational changes applicable to the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015 ("ILMDS Regulations"). The Circular follows the recommendations of a Working Group constituted by SEBI in August 2024, and builds upon the amendments already notified vide Gazette Notification SEBI/LAD-NRO/GN/2026/305 dated July 8, 2026 [SEBI (Issue and Listing of Municipal Debt Securities) (Amendment) Regulations, 2026].

The Circular is addressed to all issuers who have listed or propose to list municipal debt securities, all recognized stock exchanges, all recognized depositories, and all registered merchant bankers. It has been issued in exercise of powers conferred under Section 11(1) of the SEBI Act, 1992, read with Regulation 29 of the ILMDS Regulations.

1. Face Value of Municipal Debt Securities

Regulation 22 of the ILMDS Regulations requires that the face value of municipal debt securities be disclosed in the offer document or placement memorandum in the manner specified by the Board. Pursuant to this mandate, SEBI has now specified the following norms, applicable exclusively to municipal debt securities issued on a private placement basis:

1. The face value of each municipal debt security shall be either Rs. One Lakh or Rs. Ten Thousand, as deemed fit by the issuer.
2. Where a municipal debt security is issued at a face value of Rs. Ten Thousand, such security shall have a fixed maturity and shall not carry any structured obligations.
3. The trading lot of a privately placed municipal debt security, when traded on a stock exchange, shall always be equal to the face value of such security.
4. These face value requirements apply only to privately placed municipal debt securities and do not extend to public issues.

2. Two-Step Escrow Account Mechanism for Pooled Finance Vehicles

SEBI Circular No. SEBI/HO/DDHS/CIR/P/134/2019 dated November 13, 2019 ("2019 Circular") prescribes the escrow payment mechanism applicable to issuers of municipal debt securities. Where the listed entity is a pooled finance vehicle or Special Purpose Vehicle (SPV) constituted under the Pooled Finance Development Fund Scheme of the Government of India, the present Circular inserts a new paragraph 4.1.5 into the 2019 Circular, introducing a two-step escrow account mechanism to ensure timely repayment of interest and redemption to investors.

Under the revised framework:

• The constituent municipalities are required to create all accounts prescribed under the 2019 Circular and comply with the requirements applicable thereto.
• The SPV/pooled finance vehicle shall additionally maintain an "Interest Payment Account" and a "Sinking Fund Account", to which funds from the corresponding accounts maintained by the constituent municipalities shall be transferred, in accordance with the agreement executed between the SPV and the constituent municipalities.
• The SPV/pooled finance vehicle shall maintain, throughout the tenure of the municipal debt securities, an amount equivalent to one year's interest obligation in the Interest Payment Account.

Further, newly inserted paragraph 4.1.6 permits the SPV/pooled finance vehicle to incorporate the following forms of credit enhancement to improve credit rating and afford greater protection to investors:

(i) additional cash collateral; (ii) program equity by the state government; (iii) access to state finance commission devolutions to Urban Local Bodies (ULBs); (iv) full or partial credit guarantee from a high-rated Development Finance Institution (DFI) or multilateral institution; and (v) any other appropriate credit enhancement structure.

3. Revised Timelines for Submission of Financial Results

The 2019 Circular also prescribes timelines within which municipalities are required to submit financial results to the stock exchange(s). Recognizing the practical challenges faced by municipalities in data collection, interdepartmental coordination, and meeting disclosure requirements, SEBI has relaxed the timelines under paragraph 2.1 as follows:

Half-Yearly Unaudited Financial Results (Paragraph 2.1.1): The timeline for submission stands extended from forty-five days to sixty days from the end of the first half-year.

Annual Audited Financial Results (Paragraph 2.1.2): The timeline for submission stands extended from sixty days to ninety days from the end of the financial year, along with the audit report.

Applicability

The provisions of this Circular are applicable with immediate effect, i.e., from August 11, 2026.

Concluding Remarks

This Circular represents a calibrated response to operational difficulties encountered by municipal issuers, particularly those structured as pooled finance vehicles or SPVs. The introduction of standardized face value denominations for private placements, a two-tier escrow safeguard for SPV structures, and more realistic disclosure timelines collectively aim to strengthen investor protection while easing compliance burdens on municipal corporations participating in the debt capital markets. Issuers, merchant bankers, and stock exchanges dealing with municipal debt securities should review their internal processes to ensure alignment with the revised framework at the earliest.

SEBI Informal Guidance Clarifies: Stock Brokers Cannot House NBFC Activities Within the Same Corporate Entity

 Introduction

The Securities and Exchange Board of India ("SEBI"), through its Nodal Co-ordination Cell, has issued an informal guidance letter dated August 10, 2026 (Issue No. I/18462/2026), addressing a significant question of regulatory architecture: whether a SEBI-registered stock broker may simultaneously hold Reserve Bank of India ("RBI") Non-Banking Financial Company ("NBFC") registration and conduct NBFC business within the same corporate entity as its stock broking operations. The guidance was issued under the Securities and Exchange Board of India (Informal Guidance) Scheme, 2025, in response to an application seeking an interpretive letter.

Background of the Application

The applicant, a SEBI-registered stock broker and depository participant, represented that its Memorandum of Association expressly authorised it to provide financial assistance, lending, and factoring services, and to finance industrial enterprises. The applicant intended to commence NBFC activities under RBI's regulatory purview and sought to house both its existing broking business and the proposed NBFC operations within the same corporate entity.

The application was premised on Regulation 12 of the Securities and Exchange Board of India (Stock Brokers) Regulations, 2026 ("Stock Brokers Regulations"), which permits a stock broker to carry out activities under the framework of another financial sector regulator in a "manner specified by the Board." The applicant contended that while this provision enables multi-disciplinary operations, the specific procedural manner remained undefined, warranting SEBI's clarification.

Queries Raised

The applicant sought guidance on four specific issues:

S. No.	Query
1	Whether a singular corporate entity can simultaneously hold SEBI stock broker registration and RBI NBFC registration under the 2026 regulatory framework
2	The prescribed internal controls and accounting standards required to ensure absolute segregation of client funds and securities, preventing cross-collateralization between the broking and NBFC divisions
3	The methodology for computing net worth under Regulation 47 of the Stock Brokers Regulations, specifically whether the company must satisfy the higher of the SEBI or RBI capital requirements on an aggregate basis
4	Confirmation that the addition of NBFC activities constitutes a "material change" under Regulation 10(h) of the Stock Brokers Regulations, requiring formal notification through the Exchanges

SEBI's Analysis and Response

Statutory Framework under Regulation 12(1)

SEBI reproduced the text of Regulation 12(1) of the Stock Brokers Regulations, which states that "a stock broker may carry out an activity under the regulatory framework of the other financial sector regulator or any other specified authority in the manner as may be specified by the Board." SEBI clarified that this is an enabling provision that operates only to the extent SEBI has affirmatively specified the manner of exercise — it does not, by itself, confer a general license to diversify into other regulated sectors.

Activities Currently Permitted

SEBI noted that, as on the date of the response, only two categories of cross-regulatory activity have been specified by the Board:

1. Activities pertaining to the Negotiated Dealing System-Order Matching (NDS-OM) platform for trading in Government Securities, falling under the regulatory framework of RBI; and
2. Activities pertaining to securities market related operations in Gujarat International Finance Tech-City – International Financial Services Centre, falling under the regulatory framework of the International Financial Services Centres Authority ("IFSCA").

These permissions trace back to SEBI Circulars dated February 11, 2025 and May 2, 2025, issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read with Regulation 30 of the erstwhile Securities and Exchange Board of India (Stock Brokers) Regulations, 1992 — provisions now subsumed into the Stock Brokers Regulations, 2026 pursuant to the 'Repeal and Saving' clause.

No Framework Exists for NBFC Activities

Critically, SEBI observed that no framework or circular has been issued in terms of Regulation 12(1) with respect to a stock broker carrying out activities as an NBFC. In the absence of such a specified framework, SEBI held that a stock broker may not undertake NBFC activities under the current regulatory architecture.

Independent Restriction under the Securities Contracts (Regulation) Rules, 1957

SEBI further invoked Rule 8(1)(f) and Rule 8(3)(f) of the Securities Contracts (Regulation) Rules, 1957, which independently prohibit a stock broker from engaging "in any business other than that of securities, except as a broker or agent not involving any personal financial liability." This provision operates as a standalone restriction, independent of the Stock Brokers Regulations, reinforcing the conclusion that in-house NBFC diversification is impermissible.

Consequential Non-Consideration of Ancillary Queries

Having concluded that the primary structural query (dual registration within a single entity) could not be answered in the affirmative, SEBI's response did not extend to prescribing net worth computation methodology, fund segregation standards, or material change disclosure requirements, as these queries were premised on a structure that is not currently permissible.

Standard Caveats

As is customary with informal guidance letters, SEBI clarified that:

• The letter expresses the relevant Department's position on enforcement action only, and does not represent a decision of the Board;
• The guidance is based strictly on the representations made in the application, and different facts or conditions would warrant a different outcome;
• The applicant is not precluded from adopting any other legal position, as deemed appropriate; and
• The response does not affect the applicability of any other SEBI Regulation, Guideline, or Circular, or any law administered by any other authority.

Key Takeaways for Stock Brokers

1. Regulation 12(1) is not self-executing. It merely enables SEBI to specify permissible cross-sector activities; absent an affirmative circular or framework, no such activity may be undertaken.
2. NBFC diversification currently requires a separate corporate vehicle. Stock brokers with lending, factoring, or financing ambitions cannot house such operations within the broking entity itself.
3. Rule 8 of the SCRR, 1957 operates as an independent constraint, quite apart from SEBI's own regulations, further foreclosing single-entity diversification.
4. Informal guidance is fact-specific and non-binding on the Board, but remains a useful indicator of the Department's current enforcement posture and should inform structuring decisions until a formal framework, if any, is notified.

Stock brokers considering multi-disciplinary expansion into RBI-regulated NBFC activities should structure such operations through a distinct corporate entity, pending any future SEBI framework specifying the manner of such diversification under Regulation 12(1).

SEBI Streamlines Inspection Framework for Market Intermediaries: A Shift Towards Risk-Based Supervision

The Securities and Exchange Board of India (SEBI), vide Press Release No. 44/2026 dated August 07, 2026, has announced a significant recalibration of its inspection framework for market intermediaries, including Stock Brokers, Depository Participants (DPs), Investment Advisers (IAs), and Research Analysts (RAs). The revised approach, effective from Financial Year 2026-27, follows deliberations between SEBI, Market Infrastructure Institutions (MIIs), and the Supervisory Body for IAs/RAs.

Background

Historically, SEBI has conducted periodic inspections of market intermediaries independent of the inspections carried out by Stock Exchanges and Depositories. This has, over time, resulted in overlapping compliance burdens for entities already subject to regular oversight by these Market Infrastructure Institutions. The revised framework seeks to address this duplication while strengthening the overall quality and precision of regulatory supervision.

Key Features of the Revised Framework

1. Mandatory Joint Inspections

Stock Broker and Depository Participant inspections will now be conducted jointly by Stock Exchanges and Depositories, rather than through separate, siloed inspection cycles.

2. Rationalisation of SEBI-Led Inspections

Recognising that stock brokers, DPs, IAs, and RAs are already subject to regular inspections by Exchanges and Depositories, SEBI has rationalised its own targeted inspection numbers for FY 2026-27 to approximately one-third of the inspections conducted in FY 2025-26.

3. Discontinuation of Repetitive Comprehensive Inspections

Annual comprehensive inspections of compliant entities — particularly Qualified Stock Brokers (QSBs) — are being discontinued as a matter of routine. However, entities that repeatedly feature across shortlisting parameters, carry elevated risk scores, or trigger multiple regulatory alerts will continue to be prioritised for inspection.

4. Convergence for Multi-Registration Entities

Where an entity holds multiple intermediary registrations, inspections will, wherever feasible, be conducted jointly across the relevant SEBI departments. This is intended to reduce the aggregate number of inspection visits an entity faces over a financial year.

5. Enhanced Weightage to Alerts and Complaints

Greater emphasis is being placed on alerts generated by Exchanges, investor complaints, and social media inputs in identifying entities for inspection. Shortlisting based on these parameters will now be undertaken on a quarterly basis, replacing the earlier, less frequent review cycle.

6. Intelligence and Reference-Based Inspections

SEBI has also indicated that inspections will be triggered based on market intelligence and references received, including inputs from Regional Offices (ROs) and Local Offices (LOs). Specific themes flagged for such inspections include technical glitches, cyber incidents, and conduct of Authorised Persons of stock brokers.

Analysis and Implications

The revised framework signals a clear regulatory shift from a calendar-driven, uniform inspection model to a dynamic, risk-based supervisory approach. For compliant intermediaries with clean track records, this development is likely to translate into reduced inspection frequency and lower compliance overheads. Conversely, entities that consistently trigger risk parameters, alerts, or complaints can expect more frequent and closer scrutiny, with shortlisting now occurring quarterly rather than annually.

From a governance standpoint, market intermediaries would be well advised to strengthen internal risk and compliance monitoring systems, given that recurring appearances across risk parameters — rather than the mere passage of time — will now be a key determinant of inspection frequency. Entities holding multiple SEBI registrations should also anticipate more coordinated, consolidated inspection visits rather than department-wise separate inspections.

Conclusion

This move is consistent with SEBI's broader stated objective of enhancing Ease of Doing Business for market intermediaries while simultaneously sharpening regulatory oversight through data and alert-driven mechanisms. Intermediaries should closely monitor their compliance posture and risk indicators, as the frequency and depth of future inspections will increasingly be determined by real-time risk signals rather than fixed periodic cycles.

(Source: SEBI Press Release No. 44/2026, dated August 07, 2026)

SEBI Informal Guidance on Sale of Unlisted Equity Shares by IDBI Bank to Non-QIB Investors: An Analysis

 Introduction

The Securities and Exchange Board of India ("SEBI"), through its Nodal Co-ordination Cell, issued an Informal Guidance letter dated July 31, 2026 (Issue No. I/17888/2026) in response to an application filed by IDBI Bank Limited ("IDBI" or "the Bank") under the Securities and Exchange Board of India (Informal Guidance) Scheme, 2025 ("Informal Guidance Scheme"). The application sought an interpretive letter clarifying the regulatory position on the proposed sale of equity shares of various unlisted companies held by IDBI to non-QIB investors. This clarification carries significant relevance for banks, financial institutions, and other entities holding unlisted equity acquired through loan restructuring, pledge invocation, or exit distributions by Alternative Investment Funds (AIFs).

Background

IDBI's application, dated May 13, 2026, was prompted by an advisory dated January 15, 2026, issued by the Department of Financial Services ("DFS"), Ministry of Finance, to IDBI and other Public Sector Banks. The DFS advisory had suggested that sale of equity shares of unlisted companies by such banks may be restricted to Qualified Institutional Buyers ("QIBs") to ensure compliance with applicable regulatory provisions and to avoid unintended classification of such sales as public issues.

IDBI submitted that it holds equity shares of various unlisted companies, generally acquired through:

(a) Restructuring or resolution of loan accounts, or invocation of pledges;

(b) Direct acquisition of shares as investment; and

(c) In-specie distribution of non-exited equity shares by Venture Capital Funds ("VCFs") or AIFs at the end of their tenure.

IDBI proposed to sell such unlisted equity shares through bilateral or negotiated transactions to identified promoters, QIB investors, and non-QIB investors, without any public advertisement, Request for Proposal (RFP), Expression of Interest (EOI), or general solicitation. Importantly, such transactions were represented to be pure secondary transfers, involving no fresh issuance of securities by the underlying unlisted companies.

Queries Raised

IDBI sought clarification on three specific queries:

Query 1: Whether sale of unlisted equity shares through a non-advertised, privately negotiated transaction with identified investors — including non-QIB investors such as individuals, corporate entities, and the company's promoters — would be construed as a deemed public issue under the Companies Act, 2013 ("Companies Act"), and would not be in violation of the Companies Act and the Companies (Prospectus and Allotment of Securities) Rules, 2014 ("PAS Rules").

Query 2: Whether the Companies Act or any other applicable law mandates that such transactions be restricted exclusively to QIBs, or whether a non-advertised, privately negotiated transaction with identified investors, including non-QIB investors, can be carried out.

Query 3: Whether the Bank is entitled to transfer such unlisted equity shares to the company's promoters pursuant to contractual arrangements conferring a right of first refusal or a first right to purchase, in the event of a sale by the Bank.

SEBI's Analysis and Guidance

On the Deemed Public Issue Question (Query 1)

SEBI's response opened by noting a threshold ambiguity in IDBI's application — namely, that it did not specify whether the unlisted companies whose shares were proposed to be sold were private limited or public limited companies. This distinction is material, since Section 2(68) of the Companies Act, while defining a "private company," limits the number of members to two hundred and prohibits a private company from inviting the public to subscribe to its securities. Under Section 23(2)(b), a private company may issue securities only through private placement, in compliance with the relevant provisions of the Companies Act.

By contrast, a public company may issue securities to the public through a prospectus, including by way of an offer for sale of securities by an existing shareholder. Section 28(2) of the Companies Act provides that any document by which an offer of sale to the public is made shall itself be deemed to be a prospectus.

SEBI then turned to Explanation III to Section 42(3) of the Companies Act, which provides that where a company — whether listed or unlisted — makes an offer to allot, invites subscription, allots, or enters into an agreement to allot securities to more than a prescribed number of persons, such offer shall be deemed to be an offer to the public. The "prescribed number" is 200 persons in the aggregate in a financial year, as stipulated under Rule 14 of the PAS Rules. Section 42(2) further provides that offers or allotments made to QIBs, and to employees of the company under an employee stock option scheme, are excluded while calculating the number of persons for the purpose of determining whether an offer has been made to more than 200 persons.

Applying this framework, SEBI clarified that IDBI's proposed sale of unlisted shares through non-advertised, privately negotiated transactions to identified investors — including non-QIB investors — would not be construed as a deemed public issue, provided that the sale of shares of any given company is made up to the prescribed limit of 200 persons in a financial year, in terms of Section 42 read with Section 28 of the Companies Act.

On the Restriction to QIBs (Query 2)

On the second query, SEBI clarified that Section 42(2), read with Rule 14 of the PAS Rules, does not mandate or restrict the category of persons to whom a placement or transfer of securities may be made by a company. The provision instead restricts the number of persons to whom a private placement can be made in a financial year. While computing this numerical threshold, the statute permits placements made to QIBs to be excluded from the count.

Accordingly, SEBI held that a transfer can validly be made through a non-advertised, privately negotiated transaction to identified investors, including non-QIB investors such as individuals and corporate entities, provided the transfer remains within the prescribed limit of 200 persons in a financial year, so as not to be construed as a deemed public issue.

On Transfer to Promoters Pursuant to Contractual Rights (Query 3)

On the third query concerning transfers to promoters under a right of first refusal or first right to purchase, SEBI confirmed that such a transfer by IDBI to identified promoters may be made, subject to the same prescribed numerical limit in a financial year, so as not to be construed as a deemed public issue. SEBI further observed that the specific contractual terms governing such arrangements are a matter for the parties to determine, subject to compliance with applicable law.

Caveats Attached to the Guidance

Consistent with the standard practice under the Informal Guidance Scheme, SEBI's letter carries important qualifications. The guidance has been issued with the approval of the competent authority and is based strictly on the representations made in IDBI's application; different facts or conditions would warrant a different conclusion. The letter expresses only the relevant Department's position on enforcement action, and does not reflect a decision of the SEBI Board on the questions presented. It also does not preclude the applicant from adopting any other view, as may be deemed appropriate.

Key Takeaways

This Informal Guidance offers a useful clarificatory framework for entities — particularly banks, NBFCs, and financial institutions — that hold unlisted equity shares acquired incidentally through loan restructuring, invocation of pledges, or in-specie distribution by VCFs and AIFs, and are looking to divest such holdings through off-market, negotiated transactions.

The central principle emerging from this guidance is that the "deemed public issue" trigger under the Companies Act turns on the number of offerees in a financial year, not on the category or classification of the investor. So long as a transfer of unlisted shares through a non-advertised, privately negotiated route remains within the 200-person threshold prescribed under Rule 14 of the PAS Rules (with QIB allottees excluded from that count under Section 42(2)), such a transfer — whether to non-QIB individuals, corporate entities, or promoters exercising contractual pre-emption rights — should not, by itself, be treated as an offer to the public.

Entities structuring similar divestment transactions would nonetheless be well advised to independently verify the private or public character of the underlying unlisted company, track the aggregate number of offerees across the financial year, and ensure that no element of public solicitation — such as advertisement, RFP, or EOI — enters the transaction process.

DGFT Operationalises the Inventory-Based Cross-Border E-Commerce Facilitation Framework.

Introduction

The Directorate General of Foreign Trade (DGFT), Department of Commerce, Ministry of Commerce and Industry, has issued Public Notice No. 25/2026-27 dated 5th August 2026, operationalising the Inventory-Based Cross-Border E-Commerce Facilitation Framework under Chapter 9 of the Handbook of Procedures, 2023. The Notice has been issued in exercise of powers conferred under Paragraph 1.03 and Paragraph 2.04 of the Foreign Trade Policy, 2023, as amended from time to time.

The Notice introduces AayaatNiryaat Form (ANF) 9A for registration of "Exporters-on-Record" (EOR) and inserts detailed procedures governing registration, inventory management, seller visibility, reverse logistics, compliance certification, and dispute resolution. This framework represents a significant regulatory development for entities engaged in inventory-based cross-border e-commerce exports from India, and merits careful examination by exporters, e-commerce platforms, and their advisors.

Registration and Operational Obligations of the Exporter-on-Record (Para 9.03)

An application for registration as an Exporter-on-Record must be made in ANF-9A, along with prescribed supporting documents. Any change in particulars furnished at the time of registration must be intimated to DGFT within 30 days through a revised ANF-9A. Upon such intimation, DGFT retains discretion to confirm, modify, suspend, or cancel the registration, depending on whether the EOR continues to satisfy prescribed eligibility conditions.

A digital repository, maintained under Para 9.16 of the FTP, will be accessible to DGFT and other authorised authorities, and will remain operational irrespective of the number of locations at which Export Inventory is held. This repository is required to link procurement records, GST invoices, and export documents of the EOR to the records of each Seller-on-Record — establishing an end-to-end traceability chain.

The EOR bears responsibility for ensuring that goods held in Export Inventory conform to the descriptions, specifications, and quality parameters declared by the Seller-on-Record. Further, the EOR is solely responsible for pre-export compliance with destination-country requirements, including testing, inspection, certification, accreditation, registration, licensing, approvals, and conformity assessments, as well as labelling, packaging, marking, and other product presentation or market access requirements.

Notably, the administrative charge referable to Para 9.17(iv) of the FTP is capped at 10% of the gross amount of Export Rebates and Refunds, and Seller-attributable Export Benefits must be disbursed to the Seller-on-Record within 30 days of the EOR's receipt of such rebates and refunds.

Rights and Visibility of the Seller-on-Record (Para 9.04)

The framework casts an affirmative obligation on the EOR to provide each Seller-on-Record with access to consolidated digital records covering inventory management and segregation of goods supplied by that seller. At minimum, these records must disclose the final sale price to the buyer outside India, order status, and shipment tracking details including destination country.

The EOR is additionally required to ensure that the identity of the manufacturer or brand owner — and, where different, the identity of the Seller-on-Record — is appropriately disclosed to the buyer through the product listing or other applicable means. This provision addresses transparency concerns that have historically arisen in multi-tier e-commerce fulfilment arrangements.

Reverse Logistics and Returned Consignments (Para 9.05)

Goods received from a Seller-on-Record that fail to meet required descriptions, specifications, or quality parameters must be returned within 7 days of acceptance or deemed acceptance by the EOR. Separately, consignments returned or rejected by buyers outside India must be re-exported, returned to the Seller-on-Record, or disposed of by destruction or other agreed means, within 30 days of receipt in India.

The terms governing cancellation, return, rejection, repair, re-export, destruction, or disposal of such goods must be explicitly defined in the agreement between the Seller-on-Record and the EOR, and must be fair, transparent, and verifiable.

Compliance Certification (Para 9.06)

A distinguishing feature of this framework is its reliance on third-party professional certification rather than solely self-declaration. The EOR is required to obtain, from an independent Chartered Accountant, Cost Accountant, or such other professional as DGFT may specify, a certificate confirming compliance with obligations relating to:

• Maintenance and segregation of Export Inventory
• Prohibition on domestic diversion of Export Inventory, including returned or rejected consignments
• Seller visibility and brand disclosure obligations
• Payment settlement, including the payment period and Export Rebates and Refunds disbursement period
• Accuracy of Export Rebates and Refunds apportionment calculations
• Handling and disposal of returned or rejected consignments

The EOR must provide the certifying professional with all books of account, records, and assistance reasonably required. The compliance certificate must be furnished to DGFT within 90 days from the end of each financial year, or at such other intervals as DGFT may prescribe.

Records relating to operations under the framework must be maintained for five years from the end of the financial year in which the relevant Export Inventory is finally exported, re-exported, returned, rejected, destroyed, or otherwise disposed of. Significantly, this record-preservation obligation survives cancellation, suspension, or voluntary surrender of EOR registration, and continues to bind the entity for the full five-year period.

Dispute Resolution (Para 9.07)

Disputes or grievances between the EOR and Seller-on-Record arising under the framework may be referred to the Regional Authority of DGFT having jurisdiction over the place of business of the Seller-on-Record from which the relevant supply was made. The Regional Authority is required to provide both parties a reasonable opportunity of being heard and to endeavour to facilitate resolution within 30 days of receipt of the complaint, without prejudice to the parties' rights under applicable law.

Where a dispute remains unresolved after the prescribed period, or where the Regional Authority considers further examination necessary, the matter may be referred, with recorded reasons, to DGFT (Headquarters) for further examination and appropriate administrative directions or recommendations.

Importantly, this dispute resolution mechanism does not derogate from the rights of a Seller-on-Record that qualifies as a micro or small enterprise under the Micro, Small and Medium Enterprises Development Act, 2006, including the right to approach the Micro and Small Enterprises Facilitation Council under Section 18 of that Act. Sellers falling within this category therefore retain a statutory remedy independent of the DGFT-administered process.

Consequences of Non-Compliance

The declaration accompanying ANF-9A requires the applicant to acknowledge that breach of the undertakings, or non-compliance with framework obligations — including diversion of Export Inventory to the domestic market, delayed or contingent payment to Sellers-on-Record, mis-apportionment of Seller-attributable Export Benefits, misrepresentation of origin of goods, failure to maintain prescribed records, provision of false or misleading information, or misuse of Seller-on-Record information — may, after due process, result in one or more of the following consequences:

1. Cancellation or suspension of EOR registration under the framework
2. Suspension or cancellation of the Importer-Exporter Code (IEC)
3. Placement in the Denied Entity List (DEL) under Para 2.14 of the FTP, 2023
4. Recovery of Export Rebates and Refunds availed, along with applicable interest
5. Initiation of penal or prosecution proceedings under the Foreign Trade (Development & Regulation) Act, 1992, and rules and orders made thereunder, or under any other applicable law
6. Any other action warranted under applicable law

Furnishing false, incorrect, or misleading information in the application or accompanying documents independently constitutes grounds for these consequences.

ANF-9A: Key Disclosure Requirements

The registration form itself requires comprehensive disclosure across several heads, including:

• General entity information — IEC, PAN, GSTIN, constitution, CIN/LLPIN, and authorised signatory details
• FDI and e-commerce entity disclosure — percentage of foreign investment on a fully diluted basis, details of foreign investors, and the nature of the applicant's relationship with the associated e-commerce entity
• Export particulars — turnover figures for the preceding three financial years and proposed countries of export
• E-commerce operations — details of each e-commerce platform and the nature of the applicant's relationship with it
• Warehouse and inventory locations — including whether any location constitutes an E-Commerce Export Hub (ECEH), GST registration, storage capacity, and ownership status

The form also provides for amendment of registration particulars, covering changes in constitution, name, registered office, authorised signatory, shareholding/FDI, platform relationships, warehouse locations, and surrender of registration.

Concluding Observations

This Public Notice marks a material step toward formalising inventory-based cross-border e-commerce exports within India's regulatory architecture, embedding traceability, seller protection, and professional compliance certification into a sector that has largely operated outside dedicated foreign trade procedures. For entities intending to operate as an Exporter-on-Record — as well as for Sellers-on-Record engaging with such entities — early attention to registration, documentation, and internal compliance systems will be essential to avoid the significant consequences prescribed for non-compliance, including IEC suspension and placement in the Denied Entity List.

Entities associated with inventory-based cross-border e-commerce models would be well advised to review their existing seller agreements, inventory management systems, and record-retention practices against the obligations set out in this framework at the earliest.

This article is for general informational purposes and does not constitute legal advice. Entities are advised to consult the full text of Public Notice No. 25/2026-27, the Foreign Trade Policy, 2023, and the Handbook of Procedures before initiating compliance action.

Reserve Bank of India (Commercial Banks – Digital Payment Security Controls) Directions, 2026: An Overview

Introduction

The Reserve Bank of India ('RBI'), in exercise of the powers conferred under the extant provisions of the Banking Regulation Act, 1949, Chapter IV of the Payment and Settlement Systems Act, 2007, and all other enabling provisions, has issued the Reserve Bank of India (Commercial Banks – Digital Payment Security Controls) Directions, 2026 vide circular RBI/DoS/2026-27/411, DoS.CO.CSITEG.5/31.01.015/2026-27 dated July 31, 2026 ('the Directions'). The Directions consolidate and strengthen the regulatory framework governing security controls for digital payment products and services offered by commercial banks, and come into effect immediately upon issuance.

Applicability

The Directions apply to Commercial Banks, defined to mean banking companies (other than Small Finance Banks, Payments Banks, and Local Area Banks), corresponding new banks, and the State Bank of India, as respectively defined under clauses (c), (da), and (nc) of Section 5 of the Banking Regulation Act, 1949.

The scope extends to any digital payment product or service offered by a bank for financial and non-financial transactions — including balance enquiry, PIN generation/change, mobile banking registration, OTP generation, mini-statements, transaction status checks, and grievance redressal — whether offered directly by the bank or through a system operated by RBI or an RBI-authorised Payment System Operator (PSO), along with the associated IT assets.

Chapter II: Role of the Board

Paragraph 7 mandates that the Board of Directors approve all policies relating to digital payment products and services, with such policies subject to at least annual review by the Board.

Chapter III: General Controls

A. Governance and Management of Security Risks

Under Paragraph 8, banks are required to formulate a Board-approved policy for digital payment products and services addressing payment security requirements from a Functionality, Security and Performance (FSP) perspective. This includes controls to protect data confidentiality and integrity, infrastructure adequacy, secure product rollout following requisite testing, scalability, minimal service disruption, effective dispute resolution, and a swift corrective action mechanism. Foreign banks are exempted from maintaining a separate local policy where these aspects are adequately covered in their global policy.

Paragraphs 9 to 20 further require: Board and Senior Management accountability for policy implementation; a clearly defined digital payment cycle including exception handling and User Acceptance Testing (UAT) protocols; external assessment of application logic, build, and security; integration of compliance and fraud risk into governance programs; performance monitoring through defined product-level risk limits and quantitative benchmarks (e.g., RTO/RPO, transaction failure rates); trained resources and third-party oversight; comprehensive risk assessments covering technology stack, vulnerabilities, third-party dependence, data protection, and business continuity; Risk and Control Self-Assessment (RCSA) exercises; and half-yearly testing of backup recovery capabilities.

B. Other Generic Security Controls

Paragraphs 21 to 26 prescribe secure communication protocols, prohibition on storing sensitive data in HTML hidden fields/cookies/client-side storage, implementation of Web Application Firewall (WAF) and DDoS mitigation, adoption of strong and non-deprecated cryptographic standards, timely renewal of digital certificates, and effective logging/monitoring of user activity across mobile and internet banking applications.

C. Application Security Life Cycle

Paragraphs 27 to 40 mandate a multi-tier application architecture with segregated application, database, and presentation layers, and a 'secure by design' development approach. Banks must define security objectives across the requirements-gathering, design, development, testing, implementation, and decommissioning phases, and adopt threat modelling — including for co-branded/co-developed applications. Source code escrow arrangements are required for third-party licensed applications.

Security testing obligations include Vulnerability Assessment (VA) at least half-yearly, Penetration Testing (PT) at least annually, and compliance with OWASP standards, with additional testing triggered upon introduction of new infrastructure or major changes. Where source code is not owned by the bank, a vulnerability-free certificate must be obtained from the developer, along with penal provisions in third-party contracts for non-compliance. Banks must also monitor for non-genuine or malicious applications on app stores, ensure centralised and robust server-side authentication, and redact sensitive customer information transmitted via SMS/email.

D. Authentication Framework

Paragraphs 41 to 51 mandate multi-factor authentication (MFA) for payments, fund transfers, and ATM/micro-ATM/business correspondent cash withdrawals, with at least one dynamic or non-replicable authentication factor (e.g., OTP, device binding, biometrics, PKI/hardware tokens, or EMV chip with server-side verification). MFA implementation must be risk-based, considering customer type, transaction pattern, and data sensitivity. Alerts and OTPs must identify the merchant name rather than the payment aggregator. Banks must implement safeguards against man-in-the-middle/browser/application attacks, ensure session integrity, and set thresholds for failed authentication attempts with secure reactivation procedures.

E. Fraud Risk Management

Paragraphs 52 to 56 require banks to document configuration rules for identifying suspicious transactional behaviour, covering parameters such as transaction velocity, high-risk MCCs, counterfeit card indicators, new account activity, geo-location and IP anomalies, and behavioural biometrics. Banks must conduct fraud analysis, train fraud-control staff across specified competencies, and maintain updated stakeholder contact details along with incident-specific Standard Operating Procedures (SOPs).

F. Reconciliation Mechanism

Paragraph 57 mandates a real-time or near-real-time reconciliation framework (not later than 24 hours from receipt of settlement files) across all stakeholders in the digital payment ecosystem, along with a mechanism to monitor its effectiveness.

G. Customer Protection, Awareness and Grievance Redressal Mechanism

Paragraphs 58 to 66 require mandatory customer acknowledgment of secure usage guidelines during onboarding and post-update, a clearly defined grievance redressal mechanism with defined response timelines, adherence to the RBI's Online Dispute Resolution (ODR) framework (RBI/2020-21/21 dated August 6, 2020), customer education on device security and digital payment risks, express customer consent for channel activation, and a mechanism enabling customers to flag transactions as fraudulent for immediate bank notification.

Chapter IV: Internet Banking Security Controls

Paragraph 67 prescribes additional controls for internet banking, including adaptive authentication and CAPTCHA against brute-force/DoS attacks, DNS cache poisoning prevention, virtual keyboard availability, automatic session termination on inactivity, secure and time-bound password delivery with mandatory first-login change, and uniform authentication experience across external website integrations.

Chapter V: Mobile Payments Application Security Controls

Paragraph 68 sets out detailed controls for mobile banking/payment applications, including anomaly-triggered reinstallation protocols, device policy enforcement, secure download/installation, time-bound deactivation of older application versions (within six months), remote-access application detection, device/application encryption, minimal data collection, sandboxing, code obfuscation, device binding with multi-channel notification for new registrations, re-authentication on inactivity, unsecured network detection, prohibition on storing sensitive authentication data on-device, secure handling of temporary files, and protections against SQL injection and SSL/TLS certificate errors.

Chapter VI: Card Payment Security Controls

Paragraph 69 mandates adherence to PCI standards beyond PCI-DSS and PCI-SSF, namely PCI-PIN, PCI-PTS, PCI-HSM, and PCI-P2PE, applicable to banks in both issuer and acquirer capacities, with compliance status reported to the IT Strategy Committee under the RBI (Commercial Banks – Cybersecurity, Technology: Risk, Resilience and Assurance Framework) Directions, 2026. Detailed HSM-level controls (tamper-proof logging, clustering for high availability, ACL-based access, secure key management including LMKs) and ATM security measures (BIOS password protection, USB port disabling, anti-skimming, whitelisting, supported OS versions) are prescribed. Banks must also implement card/BIN/bank-level transaction limits at the network switch, 24x7 breach monitoring, and prohibitions on storing card details in plain text. Specific safeguards govern the use of card data scanning tools, including on-premises installation, prohibition on remote scanning, and strict controls on data export.

Chapter VII: Repeal and Other Provisions

Paragraph 70 repeals all existing directions, instructions, and guidelines on Digital Payment Security Controls applicable to Commercial Banks, as communicated vide circular DoS.CO.PPG.66/11.01.005/2026-27 dated July 31, 2026. Paragraph 71 preserves actions, rights, obligations, and liabilities accrued under the repealed framework, along with continuation of any pending investigations or legal proceedings. Paragraph 72 clarifies that the Directions operate in addition to, and not in derogation of, other applicable laws and regulations. Paragraph 73 vests RBI with the authority to issue clarifications for removing difficulties in interpretation, with such interpretation being final and binding.

Conclusion

The Directions represent a consolidated and considerably more granular regulatory architecture for digital payment security, moving several previously advisory practices into binding requirements — particularly around Board-level accountability, application security testing cadence, authentication design, and third-party oversight. Commercial banks will need to undertake a comprehensive gap assessment of existing digital payment policies, application security lifecycles, and card/mobile/internet banking controls to align with the Directions, given their immediate effect.

Corrigenda to the EPF, Pension, and EDLI Schemes, 2026: A Provision-Wise Analysis

 Introduction

The Ministry of Labour and Employment, within a span of barely five weeks of notifying the Employees' Provident Funds Scheme, 2026, the Employees' Pension Scheme, 2026, and the Employees' Deposit-Linked Insurance Scheme, 2026, has issued corrigenda to all three Schemes on 4th August, 2026. While the corrections are largely typographical and clarificatory in nature, several amendments touch upon membership eligibility, effective dates, and benefit computation formulae — provisions that carry direct compliance and interpretive consequences for employers, trustees, and members alike. This post examines the substantive changes introduced through each corrigendum.

I. Employees' Provident Funds Scheme, 2026 — G.S.R. 703(E)

The corrigendum to the EPF Scheme, 2026, notified originally vide G.S.R. 525(E) dated 29th June, 2026 (Issue No. 473), was issued vide G.S.R. 703(E) dated 4th August, 2026, and effects twenty-five sets of corrections spanning pages 66 to 114 of the original notification.

Membership and eligibility clarifications

A significant correction appears at page 69, where the phrase "member of the Employees' Provident Fund Scheme, 1952" is substituted with "member or was required to be a member of the Employees' Provident Funds Scheme, 1952." This broadens the scope of the eligibility criterion to capture persons who were statutorily required to be enrolled, even where actual enrolment may not have occurred — a distinction with material bearing on determinations of membership status for past periods.

Related corrections at pages 66 and 69 clarify the treatment of International Workers, substituting general references to "employee" and "excluded" with more precise formulations — "employee other than the International Worker" and "who is an excluded" respectively — thereby removing ambiguity in provisions that apply differently to this category of members.

Effective date correction

At page 99, a materially significant correction changes the effective date referenced in the Scheme from "1st day of July 2009" to "1st day of April 2009." Given that provident fund entitlements and contribution computations are frequently anchored to such effective dates, this correction warrants particular attention where compliance positions have been taken on the basis of the original text.

Statutory cross-references

The corrigendum also clarifies that the term "Code" appearing at page 76 refers specifically to the "Code on Wages, 2019," and that the "Provident Fund Act, 1925" reference at page 68 is to be read together with its citation "(19 of 1925)." Additionally, at page 71, a reference to "Fund" is corrected to "exempted provident fund," refining the scope of the relevant provision.

Other notable corrections

Numbering corrections across pages 78 to 80 restore the correct sequential enumeration of sub-clauses (from Roman numerals to Arabic numerals), and Form-II corrections at pages 113–114 rectify entries under the "Types of securities including ISIN etc." column — "Basel III," "CMBS," and "Unit" replacing evident printing errors.

II. Employees' Pension Scheme, 2026 — G.S.R. 704(E)

The corrigendum to the Employees' Pension Scheme, 2026, originally notified vide G.S.R. 527(E) dated 29th June, 2026 (Issue No. 475), was issued vide G.S.R. 704(E) dated 4th August, 2026, comprising ten corrections across pages 44 to 71.

Terminological precision

At page 44, the term "security agreement" is corrected to "social security agreement," a correction of consequence given the Scheme's provisions concerning totalisation and cross-border pension coordination under India's social security agreements with other countries. Separately, at page 45, "pay" is substituted with "wages," aligning the provision with the terminology consistently employed elsewhere in the Scheme and under the Code on Wages, 2019.

Benefit computation clarified

Perhaps the most consequential correction appears at page 49, where the formula description "the aggregate clauses of (a) and (b) calculated under sub-paragraph (3)" is substituted with "the aggregate of sub-clauses (i) and (ii) calculated as above." This corrects both the referencing convention and the computational basis for the relevant pensionary benefit, and should be reviewed carefully by practitioners advising on pension calculations under the Scheme.

A related cross-reference correction at page 55 restates "sub-paragraph (8) of paragraph 12" as "clause (b) of sub-paragraph (10) of paragraph 12," correcting what would otherwise be a misdirected statutory reference.

Other corrections

The corrigendum also corrects "dues" to "dies" at page 51 — a correction that materially changes the meaning of the underlying provision — along with numerical corrections to figures appearing at page 71 ("2,421" and "10650").

III. Employees' Deposit-Linked Insurance Scheme, 2026 — G.S.R. 705(E)

The corrigendum to the EDLI Scheme, 2026, originally notified vide G.S.R. 526(E) dated 29th June, 2026 (Issue No. 474), was issued vide G.S.R. 705(E) dated 4th August, 2026, and comprises nine sets of corrections across pages 13 to 22.

Exemption provisions

At page 16, three separate corrections clarify that references to "Provident Fund during preceding twelve months" and allied phrases are to be read as "Provident Fund exempted under section 143 of the Code, as the case may be, during the preceding twelve months." This correction is significant for employers maintaining exempted provident fund establishments, as it ties the relevant computation period explicitly to the exemption granted under Section 143 of the Code on Social Security, 2020.

Benefit eligibility widened

At page 18, the phrase "other eligible members of the family" is expanded to "other eligible members of the family or nominee, as the case may be," extending the class of persons eligible to receive benefits under the Scheme to include a nominee where applicable — a clarification of direct relevance to claims processing.

Computation formula corrected

At page 22, the formula for the assurance benefit, originally expressed as "(A+B-C)," is corrected to "(1+2-3)," aligning the formula with the numbered variables defined elsewhere in the relevant provision rather than the alphabetical notation originally printed.

Consistency corrections

Multiple corrections at pages 13, 14, 15, and 19 standardise the term "Deposit Linked" to the hyphenated "Deposit-Linked" throughout the Scheme, and page 22 also corrects the heading "GREIVANCES" to "GRIEVANCES."

Conclusion

While the corrections effected through G.S.R. 703(E), G.S.R. 704(E), and G.S.R. 705(E) are, in the main, corrective of typographical and drafting errors in the original notifications, a subset of amendments — particularly those concerning membership eligibility under the EPF Scheme, the effective date at page 99, the pension computation formula at page 49 of the Pension Scheme, and the exemption-linked computation period under the EDLI Scheme — carry substantive interpretive significance. Employers, trustees, and compliance professionals who have already framed policies, member communications, or compliance positions on the basis of the Schemes as originally notified on 29th June, 2026, would be well advised to cross-verify the same against the corrected text before further reliance.

Readers are encouraged to refer to the original Gazette notifications — G.S.R. 703(E), G.S.R. 704(E), and G.S.R. 705(E), all dated 4th August, 2026 — for the complete and authoritative text of these corrigenda.

SEBI Introduces GARUDA Mechanism for Faster Processing of AIF Placement Memoranda

Circular No. HO/19/19/11(2)2026-AFD-RAC2/I/17617/2026 dated July 30, 2026

Background

The Securities and Exchange Board of India (SEBI), with the objective of easing and expediting the launch of schemes/funds by Alternative Investment Funds (AIFs), has amended the SEBI (Alternative Investment Funds) Regulations, 2012 ("AIF Regulations") vide Gazette Notification No. CG-MH-E-14072026-274483 dated July 14, 2026. Pursuant to this amendment, SEBI has issued the captioned circular specifying the operational modalities under the newly introduced 'Green-Channel: AIF Rollout Upon Document Acknowledgement' (GARUDA) mechanism. The circular substitutes paragraphs 2.4 and 2.5, and inserts a new paragraph 2.7, in the SEBI Master Circular for AIFs dated June 3, 2026 ("the Master Circular").

Modalities for Filing of PPM and Launch of Regular Schemes

In terms of Regulation 12 of the AIF Regulations, AIFs may launch scheme(s) subject to filing of the Placement Memorandum (PPM) with SEBI through a SEBI-registered Merchant Banker. The revised paragraph 2.4 of the Master Circular specifies the following for Regular schemes:

Timeline for launch:

• AIFs may proceed with the launch of a new scheme after 10 working days from the date of filing the application with SEBI, unless otherwise advised.
• For the first scheme of an AIF, launch may proceed from the date of grant of SEBI registration, or after 10 working days of filing the application, whichever is later.

Filing requirements: The PPM of Regular schemes must be filed on the SEBI Intermediary Portal, at the time of registration or prior to launch of a new scheme, along with payment of the applicable scheme fee and the following documents:

Document	Requirement
Merchant Banker Due Diligence Certificate	As per format in Annexure 6
Fit and Proper declarations	With respect to the AIF, Sponsor and Manager, as specified under Schedule II of SEBI (Intermediaries) Regulations, 2008
Sponsor/Manager declarations	Confirming minimum continuing interest commitment in the AIF/scheme
PAN details	Of the AIF, its scheme (if available), Sponsor, Manager, Trustee, directors/partners of Sponsor, Manager and Trustee, and key investment team members, along with an Excel/Word/PDF file listing names and PANs

Role of the Merchant Banker: The Merchant Banker is required to independently exercise due diligence on all disclosures made in the PPM, satisfy itself as to the veracity and adequacy of such disclosures, and provide the due diligence certificate accordingly. Importantly, the Merchant Banker appointed for filing the PPM must not be an associate of the AIF, its Sponsor, Manager or Trustee.

Mandatory disclaimer clause: The details of the Merchant Banker must be disclosed in the PPM, and a specified disclaimer clause must be incorporated in the PPMs of all Regular schemes. This clause records that the Merchant Banker has independently exercised due diligence and certified that the disclosures are true, fair and adequate; that SEBI's acceptance of the filing does not amount to approval of the PPM or assumption of responsibility for the accuracy of disclosures; and that the Manager and Merchant Banker remain responsible for the accuracy and completeness of the PPM.

Accountability: The Merchant Banker and the Manager of the AIF are responsible for ensuring the accuracy and completeness of all disclosures made in the PPM and in declarations submitted by them. Any irregularity or lapse in the PPM renders the concerned entities liable for action.

Modalities for Filing of PPM and Launch of Schemes of AI Only Funds, LVFs and Angel Funds

The revised paragraph 2.5 of the Master Circular deals with schemes catering exclusively to Accredited Investors, in line with the framework for "Accredited Investors" introduced in the securities market.

AI Only Funds and Large Value Funds (LVFs): In terms of the proviso to Regulation 12(3A) of the AIF Regulations, AI only funds and LVFs (each investor investing not less than INR 25 crore) are exempt from filing their PPM with SEBI through a Merchant Banker and from incorporating SEBI's comments in the PPM. Such funds may launch their scheme immediately upon filing the PPM with SEBI. However, the first scheme of an AI only fund and/or LVF may be launched only from the date of grant of SEBI registration.

Angel Funds: Pursuant to the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2026, Angel Funds are similarly exempt from filing their PPM through a Merchant Banker and from incorporating SEBI's comments in the PPM. Angel Funds may proceed with circulation of the PPM to investors for soliciting funds from the date of grant of SEBI registration.

Filing requirement: In addition to payment of the applicable scheme/registration fee, the PPM of AI only funds, LVFs and Angel Funds must be filed on the SEBI Intermediary Portal along with a duly signed and stamped undertaking, in the format specified at Annexure 7, by:

• the Chief Executive Officer of the Manager of the AIF (or a person holding an equivalent role, depending on the legal structure of the Manager), and
• the Compliance Officer of the Manager of the AIF.

Mandatory disclaimer clause: A corresponding disclaimer clause must be included in the PPMs of AI only funds, LVFs and Angel Funds, recording that the Manager has independently exercised due diligence, that the CEO and Compliance Officer have certified the disclosures as true, fair and adequate, that SEBI's acceptance of filing does not amount to approval, and that the Manager remains responsible for the accuracy and completeness of the PPM.

Accountability: The Manager of the AIF is responsible for ensuring the accuracy and completeness of all disclosures made in the PPM and declarations submitted. Any irregularity or lapse renders the concerned entities liable for action.

Naming convention:

• Any new scheme proposed to be launched as an AI only fund must carry the words 'AI only fund' or 'AIOF' at the end of the scheme name (for example, 'Xyz AI only fund' or 'Xyz AIOF').
• Any new scheme proposed to be launched as an LVF must carry the word 'LVF' at the end of the scheme name (for example, 'Abc LVF').

Explanation Inserted (New Paragraph 2.7)

For the purposes of paragraphs 2.4 to 2.6 of the Master Circular, the following definitions have been inserted:

• "Regular schemes" means schemes other than Large Value Fund for Accredited Investors (LVF), Accredited Investor Only Fund ('AI only fund') and Angel Funds.
• "Launch" of a scheme or fund means circulation of its Placement Memorandum to investors for soliciting funds.
• "Working days" means all days excluding Saturdays, Sundays, and public holidays on which the concerned SEBI office is closed for business, as published on the SEBI website.

Changes in Terms of PPM

Paragraph 21.4.4 of the Master Circular has been modified to provide that AI only funds, LVFs and Angel Funds are exempt from the requirement of intimating any changes in the terms of the PPM through a Merchant Banker. Such funds must directly file any changes in the terms of the PPM with SEBI, along with a duly signed and stamped undertaking by the CEO of the Manager (or equivalent) and the Compliance Officer of the Manager, in the format specified at Annexure 17.

Applicability and Legal Basis

This circular comes into force with immediate effect and applies to PPMs of all schemes/funds filed with SEBI from the date of notification of the SEBI (AIF) (Second Amendment) Regulations, 2026. It has been issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, read with Regulations 12, 19 and 36 of the AIF Regulations, to protect the interests of investors in securities and to promote the development of, and regulate, the securities market. The Master Circular for AIFs dated June 3, 2026 has been updated to reflect these changes and is available on the SEBI website.

Key Takeaways

• The GARUDA mechanism significantly compresses the time taken to launch AIF schemes, particularly benefiting AI only funds, LVFs and Angel Funds, which can now launch immediately upon PPM filing.
• The due diligence and accountability framework has been sharpened, with Merchant Bankers and Fund Managers bearing clearly defined responsibility for the accuracy of PPM disclosures.
• AIF sponsors and managers should review their scheme documentation and naming conventions to ensure alignment with the revised requirements, particularly the mandatory disclaimer clauses and the AIOF/LVF naming suffix requirements.

SEBI Informal Guidance on Applicability of Regulation 62A of LODR Regulations to Transfer of Unlisted Non-Convertible Debentures Pursuant to Business Transfer Agreement

Background

The Securities and Exchange Board of India ("SEBI"), vide its Informal Guidance dated July 20, 2026 (Issue No. I/16721/2026), addressed an application filed by Ananya Finance for Inclusive Growth Private Limited ("Ananya") under the SEBI (Informal Guidance) Scheme, 2025, seeking an interpretive letter on the applicability of Regulation 62A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("LODR Regulations") in a specific fact pattern involving intra-group transfer of unlisted debt securities.

Facts of the Case

Prayas Financial Services Private Limited ("Prayas"), a wholly owned subsidiary of Ananya, entered into a Business Transfer Agreement dated February 28, 2026 ("BTA"), pursuant to which its assets and liabilities — including unlisted, unsecured Non-Convertible Debentures ("NCDs") — were transferred to Ananya. Ananya is a listed entity with its debt securities listed on recognised stock exchanges.

The relevant facts placed before SEBI were as follows:

1. The unlisted NCDs of Prayas were originally issued on July 4, 2024, with allotment on July 12, 2024, and maturity on July 12, 2027.
2. Pursuant to the BTA, Ananya assumed the obligations under these NCDs, effectively consolidating the debt instruments within the listed entity.
3. The transferred NCDs continued as the same outstanding securities; no new debt securities were issued by Ananya in substitution.
4. No new debenture certificates, amended certificates, replacement debentures, or new ISINs were issued. The existing ISINs continued to remain with Prayas, unchanged.

Queries Raised

Ananya sought SEBI's guidance on two questions:

Query 1: Whether the transfer of unlisted non-convertible debt securities of a subsidiary, pursuant to a business transfer, mandatorily requires listing on a recognised stock exchange under Regulation 62A of the LODR Regulations, or whether such a transaction could instead be treated as a "transfer" rather than a "new issuance," thereby not necessitating a fresh listing application.

Query 2: In the event listing is found to be compulsory, whether SEBI could provide detailed guidance on the process and procedural requirements for effecting such listing.

SEBI's Guidance

On Query 1:

SEBI clarified that Regulation 62A(1) of the LODR Regulations requires a listed entity whose non-convertible debt securities are listed to list all non-convertible debt securities proposed to be issued on or after January 1, 2024, on the stock exchange(s). The provision is intended to ensure that unlisted non-convertible debt securities of listed debt entities, issued on or after this cut-off date, are brought within the regulatory framework and made subject to applicable disclosure and investor protection norms.

Significantly, SEBI held that the applicability of Regulation 62A cannot be determined solely on the basis of the structure of a transaction. Where a corporate restructuring — including a transfer of business from one entity to another — results in the liability associated with outstanding unlisted non-convertible debt securities effectively becoming an obligation of a listed entity, Regulation 62A is attracted regardless of whether the transaction is characterised as a "transfer" as opposed to a fresh "issuance."

Accordingly, SEBI clarified that where a debt-listed entity assumes and continues the obligations in respect of outstanding unlisted non-convertible debt securities issued on or after January 1, 2024, the requirements of Regulation 62A must be complied with holistically by such entity.

On Query 2:

SEBI stated that operational requirements for ensuring compliance with listing requirements — including consequential matters relating to ISINs, depository records, and listing formalities — are governed by the applicable framework prescribed by the recognised stock exchange(s) and depository(ies). The applicant was accordingly directed to ensure compliance with such operational requirements as may be applicable.

Key Takeaways

1. Substance over form: SEBI has reaffirmed that the classification of a transaction as a "transfer" rather than an "issuance" does not, by itself, exclude the applicability of Regulation 62A. The determinative factor is whether a listed entity has assumed the underlying obligation on outstanding unlisted debt securities issued on or after January 1, 2024.

2. Corporate restructuring implications: Business transfer agreements, slump sales, and similar restructuring arrangements involving the movement of unlisted debt liabilities into a listed entity must be evaluated for Regulation 62A compliance at the stage of structuring, not merely at the stage of fresh issuance.

3. No exemption merely on absence of new instruments: The fact that no new debenture certificates, ISINs, or replacement instruments were issued did not, in SEBI's view, take the transaction outside the scope of Regulation 62A, since the obligation itself had shifted to a listed entity.

4. Limited scope of the guidance: As is standard under the Informal Guidance Scheme, SEBI clarified that this letter reflects the relevant department's position on enforcement action only, is based on the specific representations made in the application, does not bind the Board, and does not affect the applicability of any other SEBI regulation or law administered by any other authority.

Conclusion

This Informal Guidance is a useful reference point for listed entities undertaking group-level restructuring involving unlisted debt securities, particularly through business transfer or similar arrangements. It signals that SEBI will look through the transactional form to the substance of obligation assumption when determining Regulation 62A applicability, and that professionals advising on such restructurings should factor in listing compliance at the transaction-structuring stage itself.