SEBI 215th Board Meeting approves sweeping reforms across PMS, settlement, AIFs, REITs, InvITs and FPIs.
SEBI’s 215th Board meeting held in Mumbai on 24 September 2026 approved one of the most wide-ranging packages of capital market reform in recent years, covering portfolio management services, settlement proceedings, alternative investment funds, accredited investors, REITs, InvITs, foreign portfolio investors, commodity derivatives, vault managers, and advertising norms. The reforms collectively reflect SEBI Chairman Tuhin Kanta Pandey’s stated emphasis on ‘optimum regulation’, deepening market access, reducing redundant compliance, and broadening the investable universe across regulated products.
Key Takeaways:
- SEBI approved the SEBI (Portfolio Managers) Regulations, 2026, replacing the 2020 framework. The most commercially significant change is the introduction of a Mutual Fund-only PMS (PRIM Route) with a reduced minimum investment threshold of Rs. 25 lakh (down from Rs. 50 lakh) and a net worth requirement of Rs. 2 crore (down from Rs. 5 crore). Portfolio managers may now invest in IPOs, primary debt issuances, and direct mutual fund plans, widening the investment universe materially. The number of regulatory provisos has fallen from 47 to 4, significantly simplifying compliance.
- The SEBI (Settlement of Administrative and Civil Proceedings) Regulations, 2026 replace the 2018 settlement framework with a formula-based approach for determining settlement amounts, calibrated to the minimum penalty for the violation and adjusted for the stage of proceedings, regulatory action, gravity, aggravating factors, and mitigating factors. This brings greater predictability and transparency to the settlement process for regulated entities seeking to resolve enforcement proceedings without a contested adjudication.
- FPIs are now permitted to participate in non-agricultural commodity derivatives on Indian exchanges, a category previously restricted to domestic participants. This opens a significant new asset class to foreign institutional capital and is expected to improve price discovery and liquidity in commodity derivatives markets. FPI participation in REITs and InvITs is also expanded, with SEBI approving a framework for depository receipts on REIT and InvIT units, enabling offshore holding of these instruments.
- The accredited investor framework is significantly expanded: AIF managers, AMCs offering Specialised Investment Funds, and PMS providers are now permitted to accredit investors directly, reducing dependence on the existing accreditation agency route and potentially expanding the eligible accredited investor base from approximately 1 lakh to around 4 lakh investors. AIF investor protections are simultaneously strengthened with expanded disclosure and governance requirements.
RBI issues draft KYC Amendment Directions on money mule accounts and cyber fraud.
The Reserve Bank of India issued draft Reserve Bank of India (Know Your Customer) Amendment Directions, 2026 for public comment in September 2026, pursuant to a Supreme Court order dated 4 August 2026 directing the RBI to formulate a Standard Operating Procedure (SOP) for temporary debit holds on accounts and amounts linked to money mule activity and cyber-enabled financial fraud. The draft directions address a gap in the existing KYC and fraud response framework: the absence of a standardised, legally grounded mechanism for banks to freeze accounts suspected of being used as conduits for cyber fraud proceeds without requiring prior court orders in every case.
Key Takeaways:
- The draft directions propose a structured, time-limited temporary debit hold mechanism that banks may apply to accounts flagged as suspected money mule accounts or linked to reported cyber fraud, based on referrals from law enforcement agencies, the Indian Cyber Crime Coordination Centre (I4C), or the RBI’s own supervisory intelligence. The hold must be notified to the account holder immediately and is subject to a defined review and lift procedure, protecting against arbitrary or indefinite restriction of legitimate accounts.
- Banks are required to designate a nodal officer at the branch and head-office level for money mule account management, maintain a real-time log of all temporary debit holds imposed and lifted, and report aggregated data on money mule activity to the RBI on a quarterly basis. This institutionalises cyber fraud response within the bank’s existing AML/CFT compliance infrastructure.
- The directions complement the existing RBI Circular on Customer Protection, Limiting Liability of Customers in Unauthorised Electronic Banking Transactions, and address repeated Supreme Court observations that banks lack a consistent legal framework for protecting fraud victims while preserving due process rights for account holders whose accounts are frozen. Final directions are expected to be issued within 60 days of the close of the public comment period.
- Banks should initiate an internal review of existing fraud response SOPs, account-monitoring workflows, branch-level escalation procedures, and customer communication templates to assess alignment with the proposed framework. The nodal officer designation requirement will necessitate a formal internal appointment and training process across all branch networks before the final directions take effect.
RBI issues Basel-III Minimum Capital Requirements for Market Risk Directions.
The Reserve Bank of India has issued the Reserve Bank of India (Commercial Banks, Minimum Capital Requirements for Market Risk) Directions, 2026, aligning India’s market risk capital framework for commercial banks with the revised Basel III standards published by the Basel Committee on Banking Supervision. The Directions adopt the Simplified Standardised Approach (SSA) for calculating market risk capital requirements, reflecting a deliberate choice to provide operational simplicity and flexibility for Indian banks while maintaining international regulatory alignment. The Directions apply to all scheduled commercial banks operating in India, including foreign banks operating through branches.
Key Takeaways:
- The Simplified Standardised Approach (SSA) adopted under the Directions calculates market risk capital requirements through standardised risk weights applied to banks’ trading book positions, covering interest rate risk, equity risk, foreign exchange risk, and commodities risk, without requiring banks to build and validate the complex internal models permitted under the full Basel III Fundamental Review of the Trading Book (FRTB). This significantly reduces the model-governance and validation burden, particularly for mid-sized and smaller scheduled commercial banks.
- A revised boundary between the banking book and the trading book is established under the Directions, with clearer criteria for which positions must be held in the trading book and therefore subject to market risk capital requirements. The prior framework had allowed significant regulatory arbitrage through strategic allocation of positions between books; the revised boundary reduces this flexibility and may increase market risk capital requirements for banks with material mixed-book positions.
- Banks are required to compute and report market risk capital requirements under the new framework from the effective date of the Directions. Capital adequacy ratios, CET1, Tier 1, and Total Capital Ratio, must be maintained at all times taking into account the revised market risk charge. Banks whose capital adequacy is sensitive to their trading book should model the impact of the revised market risk capital charges on their capital ratios before the effective date.
- Risk, treasury, and capital management teams at commercial banks should review the Directions in full, update internal capital adequacy assessment processes (ICAAP) models and documentation, revise trading book policies and procedures to reflect the revised book boundary, and engage with their external auditors and RBI supervisory teams on any areas of interpretative uncertainty before the first reporting period under the new framework.
RBI recognises Unified Forum of Fintech (UFF) as Self-Regulatory Organisation for the FinTech sector.
The Reserve Bank of India has formally recognised the Unified Forum of Fintech (UFF) as a Self-Regulatory Organisation (SRO) for the FinTech sector under the RBI’s Framework for Recognising Self-Regulatory Organisation(s) for FinTech Sector (the SRO-FT Framework), issued in February 2024. The recognition of the UFF as the sector’s first formally recognised SRO marks a significant milestone in India’s FinTech regulatory architecture, establishing a structured self-governance layer between the RBI and the diverse, rapidly evolving community of fintech firms operating in India’s financial services ecosystem. UFF’s recognition follows its application and assessment against the eligibility criteria and governance requirements prescribed in the SRO-FT Framework.
Key Takeaways:
- As the recognised SRO-FT, the UFF is empowered to develop and enforce a Code of Conduct for member fintech firms, covering responsible lending and borrowing practices, customer data protection and privacy standards, grievance redressal mechanisms, cybersecurity baseline requirements, and ethical standards for digital financial products and services. Membership of the SRO-FT and adherence to its Code will become a baseline expectation for fintech firms seeking regulatory engagement with the RBI and other financial sector regulators.
- The SRO-FT plays a bridge function between the RBI and the fintech ecosystem: it is expected to relay regulatory guidance to members, provide early-warning intelligence on emerging consumer protection risks and sector misconduct patterns to the RBI, represent member views in regulatory consultations, and resolve inter-member disputes through a structured mediation and arbitration mechanism. This provides the RBI with a scalable supervisory channel for a sector too diverse and numerous for direct bilateral supervision of every entity.
- Fintech firms across lending, payments, insurance distribution, wealth management, and neobanking should assess their membership obligations under the UFF framework and begin aligning internal policies, governance structures, and product design practices with the emerging Code of Conduct. Firms that delay engagement with the SRO-FT process risk being at a disadvantage in regulatory interactions with the RBI, SEBI, IRDAI, and other regulators as the SRO-FT framework matures.
- The recognition of UFF complements recent RBI initiatives including the Digital Lending Guidelines, the account aggregator framework, the Open Finance vision document, and the CBDC pilot, all of which create regulatory touchpoints where structured fintech sector self-governance adds material value. Legal and compliance teams at fintech firms should treat SRO-FT membership as a compliance baseline rather than an optional participation, and begin mapping their existing policies against the UFF Code once published.
