Understanding Key Amendments July 2026
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The Securities and Exchange Board of India
SEBI Revises Trading Framework for Exchange Traded Funds (ETFs)
On June 15, 2026, the Securities and Exchange Board of India ("SEBI"), through Circular No. HO/47/11/11(1)2026-MRD-POD3/I/13804/2026, revised the regulatory framework governing the determination of base price, price bands, pre-open call auction mechanism, and close-out procedure for Exchange Traded Funds ("ETFs"). Issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, the circular seeks to address pricing inefficiencies arising from the existing reliance on T-2 day Net Asset Value ("NAV") and fixed price bands, while aligning ETF trading mechanisms more closely with the price behaviour of their underlying assets.
The revised framework replaces the existing T-2 day NAV-based methodology with the T-1 day closing price as the base price for determining ETF price bands, introduces dynamic price bands for Equity, Debt and Commodity ETFs, prescribes a pre-open call auction mechanism for Commodity ETFs, revises the close-out procedure for Overnight and Liquid ETFs, and requires stock exchanges and asset management companies to transition to a T-1 day closing NAV-based framework from April 1, 2027. The circular shall come into effect from September 1, 2026.
Key Highlights
1. Revision of Base Price Determination for ETFs
SEBI has replaced the existing T-2 day NAV-based methodology for determining ETF price bands with the T-1 day closing price, calculated as the last 30-minute Volume Weighted Average Price ("VWAP") of the ETF. Where no trades occur during the last 30 minutes of trading, the base price shall be the last traded price ("LTP") on T-1; where no trades occur on T-1, the latest available closing NAV shall be used. The base price shall also be adjusted for corporate actions, if any. Further, stock exchanges and asset management companies have been directed to address operational challenges and transition to the use of the T-1 day closing NAV as the base price with effect from April 1, 2027.
2. Dynamic Price Bands Introduced for Equity and Debt ETFs
For Equity ETFs and Debt ETFs (other than Overnight ETFs and Liquid ETFs), SEBI has introduced dynamic price bands with an initial operating range of ±10%, which may be expanded in stages up to ±20%. Price bands shall be relaxed by 5% following a cooling-off period of 15 minutes after trades reach 9.90% of the prevailing limit (or 5 minutes where such movement occurs during the final 30 minutes of trading). The price band shall be expanded only in the direction of the price movement, and any expansion implemented by one stock exchange shall automatically apply across all exchanges. The price band shall be flexed by 5% of the base price after the cooling-off period, for a maximum of two instances in one direction.
3. Revised Trading Framework for Commodity ETFs
Commodity ETFs (Gold and Silver) shall be subject to dynamic price bands with an initial operating range of ±6%, capable of being expanded in stages of 3% after the prescribed cooling-off period. The cooling-off period shall be of 15 minutes after trades are executed at or above 5.90% and so on, during which trading shall continue within the prevailing price band. Where such trades are executed during the last 30 minutes of trading, the cooling-off period shall be reduced to 5 minutes. Where international commodity prices move beyond the aggregate daily price limit of ±9%, stock exchanges may further relax the price bands in stages of 3%, subject to public disclosure and justification. In exceptional circumstances involving significant overnight movements in international commodity markets, exchanges may also relax the initial price band before the commencement of domestic trading. The price band shall be flexed only in the direction of the price movement without corresponding adjustment (sliding) of the band on the opposite side, and any flexing of the price band by one stock exchange shall be applicable across all stock exchanges. The circular further clarifies that there shall be no cap on the number of times price bands may be expanded during a trading session.
4. Fixed Price Bands Retained for Overnight and Liquid ETFs
SEBI has retained the existing fixed price band of ±5% for Overnight ETFs and Liquid ETFs. The circular also prescribes a revised close-out methodology for such ETFs, under which the close-out price shall be the higher of: (i) the highest traded price recorded in the relevant settlement up to the date of auction or close-out; or (ii) 5% above the latest available closing price on the day auction offers are invited. Existing auction and settlement provisions under the SEBI Master Circular shall continue to apply. Further, for all other ETFs, the existing close-out provisions specified under Paragraph 2.1 of Chapter 3 of the SEBI Master Circular shall continue to apply.
5. Introduction of Pre-Open Call Auction for Commodity ETFs
To facilitate efficient price discovery, SEBI has introduced a pre-open call auction mechanism for Commodity ETFs. Recognising that the underlying commodities trade continuously across international markets while ETF trading is limited to domestic exchange hours, the circular requires Commodity ETFs to follow the same pre-open call auction mechanism applicable to equity securities under the SEBI Master Circular. The circular specifically provides that the mechanism for the call auction in the pre-open session shall be the same as that prescribed under Paragraph 17.1 of Chapter 1 of the SEBI Master Circular.
6. Implementation Timeline and Compliance Requirements
The revised framework shall come into force on September 1, 2026. Stock exchanges, clearing corporations, and other market infrastructure institutions have been directed to implement the necessary system changes, amend their bye-laws, rules and regulations wherever required, and disseminate the revised framework to market participants and investors. The circular has been issued pursuant to the recommendations of the Working Group of Stock Exchanges, following deliberations of the Secondary Market Advisory Committee of SEBI, public consultation and discussions with various stakeholders.
Source: SEBI Circular No. HO/47/11/11(1)2026-MRD-POD3/I/13804/2026 dated June 15, 2026.
SEBI Issues Guidelines on Retention of Proceeds and 'Inoperative Fund' Status for Alternative Investment Funds
On June 16, 2026, the Securities and Exchange Board of India ("SEBI"), through Circular No. HO/19/34/11(2)2026-AFD-POD1/I/13764/2026, issued guidelines governing the retention of liquidation proceeds beyond the permissible fund life of Alternative Investment Funds ("AIFs"), the grant of "Inoperative Fund" status, and the surrender of AIF registration. Issued pursuant to the amendments notified to the SEBI (Alternative Investment Funds) Regulations, 2012 on April 18, 2026, and in exercise of powers under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulations 29 and 36 of the AIF Regulations, the circular introduces a structured framework for winding up AIF schemes while allowing limited retention of proceeds to meet specified liabilities.
The circular permits AIFs to retain liquidation proceeds beyond the permissible fund life in specified circumstances, prescribes the eligibility criteria and regulatory framework for obtaining "Inoperative Fund" status, exempts such funds from certain continuing regulatory obligations, extends the framework to Venture Capital Funds ("VCFs") registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996, and introduces annual reporting requirements in respect of retained monies and outstanding liabilities. The circular came into force with immediate effect.
Key Highlights
1. Retention of Liquidation Proceeds Beyond Permissible Fund Life
SEBI has permitted AIFs and their schemes to retain liquidation proceeds beyond the liquidation or dissolution period where at least one of the prescribed conditions is satisfied. These include: (i) receipt of a litigation notice, tax demand, regulatory communication or similar official notice indicating a potential legal, regulatory or tax liability; (ii) approval of at least 75% of the investors by value where monies are proposed to be retained for anticipated litigation or tax liabilities; or (iii) retention of amounts required for residual winding-up operational expenses supported by invoices or comparable historical expense records. Monies retained under the framework are required to be invested in accordance with Regulation 15(1)(f) of the AIF Regulations and distributed to investors once the relevant liabilities are discharged. The framework also permits an AIF to retain its registration, without retaining any liquidation proceeds, solely in anticipation of a favourable outcome in pending litigation, subject to obtaining Inoperative Fund status.
2. Introduction of 'Inoperative Fund' Status
The circular introduces a new "Inoperative Fund" status for AIFs intending to surrender their registration while retaining monies beyond the permissible fund life. Eligible AIFs may apply to SEBI in the prescribed format where one or more schemes retain proceeds under the specified conditions or where the AIF wishes to retain its registration solely in anticipation of a favourable outcome in pending litigation. Upon approval, the AIF shall be tagged as an "Inoperative Fund" and may surrender its certificate of registration only after all liabilities have been settled and all retained monies have been distributed to investors. Applications for obtaining Inoperative Fund status are required to be submitted in the format prescribed under Annexure A to the circular and must provide scheme-level details regarding liquidation proceeds, the grounds for seeking retention or Inoperative Fund status, proposed investment of retained monies, expected timelines for resolution and distribution, and any pending enforcement actions. The application must also be accompanied by undertakings confirming that all investments have been liquidated, retained monies shall be used only for the permitted purposes, no new schemes shall be launched, no management fees shall be charged, and any balance monies shall be distributed to investors in accordance with the Private Placement Memorandum.
3. Regulatory Framework Applicable to Inoperative Funds
An AIF designated as an "Inoperative Fund" shall continue to invest retained monies only in accordance with Regulation 15(1)(f) of the AIF Regulations, shall not launch any new schemes, and shall not charge management fees in respect of any of its schemes. In addition, SEBI has exempted Inoperative Funds from various continuing regulatory requirements, including activity reports, compliance test reports, audit of Private Placement Memoranda ("PPMs"), valuation requirements, benchmarking disclosures, NISM certification requirements, custodian requirements and certain investor reporting obligations, as specified in Annexure B to the circular. The circular further specifies the effective dates for the applicable exemptions. While certain exemptions become effective upon obtaining Inoperative Fund status, others apply from the subsequent financial year or reporting period. Notwithstanding the exemption from periodic valuation requirements, Inoperative Funds are required to report the valuation of retained investments and the updated Net Asset Value of AIF units annually as part of the prescribed retention status report.
4. Annual Reporting Requirements Introduced
AIFs retaining monies beyond the permissible fund life and AIFs tagged as Inoperative Funds are required to submit an annual status report to SEBI and the investors of the relevant schemes within 30 calendar days from the end of each financial year. The report must disclose, inter alia, details of retained amounts, outstanding liabilities, reasons for non-winding up, progress in resolution of pending matters, expected timelines for distribution of retained monies, and investments made using the retained proceeds.
The annual retention status report is required to be submitted in the format prescribed under Annexure C to the circular and must include scheme-wise details of the reasons for non-winding up, the specific ground on which monies have been retained or Inoperative Fund status has been obtained, the amount retained, distributed and remaining outstanding, the present status of the relevant proceedings or liabilities, and the expected timeline for their resolution. The report must also separately disclose the details of investments made out of the retained monies, including the name of each instrument or investee company, cost and latest value of the holding, and the type of security, including investments in liquid mutual funds, bank deposits, treasury bills, Government securities, TREPS, commercial papers and certificates of deposit.
5. Applicability Extended to Venture Capital Funds
The framework has also been extended to Venture Capital Funds registered under the erstwhile SEBI (Venture Capital Funds) Regulations, 1996. Such VCFs may similarly retain proceeds beyond the permissible fund life, obtain Inoperative Fund status, and shall be subject to the same regulatory conditions, exemptions and reporting obligations applicable to AIFs under the circular.
Source: SEBI Circular No. HO/19/34/11(2)2026-AFD-POD1/I/13764/2026 dated June 16, 2026
SEBI Clarifies Applicability of Early Pay-in Benefits in the Commodity Derivatives Segment
On June 19, 2026, the Securities and Exchange Board of India ("SEBI"), through Circular No. HO/47/16/13(4)2026-MRD-POD1/I/14266/2026, issued a clarification regarding the applicability of the Early Pay-in facility in the Commodity Derivatives Segment. Issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, the circular revises Paragraph 11.3.1 of the SEBI Master Circular for the Commodity Derivatives Segment dated August 4, 2023. The clarification has been issued based on representations received from stakeholders and deliberations by the Working Group (“WG”) on the "Review of current regulatory framework of delivery and settlement applicable to Agricultural Commodity Derivatives Segment" and the Commodity Derivatives Advisory Committee (“CDAC”).
The circular clarifies the margin benefits available where market participants make an early pay-in by depositing certified goods with Clearing Corporations against eligible commodity derivatives contracts. It also prescribes the continued applicability of mark-to-market margins despite the grant of margin exemptions. The revised framework shall come into effect from September 21, 2026.
Key Highlights
1. Clarification on Early Pay-in Facility
SEBI has clarified that Clearing Corporations shall continue to provide the Early Pay-in facility, enabling market participants to deposit certified goods in Clearing Corporation-accredited warehouses against the relevant commodity derivatives contracts. The clarification revises the existing framework under the SEBI Master Circular governing commodity derivatives.
2. Margin Exemption for Early Pay-in Positions
The circular provides that, for positions where an early pay-in has been made, Clearing Corporations may, based on their risk assessment, exempt the imposition of all types of margins. The relaxation is discretionary and subject to the Clearing Corporation's assessment of the associated risks.
3. Continued Levy of Mark-to-Market Margins
Notwithstanding the relaxation in respect of other margins, SEBI has clarified that Clearing Corporations shall continue to collect mark-to-market ("MTM") margins from market participants against positions for which the Early Pay-in facility has been availed. Accordingly, the exemption does not extend to MTM margin requirements.
4. Effective Date and Implementation
The revised framework shall come into effect from September 21, 2026. Stock Exchanges and Clearing Corporations have been directed to implement the necessary system changes, bring the revised provisions to the notice of their members, and disseminate the circular on their respective websites. The circular has been issued to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market.
Source: SEBI Circular No. HO/47/16/13(4)2026-MRD-POD1/I/14266/2026 dated June 19, 2026.
SEBI Relaxes Certification Requirements for Persons Associated with Investment Advice Performing Sales and Other Non-Core Services
On June 24, 2026, the Securities and Exchange Board of India ("SEBI"), through Circular No. HO/38/12/11(5)2026-MIRSD-POD/I/14660/2026, relaxed the certification requirements applicable to Persons Associated with Investment Advice ("PAIA") performing sales and other non-core services. Issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 7 of the SEBI (Investment Advisers) Regulations, 2013 and Regulation 3(1) of the SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007, the circular introduces a simplified certification framework as part of SEBI's ease of doing business initiative. The circular follows the Gazette Notification dated January 2, 2025, which specified that PAIA are required to obtain the NISM Series-X-A: Investment Adviser (Level 1) Certification Examination and the NISM Series-X-B: Investment Adviser (Level 2) Certification Examination. Based on feedback from market participants and as a step towards ease of doing business, SEBI has now introduced a lighter certification module for specified categories of PAIA.
The circular prescribes a separate NISM certification for PAIA engaged exclusively in sales and other non-core services, while retaining the existing certification requirements for personnel involved in investment advice. It also provides a transition mechanism for individuals who already hold the existing Investment Adviser certifications. The circular came into force with immediate effect.
Key Highlights
1. Separate Certification Introduced for Sales and Other Non-Core Personnel
SEBI has introduced a separate certification requirement for PAIA who perform only sales and other non-core services, including sales staff, relationship managers and other personnel who interact with clients but are not directly involved in providing investment advice. These personnel have contact with the client but are not directly associated or involved in investment advice-related aspects. Such personnel are now required to obtain the NISM Series-XXV-B: Persons Associated with Investment Advice (Sales and Other Non-Core Services) Certification Examination, in place of the existing Investment Adviser certification modules, as specified in the NISM Communique No. NISM/Certification/NISM-Series-XXV-B: Persons Associated with Investment Advice (Sales and Other Non-Core Services) Certification Examination/2026/01 dated May 18, 2026.
2. Existing Certification Requirements Continue for Investment Advisory Personnel
The circular clarifies that PAIA who are directly associated with investment advisory functions shall continue to obtain the NISM Series-X-A: Investment Adviser (Level 1) Certification Examination and NISM Series-X-B: Investment Adviser (Level 2) Certification Examination, in accordance with the existing regulatory framework. The relaxation is therefore limited to personnel performing sales and other non-core functions.
3. Transitional Relief for Existing Certificate Holders
SEBI has provided transitional relief to PAIA engaged in sales and other non-core services who have already obtained the NISM Series-X-A and Series-X-B certifications prior to the issuance of the circular. Such individuals are not required to immediately obtain the newly introduced Series-XXV-B certification and may do so upon the expiry of the validity of their existing certifications.
4. Immediate Applicability and Implementation Measures
The circular came into force with immediate effect. The Investment Adviser Administration and Supervisory Body ("IAASB") has been directed to amend its bye-laws and rules, wherever necessary, and disseminate the revised certification requirements to all registered Investment Advisers. The circular has been issued with the approval of the competent authority in exercise of SEBI's powers to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.
Source: SEBI Circular No. HO/38/12/11(5)2026-MIRSD-POD/I/14660/2026 dated June 24, 2026.
The Reserve Bank of India
RBI Eases Foreign Portfolio Investment Framework for Government Securities
On June 5, 2026, the Reserve Bank of India ("RBI"), through A.P. (DIR Series) Circular No. 11 (RBI/2026-27/97), amended the regulatory framework governing investments by Foreign Portfolio Investors ("FPIs") in Government Securities under the Foreign Exchange Management (Debt Instruments) Regulations, 2019 and the Master Direction – Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025. Issued with a view to facilitating greater ease of investment, the circular removes certain investment restrictions applicable under the General Route, rationalises investment limits, expands the scope of securities eligible under the Fully Accessible Route ("FAR"), and introduces consequential amendments to the Master Direction.
The circular withdraws the short-term investment, security-wise and concentration limits applicable to FPIs investing through the General Route, merges the existing investment sub-categories into a unified limit for Central Government Securities and State Government Securities, designates additional Government Securities and Sovereign Green Bonds as specified securities under the FAR, and revises the Master Direction to reflect the amended framework. The circular also modifies the investment limits for FY 2026–27 that were previously notified vide A.P. (DIR Series) Circular No. 05 dated April 6, 2026, to give effect to the revised unified investment framework. The revised directions came into force with immediate effect.
Key Highlights
1. Withdrawal of Investment Restrictions under the General Route
RBI has withdrawn the requirement for FPIs investing in Government Securities through the General Route to comply with the existing short-term investment limit, security-wise limit, and concentration limit. The relaxation is intended to simplify the investment framework and facilitate greater participation by FPIs in the Government Securities market.
2. Rationalisation of Investment Limits
The circular merges the existing "general" and "long-term" sub-categories of investment limits into a single investment limit for Central Government Securities and a separate single limit for State Government Securities ("SGSs"). Accordingly, the investment limits notified for FY 2026–27 vide A.P. (DIR Series) Circular No. 05 dated April 6, 2026 have been modified, the unified investment limits have been prescribed at ₹4,62,490 crore and ₹1,53,043 crore for the period April–September 2026, and ₹4,77,006 crore and ₹1,64,242 crore for the period October 2026–March 2027 for Central Government Securities and SGSs, respectively.
3. Expansion of the Fully Accessible Route
RBI has expanded the list of "specified securities" eligible under the Fully Accessible Route by including all new issuances of 15-year, 30-year and 40-year Government Securities, as well as all new issuances of 5-year, 7-year, 10-year, 15-year, 30-year and 40-year Sovereign Green Bonds. In addition, three existing Government Securities—6.68% GS 2040 (ISIN: IN0020250042), 7.24% GS 2055 (ISIN: IN0020250075), and 7.71% GS 2066 (ISIN: IN0020260033) have also been designated as specified securities under the FAR.
4. Consequential Amendments to the Master Direction
The updated Master Direction omits the definitions of "Long-Term FPIs" and "Short-term Investments", removes provisions relating to minimum residual maturity, short-term investment limits, security-wise limits and concentration limits, revises the monitoring responsibilities of the Clearing Corporation of India Limited ("CCIL"), and updates the provisions governing investments under the Fully Accessible Route to align with the revised regulatory framework. Consequently, CCIL will monitor only the utilisation of the investment limits for FPI investments in Central Government Securities and State Government Securities, with the reference to monitoring the security-wise limit for investment in Central Government Securities being omitted. The Master Direction also amends paragraph 7A.4 governing investments in Central Government Securities (including Treasury Bills) other than the specified securities included under the FAR by omitting the proviso exempting investments made through the Special Rupee Vostro Account ("SRVA") route from the short-term investment limit.
5. Immediate Applicability
The revised framework came into force with immediate effect. AD Category-I banks have been advised to notify their constituents of the amended regulatory framework governing FPI investments in Government Securities. The directions have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999, without prejudice to any permissions or approvals that may be required under any other applicable law.
Source: RBI A.P. (DIR Series) Circular No. 11 (RBI/2026-27/97) dated June 5, 2026.
RBI Prescribes Revised Lending Framework for Small Finance Banks Financing Infrastructure Investment Trusts
On June 10, 2026, the Reserve Bank of India ("RBI"), through DOR.CRE.REC.92/07.01.002/2026-27, issued the Reserve Bank of India (Small Finance Banks – Credit Facilities) Second Amendment Directions, 2026, amending the Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025. Exercising its powers under Sections 21 and 35A of the Banking Regulation Act, 1949, the RBI has substituted Paragraph 137A under Chapter IX (Infrastructure Financing) to prescribe a comprehensive regulatory framework governing lending by Small Finance Banks ("SFBs") to Infrastructure Investment Trusts ("InvITs").
The amended framework permits SFBs to extend credit facilities to SEBI-registered InvITs subject to detailed eligibility conditions, governance and underwriting standards, prudential exposure limits, end-use restrictions, security requirements, and repayment norms. The Directions shall come into force from October 1, 2026, or an earlier date if adopted in entirety by an SFB. Existing non-compliant exposures may continue until maturity but cannot be renewed or enhanced unless they comply with the revised framework.
Key Highlights
1. Lending to SEBI-Registered Listed InvITs Permitted
The amended Directions permit Small Finance Banks to lend to InvITs registered with and regulated by SEBI. Such lending is restricted to listed InvITs, including InvITs recognised under sub-regulations (2) and (4) of Regulation 14 of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, including those recognised under Regulations 14(2) and 14(4) of the SEBI (Infrastructure Investment Trusts) Regulations, 2014, provided that at least 80% of the value of the InvIT's assets is invested in completed and revenue-generating infrastructure projects that have generated positive operational cash flows for a minimum period of one year.
2. Comprehensive Governance and Lending Conditions Introduced
SFBs are required to adopt a Board-approved policy governing lending to InvITs, covering appraisal mechanisms, sanctioning conditions, underwriting norms, debt service coverage ratio ("DSCR") benchmarks, exposure limits, monitoring mechanisms and loan covenants. As the valuations of InvITs are primarily based on projected cash flows, banks are also required to satisfy themselves regarding the valuation methodology and the assumptions used for such valuations vis-à-vis the bank's own policy and relevant regulatory standards. Banks must independently assess valuation methodologies, ensure that the legal structure of the InvIT permits borrowing and enforcement of security interests, and where the InvIT is established as a trust, ensure that the trust deed contains appropriate provisions permitting such borrowings, monitor end-use of funds, and ensure that lending is not utilised to finance Special Purpose Vehicles ("SPVs") facing financial difficulty. Further, refinancing existing SPV borrowings is permitted only for completed projects that have commenced commercial operations.
3. Prudential Exposure and Repayment Framework
The amended Directions prohibit bullet or balloon repayment structures for bank credit facilities, except where banks hold exposures through investments in bonds, debentures or commercial paper. Banks are also prohibited from financing InvITs for acquiring equity interests in other entities. Further, the overall leverage of the borrowing InvIT must remain within the prudential limits prescribed by SEBI or such lower limits as determined by the bank's Board. In addition, the aggregate exposure of all banks to an InvIT, together with its underlying SPVs and holding companies, shall not exceed 49% of the value of the InvIT's assets, unless a lower internal limit has been prescribed. For this purpose, "exposure" includes outstanding fund-based credit facilities (including investments in bonds, debentures and commercial paper) as well as the credit equivalent of non-fund-based facilities extended by banks. Further, the value of the InvIT's assets shall be considered on a gross basis, without netting cash and cash equivalents, and shall be based on the latest annual or half-yearly valuation prescribed under the SEBI (Infrastructure Investment Trusts) Regulations, 2014, whichever is later.
4. Enhanced Security and Risk Mitigation Requirements
The Directions require all lending to InvITs to be fully secured through appropriate security interests, including a charge over the underlying immovable property, assignment of project cash flows and receivables, pledge of equity interests held by the InvIT in the relevant SPVs, and other legally enforceable security arrangements. Where a charge is created over immovable property, it must invariably be in the nature of an exclusive first charge or a first pari passu charge where multiple lenders are involved, governed by an inter-creditor agreement or any other arrangement amongst such lenders. Loan documentation must also incorporate robust creditor protection mechanisms, including escrow arrangements, lender step-in rights, appropriate termination payment protections, and restrictions on additional indebtedness without lender consent. The contractual provisions must also restrict the borrower entity and the underlying SPVs from acting to the detriment of creditors, including by issuing additional debt without the consent of existing creditors.
5. Effective Date and Transitional Arrangements
The revised framework shall come into effect from October 1, 2026, or an earlier date where adopted by an SFB in its entirety. Existing loans to InvITs that do not conform to the amended framework may continue until maturity; however, such facilities shall not be renewed, reviewed or enhanced after expiry unless brought into compliance with the amended Directions.
Source: RBI Notification No. DOR.CRE.REC.92/07.01.002/2026-27 dated June 10, 2026
RBI Liberalises Foreign Portfolio Investment Framework under Schedule III of the FEMA (Non-Debt Instruments) Rules, 2019
On June 15, 2026, the Reserve Bank of India ("RBI"), through A.P. (DIR Series) Circular No. 14 (RBI/2026-27/114), operationalised the liberalised Foreign Portfolio Investment ("FPI") framework under Schedule III of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Issued pursuant to the Sections 10(4) and 11(1) of the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026 and the corresponding amendments to the Foreign Exchange Management (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019, the circular expands the category of eligible investors with enhanced investment limits and prescribes the operational framework for Authorised Dealer ("AD") Category-I banks facilitating such investments.
The circular permits all individual persons resident outside India to invest in equity instruments of listed Indian companies under Schedule III of the FEMA (Non-debt Instruments) Rules, 2019, prescribes the banking and reporting framework applicable to such investments, clarifies the treatment of reclassification of investments into Foreign Direct Investment ("FDI"), and requires AD Category-I banks to establish appropriate compliance mechanisms. The circular came into force with immediate effect.
Key Highlights
1. Expansion of Eligible Investors under Schedule III
Pursuant to the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2026, RBI has operationalised the expansion of the Schedule III investment framework to permit all individual persons resident outside India to invest in equity instruments of listed Indian companies on recognised stock exchanges in India. Previously, such investments under Schedule III were restricted to Non-Resident Indians ("NRIs") and Overseas Citizens of India ("OCIs"). The amendment also provides for enhanced investment limits under the revised framework.
2. Banking and Reporting Framework for Investments
The circular permits AD Category-I banks to open repatriable INR accounts for eligible individual persons resident outside India in accordance with the Foreign Exchange Management (Deposit) Regulations, 2016 to facilitate investments under Schedule III. RBI has further clarified that reporting of such transactions and monitoring of applicable investment limits shall be undertaken in the same manner as presently followed for investments made by NRIs and OCIs.
3. Reclassification of Investments into FDI
RBI has clarified that where investments made under Schedule III are required to be reclassified from Foreign Portfolio Investment to Foreign Direct Investment, including upon breach of the prescribed investment limits, such reclassification shall be undertaken in accordance with the framework applicable to Foreign Portfolio Investors ("FPIs") prescribed under A.P. (DIR Series) Circular No. 19 dated November 11, 2024.
4. Compliance Obligations for AD Category-I Banks
The circular requires AD Category-I banks to ensure compliance with the FEMA (Non-debt Instruments) Rules, 2019, the corresponding Regulations, and applicable SEBI regulations while facilitating investments under the revised framework. Banks have been directed to establish appropriate systems and procedures and obtain such documents and disclosures from investors as may be necessary to ensure compliance with the applicable regulatory requirements.
5. Immediate Applicability
The revised framework came into force with immediate effect. AD Category-I banks have been advised to bring the provisions of the circular to the notice of their customers and other concerned stakeholders.
Source: RBI A.P. (DIR Series) Circular No. 14 (RBI/2026-27/114) dated June 15, 2026.
RBI Rationalises Reporting Requirements under FEMA for Authorised Persons
On June 24, 2026, the Reserve Bank of India ("RBI"), through A.P. (DIR Series) Circular No. 17 (RBI/2026-27/174), rationalised the reporting framework applicable to Authorised Persons under the Foreign Exchange Management Act, 1999 ("FEMA"). Issued pursuant to the Foreign Exchange Management (Authorised Persons) Regulations, 2026, the Master Direction – Money Changing Activities, the Master Direction – Money Transfer Service Scheme ("MTSS"), and the Master Direction – Reporting under FEMA, the circular revises prescribed reporting formats, introduces additional reporting requirements, and discontinues certain existing returns to simplify regulatory compliance.
The circular prescribes revised reporting formats, the formats for submission of which are provided in the Annex to the circular, relaxes the approval requirement for write-off of foreign currency notes, introduces periodic reporting relating to franchisee arrangements and MTSS sub-agents, discontinues specified returns and registers under the existing reporting framework, and provides that the relevant Master Directions shall be updated to reflect these changes. The revised framework came into force with immediate effect.
Key Highlights
1. Rationalisation of Reporting Formats under FEMA
RBI has rationalised the reporting requirements applicable to Authorised Persons and prescribed revised reporting formats pursuant to the Foreign Exchange Management (Authorised Persons) Regulations, 2026. The circular also prescribes and modifies the formats for submission of various returns. The revised framework includes updated formats for reporting purchases and sales of foreign currency notes (FLM-8), reporting of Forex Correspondents and franchisees, and declarations relating to the fit and proper criteria applicable to Authorised Persons.
2. Revised Reporting Requirements for Foreign Currency Notes and Franchisee Arrangements
The revised FLM-8 return has been expanded to capture details relating to the write-off of foreign currency notes. RBI has also discontinued the requirement for prior approval where the write-off of foreign currency notes exceeds USD 2,000. Further, entities maintaining Nostro accounts and reporting transactions through FETERS are no longer required to submit FLM-8 returns. In addition, Authorised Persons having franchisee arrangements are now required to submit a quarterly list of such arrangements within fifteen days from the end of each calendar quarter, while Indian Agents under the MTSS must similarly submit quarterly details of their sub-agents within the same timeline.
3. Discontinuation of Existing Returns and Registers
The circular discontinues several reporting requirements under the existing FEMA framework, including the prescribed FLM-1 to FLM-7 registers under the Master Direction – Reporting under FEMA. However, Full Fledged Money Changers ("FFMCs") and non-bank AD Category-II entities are required to continue maintaining complete and accurate records of all foreign exchange transactions for supervisory and inspection purposes. RBI has also discontinued the quarterly statement relating to Foreign Currency Accounts opened from export proceeds of foreign currency notes and travellers' cheques, the requirement to submit separate lists of additional MTSS locations and the requirement of the quarterly confirmations regarding the veracity of the list published on the Reserve Bank’s website thereof, and the Statement of Collateral under the MTSS, while continuing to require Indian Agents to maintain adequate collateral in accordance with the applicable regulatory framework.
4. Consequential Amendments to Master Directions
RBI has clarified that the Master Direction – Money Changing Activities and the Master Direction – Reporting under FEMA shall be updated separately to incorporate the revised reporting framework introduced by the circular.
Source: RBI A.P. (DIR Series) Circular No. 17 (RBI/2026-27/174) dated June 24, 2026.
The Ministry of Corporate Affairs
MCA Relaxes Additional Fees for Delayed Filing of Form DPT-3
In June 2026, the Ministry of Corporate Affairs ("MCA"), through General Circular No. 02/2026 (F. No. Policy-02/2/2020-CL-V-MCA), granted a one-time relaxation in the payment of additional fees for delayed filing of Form DPT-3 (Return of Deposits) for the Financial Year 2025–2026. The relaxation was introduced in view of the capacity enhancement and restoration activities being undertaken at the MCA Data Centre following a fire incident on June 5, 2026, which affected the timely filing of statutory returns.
The circular permits companies to file Form DPT-3 for the Financial Year 2025–2026 without payment of additional fees up to July 31, 2026, thereby extending relief beyond the original due date of June 30, 2026. The circular was issued with the approval of the competent authority.
Key Highlights
1. One-time Waiver of Additional Fees
MCA has allowed companies to file Form DPT-3 (Return of Deposits) for the Financial Year 2025–2026 without payment of any additional fees up to July 31, 2026. The relaxation applies only to additional fees, while the applicable normal filing fees continue to be payable.
2. Relief Granted Due to Data Centre Disruption
The relaxation has been granted in view of the capacity enhancement and restoration activities being undertaken at the MCA Data Centre following the fire incident on June 5, 2026, which affected the filing infrastructure and warranted temporary compliance relief for stakeholders.
3. Applicability
The circular applies to the filing of Form DPT-3 relating to the Financial Year 2025–2026, for which the original due date was June 30, 2026. Companies completing the filing on or before July 31, 2026 will not be liable to pay additional fees for the delay.
Source: MCA General Circular No. 02/2026 (F. No. Policy-02/2/2020-CL-V-MCA), June 2026.
The Insolvency and Bankruptcy Board of India
IBBI Issues Comprehensive Guidelines for Conducting Valuation under the Insolvency and Bankruptcy Code, 2016
On June 15, 2026, the Insolvency and Bankruptcy Board of India ("IBBI"), through Circular No. IBBI/RV/103/2026, issued the Guidelines for Conducting Valuation under the Insolvency and Bankruptcy Code, 2016. Issued pursuant to the amendments to the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, the IBBI (Liquidation Process) Regulations, 2016, the IBBI (Voluntary Liquidation Process) Regulations, 2017, the IBBI (Pre-packaged Insolvency Resolution Process) Regulations, 2021 and the IBBI (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019, the circular prescribes a standardised framework governing valuation reports, documentation requirements, asset-specific reporting formats and the role of the Coordinating Valuer in insolvency proceedings. The Guidelines are intended to promote consistency, professionalism, transparency, comparability and trust in the valuation process and prescribe the minimum contents of valuation reports and the responsibilities of registered valuers in preparing the relevant documentation for arriving at a value.
The Guidelines prescribe minimum documentation and reporting standards for registered valuers, introduce standardised valuation report formats for land and buildings, plant and machinery, and securities or financial assets, specify key parameters for valuation of receivables, define the duties of registered valuers towards the Coordinating Valuer, and establish a comprehensive framework for determination of the fair value of the corporate debtor. The Guidelines are divided into three parts, namely: Part I prescribing the general requirements regarding documentation, minimum contents of valuation reports, key parameters for valuation of receivables and duties of registered valuers towards the designated Coordinating Valuer; Part II containing the asset-specific valuation report formats; and Part III prescribing the framework governing the Coordinating Valuer for determination of the fair value of the corporate debtor under the Insolvency and Bankruptcy Code, 2016. The circular came into force with immediate effect and applies to all valuations conducted under the Insolvency and Bankruptcy Code, 2016 thereafter.
Key Highlights
1. Standardised Documentation and Valuation Report Framework
The Guidelines require every registered valuer appointed under the Insolvency and Bankruptcy Code, 2016 to maintain comprehensive documentation supporting the valuation process, including communications with the client, working papers, supporting materials, valuation methodologies, assumptions, professional judgments and quality control procedures. The documentation is also required to include alternative methodologies considered, additional data and inputs evaluated, risks and potential biases identified and addressed, and the manner in which valuation risk was identified, assessed and managed by the registered valuer. The valuation report must contain prescribed minimum disclosures relating to the purpose and scope of valuation, valuation approaches and methodologies, basis and premise of value, significant assumptions, rationale for valuation, discounts or premiums applied, sustainability factors, caveats and supporting documentation. The prescribed minimum contents also include details of the registered valuer and any other experts involved in the valuation, disclosure of conflicts of interest, identity of the client and intended users, valuation currency, Valuation Report Identification Number (VRIN), valuation standards followed, sources and selection of significant data and inputs, inspections or investigations undertaken, specific reasons for assigning zero value to any asset, findings of experts involved in the valuation, and caveats, limitations and disclaimers in accordance with the IBBI (Use of Caveats, Limitations, and Disclaimers in Valuation Reports) Guidelines, 2020.
2. Asset-specific Valuation Report Formats Introduced
IBBI has prescribed uniform valuation report formats for three asset classes—Land and Building, Plant and Machinery, and Securities or Financial Assets. Each format prescribes a standard executive summary, mandatory disclosures, asset-specific information requirements, valuation methodologies, sources of information, inspection details, sustainability considerations, valuation rationale and supporting annexures, thereby promoting consistency and comparability across valuation assignments. The prescribed formats also require disclosure of the Valuation Report Identification Number (VRIN), status of the certificate of practice of the registered valuer, executive summaries containing key valuation particulars and prescribed annexures, including appointment letters, engagement terms, market data, supporting calculations and records of discussions held with the Committee of Creditors, where applicable.
3. Framework for Valuation of Receivables and Duties of Registered Valuers
The Guidelines prescribe key parameters to be considered while valuing receivables, including the nature and ageing of receivables, credit profile of debtors, legal enforceability, historical recovery trends, macroeconomic and industry-specific factors and other relevant valuation considerations. Registered valuers are also required to cooperate with the designated Coordinating Valuer by sharing timely inputs, maintaining supporting documentation, complying with applicable valuation standards and providing additional information or clarifications as required. They are further required to ensure that all information, data and assumptions shared with the Coordinating Valuer are true, correct, complete and free from material misstatement or omission.
4. Coordinating Valuer Framework Introduced
The circular introduces a detailed framework governing the appointment, responsibilities and reporting obligations of the Coordinating Valuer, who shall be designated by the Insolvency Professional in consultation with the Committee of Creditors from amongst the appointed registered valuers. The Coordinating Valuer is responsible for integrating asset-wise valuation reports, assessing business synergies and intangible assets, determining the fair value of the corporate debtor as a going concern, and preparing a Coordinating Valuation Report based on the prescribed reporting format. In determining the fair value of the corporate debtor, the Coordinating Valuer is required to assess the integrated value of the business as a whole, taking into account expected future cash flows, business synergies, industry outlook, and both tangible and intangible assets. The Coordinating Valuer is also required to explain the valuation methodology to the Committee of Creditors before computation of estimates. The Coordinating Valuation Report must include, inter alia, the valuation reports considered, methodologies applied, key assumptions, assessment of business synergies, data sources relied upon, and the final estimate of the fair value of the corporate debtor. Further, the Coordinating Valuer is required to maintain independence, objectivity and confidentiality, conduct the assignment in accordance with the applicable valuation standards, and preserve records and documentation in accordance with the Guidelines.
5. Immediate Applicability
The circular came into force on the date of its issuance and applies to all valuations conducted under the Insolvency and Bankruptcy Code, 2016. All registered valuers are required to prepare valuation reports and maintain documentation in accordance with the prescribed Guidelines.
Source: IBBI Circular No. IBBI/RV/103/2026 dated June 15, 2026
Disclaimer:-
The content provided in this update is for educational and informational purposes only and should not be construed as legal advice or the opinion of Tempus Law Associates. Tempus Law Associates disclaims any liability in connection with the use of this information without seeking appropriate legal counsel.
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