Understanding Key Amendments - October 2026
SECURITIES AND EXCHANGE BOARD OF INDIA
SEBI Reviews Position Limits for Clients in Commodity Derivatives
On September 9, 2026, the Securities and Exchange Board of India (“SEBI”) revised the position limits applicable to clients in the commodity derivatives segment and the penalty provisions relating to violations or breaches of such limits.
The revised framework forms part of SEBI’s continuing efforts to strengthen the risk management and compliance framework applicable to commodity derivatives and to ensure that market participants maintain positions within prescribed regulatory thresholds.
Position limits are an important component of the regulatory framework for commodity derivatives, as they seek to control excessive concentration of positions and mitigate risks that may arise from large exposures in individual contracts. The revision of both the applicable limits and consequences for breaches is therefore relevant to clients, trading members and other participants active in the commodity derivatives segment.
Key Highlights
Revised Position Limits and Penalty Provisions: SEBI has revised the penal provisions under concerning violations of client-level open interest/position limits at the commodity and near-month contract levels. The revised framework provides for a daily monetary penalty on the concerned member based on the extent and duration of the violation: where the breach exceeds 2% of the prescribed limit, the penalty will be 2% of the limit exceeded × closing price × number of days of violation, subject to a maximum of ₹2,00,000, while for breaches of up to 2%, the same formula will apply subject to a maximum of ₹10,000. Members are required to bring excess positions within the prescribed limits by the next trading day, failing which the Exchange may square off the excess position without further notice. Where a breach exceeding 2% occurs more than three times in a calendar month for the same commodity, the member may be placed in square-off mode for one day. Further, where violations under either category occur more than three times in a month, an additional penalty equivalent to the penalty imposed for the relevant violation may be levied, except where the breach arises solely due to clubbing of positions. Repeated violations may also invite further regulatory action by SEBI. The revised limits are intended to ensure that positions maintained by clients remain within prescribed regulatory thresholds. Trading members and clients may accordingly need to review existing positions and monitoring mechanisms to ensure continued compliance with the applicable limits and the revised consequences strengthen the compliance framework governing position-limit requirements and highlight the importance of timely monitoring and corrective action where positions approach or exceed applicable thresholds
Definition of ‘Broad Commodity’ and Client-Level Position Limits: SEBI has modified the definition of a ‘Broad Commodity’ to include an agricultural commodity that is not classified as a ‘Sensitive Commodity’ and has an average deliverable supply over the preceding 5 years of at least 10 lakh MT in quantitative terms or ₹5,000 crore in monetary terms. Further, client-level overall open position limits will now be determined based on the annual deliverable supply, with limits set at 2% for Broad Commodities, 1% for Narrow Commodities and 0.5% for Sensitive Commodities, with the resulting figures rounded down to the appropriate number of zeroes. Commodities that move from the Narrow to Broad category due to the revised definition will continue to have a 1% position limit for one year, after which the Exchange may, subject to review and satisfaction, increase the limit to 2% applicable to Broad Commodities. These changes reinforce SEBI’s focus on managing risks associated with excessive concentration of positions in commodity derivatives. Position limits serve as an important risk-control mechanism by restricting the extent to which individual market participants can accumulate positions and thereby helping address potential market and systemic risks arising from large exposures.
Compliance Monitoring: The revised framework may require trading members and other relevant market participants to review their internal monitoring and compliance mechanisms. Systems used to track client positions may need to be assessed to ensure that applicable limits are monitored effectively and that potential breaches can be identified and addressed in a timely manner.
The revised framework is relevant to trading members, clients and other market participants active in the commodity derivatives segment. Participants may need to review their existing positions, risk management processes and internal compliance controls to ensure that the revised position limits and penalty provisions are appropriately incorporated into their operations.
SEBI Eases Regulatory Compliance for FPIs Investing Only in Government Securities
On September 7, 2026, the SEBI introduced measures to ease regulatory compliance requirements applicable to Foreign Portfolio Investors (“FPIs”) investing exclusively in Government Securities.
The measures form part of SEBI’s continuing efforts to simplify the regulatory framework applicable to FPIs and facilitate ease of doing business for foreign investors whose investment activity is limited to Government Securities. By reducing certain compliance and documentation requirements, the framework seeks to make the regulatory process more proportionate to the nature of such investments while retaining appropriate regulatory safeguards.
FPIs play an important role in India’s financial markets, including through investments in Government Securities. Simplifying compliance requirements for FPIs with a limited investment profile can help reduce operational and documentation-related burdens associated with maintaining such investments.
Key Highlights
Relaxed Disclosure Requirements: FPIs investing exclusively in Government Securities under fully accessible route will benefit from simplified compliance requirements, including the relaxation of certain documentation and investor details disclosure-related obligations. The revised approach is intended to reduce compliance requirements that may otherwise apply to FPIs while recognising the relatively limited nature of their investment activities.
Ease of Doing Business: The measures are intended to simplify the regulatory framework applicable to FPIs whose investments are restricted to Government Securities through general route. By reducing certain operational requirements, SEBI seeks to make compliance processes more efficient and reduce the administrative burden associated with maintaining such investments in India.
Facilitating Foreign Investment: The easing of regulatory requirements may make investment in Indian Government Securities more accessible to eligible foreign investors. A simplified compliance framework can reduce regulatory friction and facilitate participation by FPIs whose investment strategies are limited to Government Securities.
Proportionate Regulatory Framework: The measures reflect an approach towards aligning compliance requirements with the nature and scope of an FPI’s investment activity. FPIs investing exclusively in Government Securities may therefore benefit from a regulatory framework that reduces certain requirements while continuing to operate within SEBI’s broader regulatory and supervisory framework.
The measures are relevant to FPIs whose investments in India are limited to Government Securities and may require eligible investors, intermediaries and compliance teams to review their existing regulatory and documentation processes. FPIs may need to assess the applicability of the revised requirements to their investment activities and determine whether corresponding internal compliance procedures can be streamlined.
SEBI Launches “Demat 2.0” Pilot for Tokenised Corporate Bonds
On September 10, 2026, the SEBI announced the successful launch of the “Demat 2.0” pilot project for tokenised corporate bonds, marking a significant development in the exploration of distributed ledger technology (“DLT”) within India’s securities market.
The pilot seeks to explore the use of tokenisation in the issuance, holding and settlement of corporate bonds by integrating tokenised securities with digital settlement infrastructure. The initiative also involves the use of the Reserve Bank of India’s (“RBI”) wholesale Central Bank Digital Currency (“CBDC”), demonstrating the potential for greater integration between emerging financial technologies and existing market infrastructure.
Corporate bonds form an important component of India’s debt capital markets. The application of DLT to their lifecycle could potentially improve the efficiency of processes relating to issuance, ownership records and settlement while operating within the existing regulatory framework.
Key Highlights
Tokenised Corporate Bonds: The “Demat 2.0” pilot enables corporate bonds to be represented in tokenised form using DLT. The initiative provides an opportunity to examine how distributed ledger technology can be applied to the representation and management of securities within the regulated financial market infrastructure.
Digital Settlement Infrastructure: The pilot integrates tokenised securities with digital settlement infrastructure, including RBI’s wholesale CBDC. This integration enables the initiative to explore the potential interaction between tokenised securities and digital forms of central bank money in the settlement of transactions involving corporate bonds.
Market Innovation: The pilot seeks to examine technology-driven improvements across the issuance, holding and settlement lifecycle of corporate bonds. The initiative may provide insights into how DLT-based infrastructure can be deployed within the securities market while continuing to operate subject to applicable regulatory requirements and safeguards.
Investor Protection and Regulatory Safeguards: Existing regulatory requirements relating to credit ratings, debenture trustees, listing and disclosures continue to apply to the tokenised securities. The pilot therefore seeks to explore technological innovation without removing the established investor protection and transparency requirements applicable to corporate bonds.
The “Demat 2.0” pilot is relevant to issuers, investors, market intermediaries and other participants involved in India’s corporate bond market. The initiative may provide an opportunity for market participants to assess the potential operational and regulatory implications of tokenised securities and DLT-based market infrastructure.
SEBI Board Approves Comprehensive Securities Market Reforms
On September 24, 2026, the SEBI Board approved a wide range of regulatory reforms covering portfolio managers, settlement proceedings, research analysts, advertisements, Foreign Portfolio Investors (“FPIs”), Real Estate Investment Trusts (“REITs”), Infrastructure Investment Trusts (“InvITs”), debt securities and Alternative Investment Funds (“AIFs”).
The decisions form part of SEBI’s broader review of the securities market regulatory framework and seek to address various aspects of market participation, regulatory compliance, investor access and ease of doing business. The measures approved by the Board are expected to be followed by the issuance of relevant regulations, amendments and circulars to implement the approved changes.
The reforms cover multiple categories of market participants and financial products and may therefore have implications for intermediaries, investors, issuers and other entities operating within the securities market.
Key Highlights
Portfolio Management Framework: SEBI has approved the new Portfolio Managers Regulations, 2026, replacing the 2020 framework, with a focus on industry development, ease of compliance and regulatory simplification. Key changes include wider investment avenues such as IPOs, foreign securities, certain unlisted debt securities and greater flexibility in derivatives, introduction of the PRIM route for mutual fund investments and Independent Fund Managers (IFMs), and relaxation of certain compliance requirements, including Principal Officer qualifications and dealing-room requirements. The regulations have also been consolidated and simplified, resulting in a 53% reduction in their length, making the framework more streamlined and easier to understand and comply with..
Settlement Framework: The new framework simplifies and streamlines the settlement process by defining settlement terms to include the settlement amount, disgorgement of wrongful gains (where applicable), and Remedial and Regulatory Terms (RRT). A new formula has been introduced for calculating the settlement amount, based on the minimum statutory penalty and factors such as the stage of proceedings, regulatory action, gravity of the violation, aggravating and mitigating circumstances, along with legal costs. Wrongful gains, loss avoided or loss caused to investors will be disgorged separately and excluded from the base amount to avoid double counting. The framework also expands access to settlement by introducing a 60-day pre-show-cause settlement notice, a 90-day period to apply after a show-cause notice, fast-track settlement for specified matters involving amounts up to ₹10 lakh, and a one-time 90-day window for certain pending matters under the 2018 Regulations, subject to an additional 20% settlement amount. It further permits settlement of specified matters involving financial statement misrepresentation and diversion or siphoning of funds, subject to appropriate remedial measures. Interest on disgorgement will generally apply at 9% per annum, with 12% per annum thereafter in specified cases, and no interest will be charged on interest. Overall, the revised framework aims to make settlements more predictable, transparent and accessible while retaining appropriate deterrence and regulatory safeguards.
Broader Market Participation: Several of the approved measures seek to broaden investment avenues and facilitate greater participation by foreign investors in specified segments of the securities market. The reforms may accordingly provide additional opportunities for market participants while supporting SEBI’s objective of developing and deepening India’s securities markets.
Ease of Doing Business: The Board approved various measures directed towards rationalising compliance requirements and reducing regulatory burdens for market participants. The measures are intended to simplify regulatory processes and improve operational efficiency while maintaining the applicable investor protection and market integrity safeguards.
Multiple Regulatory Segments: The decisions extend beyond portfolio management and settlement proceedings and cover areas including research analysts, advertisements, FPIs, REITs, InvITs, debt securities and AIFs. The breadth of the measures indicates a wider review of regulatory requirements applicable across different segments of the securities market and may result in corresponding changes to compliance processes for affected entities.
The reforms are relevant to a wide range of market participants, including portfolio managers, FPIs, investment managers, intermediaries, issuers and other regulated entities. Affected participants may need to monitor the subsequent regulations and circulars issued by SEBI and assess the implications of the approved measures for their existing business models, policies, documentation and compliance frameworks.
SEBI Issues Master Circular for Debenture Trustees
On September 28, 2026, the SEBI issued a Master Circular for Debenture Trustees, consolidating the applicable regulatory requirements governing the role and responsibilities of Debenture Trustees in relation to listed debt securities.
The Master Circular brings together the relevant SEBI requirements applicable to Debenture Trustees into a single regulatory document, providing a consolidated reference framework for stakeholders involved in the debt securities market. The consolidation is intended to improve accessibility and provide greater clarity regarding the regulatory obligations applicable to Debenture Trustees.
Debenture Trustees play an important role in monitoring compliance with the terms and conditions of debt securities and protecting the interests of debenture holders. The consolidated framework therefore provides an important reference point for Debenture Trustees and other participants involved in the issuance and administration of listed debt securities.
Key Highlights
Consolidated Regulatory Framework: The Master Circular consolidates the applicable SEBI requirements relating to Debenture Trustees into a single regulatory document. Bringing together the relevant provisions in one framework is intended to make the applicable regulatory requirements easier to access and reference and may assist stakeholders in maintaining consistency in their compliance processes.
Due Diligence and Monitoring: The framework consolidates requirements relating to due diligence and the ongoing monitoring responsibilities of Debenture Trustees. This includes requirements concerning security and covenant monitoring, security cover and continuous monitoring of relevant matters. Debenture Trustees may therefore need to ensure that their existing monitoring and compliance procedures remain aligned with the consolidated requirements.
Security and Covenant Monitoring: The Master Circular provides a consolidated reference for requirements relating to monitoring of security cover and compliance with applicable covenants. These functions are important to the ongoing oversight of listed debt securities and may require Debenture Trustees to maintain appropriate systems, records and processes for identifying and addressing relevant compliance matters.
Stakeholder Compliance: The circular provides a single reference framework for Debenture Trustees as well as other stakeholders involved in the listed debt securities ecosystem, including issuers of listed debt securities, credit rating agencies, stock exchanges and depositories. The consolidation may facilitate greater consistency in understanding and applying the relevant regulatory requirements across different market participants.
Supersession of Earlier Master Circular: The September 2026 Master Circular supersedes the earlier Master Circular for Debenture Trustees issued in August 2025. Stakeholders should accordingly refer to the updated circular when assessing the applicable regulatory requirements and review their existing compliance frameworks to identify any changes arising from the consolidated provisions.
The Master Circular is relevant to Debenture Trustees and other participants involved in the listed debt securities market. Debenture Trustees may need to review their internal policies, due diligence processes, monitoring mechanisms and documentation practices to ensure that their compliance frameworks appropriately reflect the consolidated requirements.
MINISTRY OF CORPORATE AFFAIRS
MCA Cautions Public Against High-Return Promises by Non-Compliant Nidhi Companies
On September 24, 2026, the Ministry of Corporate Affairs (“MCA”) issued an advisory cautioning the public against investment decisions involving Nidhi Companies without conducting an appropriate background check, particularly where such companies promise high returns. MCA reiterated the requirement for companies seeking to function as Nidhis to file Form NDH-4 for declaration or updation of their Nidhi status.
The advisory follows MCA’s examination of NDH-4 applications, during which it observed instances of non-compliance with applicable provisions of the Companies Act and the Nidhi Rules. MCA also highlighted that deposits with Nidhi Companies are not insured by the Deposit Insurance and Credit Guarantee Corporation (“DICGC”).
Key Highlights
Mandatory NDH-4 Filing: MCA reiterated that every company seeking to function as a Nidhi is required to file Form NDH-4 for obtaining or updating its Nidhi declaration. Companies functioning as Nidhis should therefore ensure compliance with the applicable filing requirements.
Investor Caution: MCA has advised members of the public to conduct appropriate background checks before making investment decisions involving Nidhi Companies, particularly where unusually high returns are promised. Investors should verify the company’s regulatory status rather than relying solely on representations made by agents or other intermediaries.
Non-Compliance Concerns: MCA stated that examination of NDH-4 applications identified instances where companies functioning as Nidhis were not complying fully with applicable statutory provisions and rules. The advisory highlights the importance of verifying whether an entity has satisfied the requirements applicable to Nidhi Companies.
Deposits Not Insured by DICGC: MCA specifically highlighted that deposits with Nidhi Companies are not insured by DICGC. This is relevant for members and prospective investors when assessing the risks associated with deposits placed with such entities.
The advisory is relevant to Nidhi Companies, their members and prospective investors. Companies operating as Nidhis should review their compliance with the Companies Act, applicable Nidhi Rules and NDH-4 requirements, while investors should independently verify the regulatory status of an entity before placing funds.
MCA Extends Tenure of Technical Members of NCLAT
On September 7, 2026, the Ministry of Corporate Affairs (“MCA”) issued a notification extending the tenure of certain Technical Members of the National Company Law Appellate Tribunal (“NCLAT”) under section 410 of the Companies Act, 2013, read with the relevant provisions of the Tribunals Reforms Act, 2026.
The notification provides for continuation of the specified Technical Members on the same terms and conditions for the period prescribed in the notification, subject to the applicable age limit. The measure is relevant to the institutional functioning and continuity of NCLAT, which exercises appellate jurisdiction in matters arising under the Companies Act and insolvency and bankruptcy framework.
Key Highlights
Extension of Tenure: MCA extended the tenure of specified Technical Members of NCLAT with effect from September 9, 2026, for the period specified in the notification or until the applicable age limit is reached, whichever is earlier.
Institutional Continuity: The extension supports continuity in the composition and functioning of NCLAT and enables the Tribunal to continue discharging its appellate and adjudicatory responsibilities under the applicable statutory framework.
Companies Act Framework: The notification was issued under section 410 of the Companies Act, 2013, read with the relevant provisions of the Tribunals Reforms Act, 2026. The measure therefore forms part of the statutory framework governing the constitution and tenure of NCLAT members.
FOREIGN EXCHANGE MANAGEMENT ACT
RBI Withdraws Seven Inoperative FEMA Circulars as Part of Regulatory Rationalisation
On September 8, 2026, the Reserve Bank of India (“RBI”) issued A.P. (DIR Series) Circular No. 21 as part of its ongoing review of circulars issued under the Foreign Exchange Management Act, 1999 (“FEMA”). RBI withdrew seven circulars that had ceased to be operative due to subsequent regulatory amendments, redundancy, overlap or supersession by newer directions.
The review forms part of RBI’s broader initiative to rationalise the FEMA regulatory framework and remove legacy instructions that are no longer operative. The measure is intended to improve clarity and accessibility of the foreign exchange regulatory framework for Authorised Persons and other stakeholders.
Key Highlights
Withdrawal of Inoperative Circulars: RBI has withdrawn seven FEMA-related circulars that had ceased to have operative relevance due to subsequent regulatory changes, redundancy, overlap or their replacement by newer directions.
Regulatory Rationalisation: The measure forms part of RBI’s ongoing review of circulars issued under FEMA since June 1, 2000. The exercise seeks to identify and remove provisions that are no longer required within the current regulatory framework.
Reduced Regulatory Overlap: Withdrawal of superseded or redundant circulars is intended to reduce the possibility of reliance on outdated instructions and provide greater clarity regarding the FEMA provisions currently applicable to foreign exchange transactions.
Relevance for Authorised Persons: Authorised Persons should review their existing FEMA compliance manuals, regulatory repositories and internal guidance materials to ensure that withdrawn circulars are not inadvertently relied upon in operational or compliance processes.
The withdrawal is relevant to Authorised Persons and other entities involved in transactions governed by FEMA. While the measure does not introduce a new substantive foreign exchange restriction, it is relevant from a regulatory housekeeping and compliance perspective.
FEMA Framework Amended to Permit Inventory-Based E-Commerce for Exports
On September 2, 2026, the Ministry of Finance, Department of Economic Affairs, notified the Foreign Exchange Management (Non-debt Instruments) (Fourth Amendment) Rules, 2026, further amending the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. The amendment introduces a specific exception permitting e-commerce entities to undertake an inventory-based model exclusively for the export of goods or products manufactured or produced in India.
The amendment gives effect to the policy relaxation for export-oriented inventory-based e-commerce and is relevant to entities with foreign investment operating in the Indian e-commerce sector. The relaxation is subject to the applicable Foreign Trade Policy, Handbook of Procedures and FEMA export regulations.
Key Highlights
Export-Oriented Inventory Model: A new serial number 15.2.5 has been inserted into Schedule I of the FEMA (Non-debt Instruments) Rules, 2019. The provision permits an e-commerce entity to undertake an inventory-based model exclusively for exporting goods or products manufactured or produced in India.
Relaxation of Existing Restrictions: The existing restrictions relating to Business-to-Consumer (“B2C”) transactions and inventory-based e-commerce under the preceding provisions will not apply to exports undertaken under the newly permitted framework. The relaxation is specifically linked to export activity and does not generally permit inventory-based e-commerce for domestic sales.
Compliance with Export Regulations: The permitted export activity must be undertaken in accordance with the Foreign Trade Policy 2023, the Handbook of Procedures and the applicable FEMA regulations governing exports. Entities using the framework will therefore need to consider both foreign investment and export-related compliance requirements.
Foreign Investment Implications: The amendment may provide greater flexibility to foreign-funded e-commerce businesses seeking to establish export-oriented inventory models in India. This may be particularly relevant for businesses that manufacture or source goods in India for sale to customers outside India.
The amendment is relevant to e-commerce entities with foreign investment, Indian companies undertaking export-oriented e-commerce activities and investors evaluating business structures involving inventory-based exports. Businesses may need to review their existing structures and operating models to determine whether the new provision can be utilised.
FEMA Export Regulations Amended – Export Realisation Period Reduced and AD Powers Expanded
On September 22, 2026, the RBI notified the Foreign Exchange Management (Export and Import of Goods and Services) (Amendment) Regulations, 2026, further amending the Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026. The amendment will come into force from October 1, 2026 and introduces changes to the timelines for realisation and repatriation of export proceeds as well as the handling of certain legacy export, import and merchanting trade transactions.
The amendment is relevant to exporters, importers and Authorised Dealer (“AD”) banks and may require businesses to review their foreign exchange compliance processes, export receivables monitoring and transaction-handling procedures.
Key Highlights
Reduced Export Realisation Period: The prescribed period for realisation and repatriation of export proceeds for exports of goods and services has been reduced from fifteen months to nine months. This change will require exporters to monitor outstanding export proceeds against the revised timeline from October 1, 2026.
Indian Rupee Transactions: For exports invoiced and/or settled in Indian Rupees, the period prescribed under the relevant provision has been reduced from eighteen months to twelve months. Exporters undertaking such transactions may therefore need to review their receivables monitoring and foreign exchange compliance systems.
Treatment of Caution-Listed Exporters: Exporters appearing on the Caution List as at September 30, 2026 will continue to be governed by the applicable orders issued under the earlier framework until their names are removed from the list. This provides continuity for transactions already subject to caution-list restrictions.
Greater Role for Authorised Dealers: A new Regulation 20 empowers Authorised Dealers to handle specified export, import and merchanting trade transactions undertaken before October 1, 2026 that previously required RBI approval. The change is intended to facilitate the processing of specified legacy transactions through the banking channel.
The amendments are relevant to exporters, importers, merchanting traders and AD banks. Businesses should review their outstanding export receivables and internal monitoring systems in light of the revised timelines and assess whether existing transaction-handling procedures require modification.
From a broader regulatory perspective, the amendments seek to streamline foreign exchange administration while placing greater emphasis on timely realisation and repatriation of export proceeds and decentralised processing through Authorised Dealers.
RESERVE BANK OF INDIA
RBI Proposes Amendments to KYC Framework – Safeguards for Money Mule Accounts
On September 11, 2026, the RBI invited comments on the draft Reserve Bank of India (Know Your Customer) Amendment Directions, 2026, proposing additional safeguards in relation to suspected money mule accounts and fraudulent transactions.
The proposed amendments form part of RBI’s continuing efforts to strengthen the Know Your Customer (“KYC”) framework and enhance controls against the misuse of bank accounts for cyber-enabled financial fraud. The proposals seek to provide regulated entities with a framework for identifying suspected money mule activity and taking appropriate interim measures while also providing customers an opportunity to establish the genuineness of the relevant transactions or account activity.
Money mule accounts can be used to receive, transfer or facilitate the movement of funds connected with fraudulent activities. Strengthening controls around such accounts is therefore relevant to banks’ broader fraud risk management, customer protection and financial crime compliance frameworks.
Key Highlights
Temporary Debit Holds: The proposed framework may require banks to place temporary debit holds in relation to suspected money mule transactions or accounts. Such measures are intended to provide regulated entities with an interim mechanism to restrict the movement of funds where account activity raises concerns of potential fraudulent use. Banks may accordingly need to consider appropriate processes for identifying transactions or accounts that warrant such intervention.
Opportunity for Customer Response: Customers would be provided an opportunity to explain and establish the genuineness of the relevant transaction or account activity. This mechanism is intended to provide customers with an avenue to clarify potentially suspicious activity and would require regulated entities to establish appropriate communication and review processes. Banks may therefore need to ensure that customer responses are considered through defined internal procedures.
Internal Policies and Procedures: Regulated entities would be required to establish internal policies covering the identification of suspected money mule transactions, imposition of temporary debit holds, customer communication and grievance redressal. The proposed requirements may consequently require banks to review and strengthen their existing fraud monitoring, KYC, customer-service and escalation frameworks to ensure that suspected mule activity is handled consistently.
Cyber-Fraud Prevention: The proposed amendments seek to strengthen coordination between banks and the financial cyber-fraud reporting mechanism. Enhanced coordination may assist regulated entities in responding to suspected fraudulent transactions and taking appropriate measures to mitigate the potential movement of funds associated with cyber-enabled financial fraud.
The proposed amendments are relevant for banks and other regulated entities in strengthening their KYC and fraud risk management frameworks. In particular, regulated entities may need to assess their existing systems for identifying suspected money mule activity, applying temporary debit holds, communicating with affected customers and handling related grievances.
Priority Sector Lending Framework Amended – Treatment of Specified Advances for ANBC
On September 11, 2026, the RBI issued the Reserve Bank of India (Priority Sector Lending – Targets and Classification) Third Amendment Directions, 2026, introducing further changes to the treatment of specified advances for the purpose of calculating Adjusted Net Bank Credit (“ANBC”) for Priority Sector Lending (“PSL”) requirements.
The amendment forms part of RBI’s continuing efforts to refine the PSL framework and provides further clarity on the advances that are to be considered while determining the lending base used for calculating banks’ PSL obligations.
The PSL framework requires banks to direct a specified proportion of their lending towards identified priority sectors of the economy. The calculation of ANBC is therefore an important component of regulatory compliance, as changes in the treatment of specified advances can affect the lending base against which PSL targets are determined.
Key Highlights
Revised Treatment of Specified Advances: The amendment provides that advances extended in India against fresh FCNR(B) deposits with a tenor of 3 to 5 years, mobilised between June 8, 2026 and September 30, 2026, and against fresh NRE term deposits with a tenor of 3 years or more, mobilised between June 19, 2026 and September 30, 2026, will be excluded from ANBC for the purpose of calculating PSL targets, subject to the deposits qualifying for the applicable CRR/SLR exemption. Since ANBC forms the basis for determining a bank’s PSL targets, the exclusion of these eligible advances may reduce the ANBC base used for PSL target computation. Banks should accordingly identify the qualifying FCNR(B)/NRE deposits and corresponding advances and ensure that the eligible exclusion is appropriately reflected in their ANBC and PSL calculations. Furthermore, the amount excluded from ANBC cannot exceed the amount of eligible fresh FCNR(B)/NRE deposits qualifying for CRR/SLR exemption. Banks should therefore ensure that the exclusion is appropriately supported by deposit-level records and that the amount of advances excluded is within the prescribed limit.
Impact on PSL Calculations: The revised methodology may have a direct bearing on the calculation of PSL obligations for banks, depending on the nature and volume of the specified advances maintained by individual institutions. Banks may need to review their existing ANBC computation processes and assess whether advances that were previously treated in a particular manner are required to be considered differently following the amendment.
Regulatory Reporting and Compliance: The amendment is relevant not only to the calculation of PSL targets but also to banks’ regulatory reporting and internal compliance processes. Banks may need to ensure that the revised treatment is appropriately reflected in relevant reporting mechanisms, internal calculations and compliance monitoring frameworks. Coordination between regulatory reporting, finance, credit and compliance functions may be required to ensure consistent implementation.
Immediate Applicability: The amendment was issued on September 11, 2026. Banks will need to factor the revised treatment into their applicable ANBC calculations and related PSL compliance processes. Internal policies, calculation methodologies and monitoring systems may need to be reviewed to ensure that the revised provisions are appropriately incorporated.
The amendment is relevant for banks in reviewing their PSL compliance framework, particularly in relation to the computation of ANBC and the treatment of specified advances. Banks should assess the impact of the revised methodology on their PSL calculations and ensure that corresponding regulatory reporting and internal compliance processes are appropriately updated.
RBI Relaxes Reporting Requirements for Accounts of Non-Resident Banks
On September 2, 2026, the RBI issued A.P. (DIR Series) Circular No. 20, relating to deposits and accounts maintained for non-resident banks. The circular dispenses with certain reporting requirements previously applicable to Authorised Dealer Category-I (“AD Category-I”) banks in relation to rupee accounts of non-resident banks.
The measure forms part of RBI’s broader efforts to rationalise operational and reporting requirements under the foreign exchange regulatory framework. By discontinuing specified reporting obligations that were considered no longer necessary, RBI seeks to reduce the compliance burden on AD Category-I banks while maintaining the underlying regulatory framework governing such accounts.
Key Highlights
Discontinuation of Periodic Reporting: AD Category-I banks are no longer required to furnish an annual up-to-date list of their offices or branches maintaining rupee accounts of non-resident banks to RBI’s Central Office. The earlier requirement required such information to be reported as at the end of December each year.
Removal of Overdrawal Reporting: RBI has also dispensed with the requirement to report certain temporary overdrawals by overseas branches or correspondents where such overdrawals exceeded the permissible limit and remained unadjusted beyond the prescribed period.
Immediate Effect: The revised instructions apply with immediate effect. AD Category-I banks should accordingly update their internal regulatory reporting procedures and discontinue the reporting requirements that have been expressly withdrawn.
Operational Simplification: The measure reduces specific reporting obligations relating to non-resident bank accounts and may simplify the compliance processes followed by AD Category-I banks in connection with such accounts.
The circular is relevant to AD Category-I banks maintaining rupee accounts of non-resident banks and may require affected banks to review their foreign exchange reporting procedures and internal compliance checklists.
INSOLVENCY AND BANKRUPTCY BOARD OF INDIA (IBBI)
IBBI Strengthens Due Diligence by Insolvency Professionals to Prevent Misuse of IBC Framework
On September 9, 2026, the Insolvency and Bankruptcy Board of India (“IBBI”) issued a circular on “Due diligence by Insolvency Professionals regarding misuse of IBC framework”, directing Insolvency Professionals (“IPs”) to remain vigilant against potential misuse of the insolvency framework under the Insolvency and Bankruptcy Code, 2016 (“IBC”).
The circular follows information received by IBBI from law enforcement and regulatory agencies concerning instances where the IBC framework may allegedly be used for purposes other than genuine insolvency resolution or liquidation. The circular seeks to strengthen the due diligence expected from IPs and promote greater scrutiny of circumstances that may indicate misuse of insolvency proceedings.
Key Highlights
Enhanced Due Diligence: IPs are required to remain vigilant regarding circumstances that may indicate misuse of the IBC framework. The requirement places greater emphasis on identifying indicators that may suggest that insolvency proceedings are being initiated or used for purposes unrelated to genuine insolvency resolution or liquidation.
Potential Misuse of IBC Proceedings: The circular identifies concerns relating to the use of insolvency proceedings for purposes such as mitigating tax liabilities, avoiding regulatory scrutiny, mitigating investigations, prosecution or penalties, and monetising or ring-fencing assets. IPs may therefore need to undertake additional scrutiny where circumstances raise such concerns.
Professional Responsibility: The circular reinforces the role of IPs as key participants in maintaining the integrity of insolvency proceedings. IPs should appropriately examine relevant information and remain alert to circumstances that may require further enquiry or action under the applicable framework.
Strengthening the Integrity of Insolvency Processes: The enhanced due diligence expectations are intended to reduce the risk of the IBC framework being used for purposes inconsistent with its objectives. This may contribute to greater transparency and integrity in corporate insolvency resolution and liquidation proceedings.
The circular is relevant to Insolvency Professionals, Insolvency Professional Entities and Insolvency Professional Agencies. IPs may need to review their existing due diligence procedures and ensure that relevant warning indicators are appropriately considered during insolvency assignments.
IBBI Proposes Strengthening Safeguards for Insolvency Resolution of Personal Guarantors
On September 12, 2026, the IBBI published a circular titled “Strengthening safeguards in the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors”, seeking stakeholder views on potential measures to strengthen the regulatory framework applicable to insolvency resolution processes involving personal guarantors.
The circular forms part of IBBI’s continuing review of the insolvency framework and considers measures aimed at strengthening safeguards, transparency and procedural requirements in proceedings involving personal guarantors to corporate debtors.
Key Highlights
Strengthening Safeguards: The circular examines potential measures to strengthen safeguards applicable during the insolvency resolution process for personal guarantors to corporate debtors. The proposals are intended to address identified procedural and regulatory considerations within the existing framework.
Stakeholder Protection: The proposed measures seek to strengthen transparency and procedural safeguards for stakeholders involved in personal guarantor insolvency proceedings. This may have implications for creditors, personal guarantors and insolvency professionals participating in such processes.
Regulatory Review: The circular reflects IBBI’s ongoing review of the insolvency framework and its approach towards identifying areas where additional regulatory safeguards may be appropriate.
Consultation Process: As a circular, the measures set out therein represent proposals for stakeholder consideration and should be distinguished from amendments or requirements that have already been brought into force. Stakeholders may accordingly review the proposals and provide comments within the consultation process.
The circular is relevant to creditors, personal guarantors, Insolvency Professionals and other stakeholders involved in insolvency resolution processes concerning personal guarantors to corporate debtors.
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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