On 27 August, the Securities and Exchange Board of India (SEBI) proposed exempting listed issuers regulated by a financial sector regulator from appointing a merchant banker for private placement of small-value debt securities, subject to specified conditions.

SEBI said the proposal seeks to address operational difficulties and reduce costs associated with small-value debt issuances, which it said could help develop the market and encourage more frequent issuances.

At present, Clause 1.3 of Chapter V of the SEBI Master Circular for issue and listing of Non-Convertible Securities dated 15 October 2025 requires issuers making a private placement of debt securities or non-convertible redeemable preference shares with a face value of Rs. 10,000 to appoint at least one merchant banker.

SEBI said market participants had sought removal of this requirement, citing the additional cost involved. It noted that the limited number of merchant bankers in the debt segment and delays in completing private placements also make small-value issuances less viable. According to SEBI, these factors increase the cost of capital and discourage frequent small-value debt issuances.

The regulator further noted that listed issuers are already subject to regulatory supervision, governance requirements, continuous disclosure obligations and scrutiny under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. It added that many listed debt issuers are non-banking financial companies (NBFCs) regulated by the Reserve Bank of India (RBI) and are therefore subject to additional regulatory oversight.

Under the new proposal, an issuer would qualify for the exemption if it is regulated by a financial sector regulator, has been listed for at least one year without any pending penalties under the LODR Regulations, and has not defaulted on specified payments during the last three financial years and the current financial year.

The issuer must provide an auditor's certificate to the Stock Exchange confirming compliance with these conditions. The debt security must also be senior and secured by a first or pari passu charge on identifiable assets of the issuer. Further, a privately placed debt security must have a credit rating of AA- or higher.

The draft circular proposes corresponding amendments to Clause 1.3 of the NCS Master Circular to provide that an eligible issuer may be exempted from appointing a merchant banker upon fulfilling the prescribed conditions.

SEBI has invited public comments on the proposal until 17 September 2026.

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To Read the full text of the Order CLICK HERE