SEBI proposes merchant banker exemption for small-value private debt issues by eligible listed issuers

The Securities and Exchange Board of India (SEBI) has suggested allowing certain listed companies to bypass the requirement to hire a merchant banker when issuing small-value debt through private placement, according to a proposed rule change. The exempted debt securities or non-convertible redeemable preference shares would be issued at a face value of ₹10,000.

The existing regulations currently mandate merchant bankers for such small-value debt offerings. SEBI asserts that market participants have raised concerns about the burden merchant banker appointments impose, including high appointment costs, limited availability of suitable merchant bankers, and potential delays. The regulator proposes that an issuer seeking this exemption must meet several conditions, including registration with an Indian financial-sector regulator, a one-year history of stock exchange listing, a clean record with no fines or penalties from SEBI or the exchange, no defaults on key repayment obligations for the past three financial years, and a current financial year without any such defaults, among others.

The debt security must be unsubordinated or senior, secured by a first or pari passu charge on identifiable assets, and carry an AA- or higher rating as of the private placement date. SEBI aims to limit the exemption to lower-risk instruments, as the issuer's information is already publicly available, and listed issuers are already under regulatory oversight. Public comments on the proposal are being sought through September 17, 2026.