SEBI Merchant Banker Exemption 2026: Private Placement Debt Eligibility Checklist
The exemption is narrow and evidence-driven: regulated issuer, listing history, clean LODR record, no recent default, secured senior debt and at least AA− rating.
Search intent and key terms
Primary keyword: SEBI merchant banker exemption 2026
Intent: Informational compliance update for listed issuers, CFOs, company secretaries, debt teams, merchant bankers, exchanges and investors.
Direct answer
SEBI now allows certain eligible listed issuers to privately place debt securities or non-convertible redeemable preference shares with ₹10,000 face value without appointing a merchant banker. The 7 October 2026 circular replaces Clause 1.3 of Chapter V of the NCS Master Circular and makes the exemption available only when all specified conditions are satisfied.
This is an optional route, not a blanket removal of merchant bankers. The issuer must prove its regulatory status, listing history, compliance record, default history, security structure and rating. The Best CS Firm In India implementation is to assemble that evidence before seeking in-principle approval and preserve it with the issue file.
The five cumulative conditions
| Condition | SEBI requirement | Evidence to prepare |
|---|---|---|
| Regulatory status | Issuer regulated by SEBI, RBI, IRDAI or PFRDA | Registration and current regulatory status |
| Listing record | Listed in any segment of a recognised exchange for at least one year | Listing date and exchange confirmation |
| LODR record | No pending SEBI/exchange fines or penalties for applicable LODR non-compliance | Compliance statement and exchange check |
| Default history | No specified repayment, redemption, interest or dividend default in last three FYs and current FY | Statutory auditor certificate |
| Instrument and rating | Senior/unsubordinated, first or pari passu secured debt; at least AA− | Security documents and rating letter |
Instrument rules and PSU exception
For ordinary eligible issuers, the debt must be unsubordinated or senior and secured by a first or pari passu charge over identifiable issuer assets. Central public sector enterprises, public sector undertakings and statutory bodies may issue secured or unsecured debt under this condition.
The debt security must carry at least an AA− rating on the private placement date. Where multiple agencies provide ratings, use the lowest rating for eligibility. A downgrade before placement can therefore change the route.
Issuer implementation checklist
- Confirm the proposed security falls within the ₹10,000 face-value private placement framework.
- Record which financial regulator supervises the issuer and retain proof.
- Confirm at least one continuous year of recognised-exchange listing.
- Check all applicable LODR fines and penalties with no pending amount.
- Obtain the statutory auditor certificate covering the exact default window.
- Verify seniority and create a first or pari passu charge over identifiable assets.
- Obtain current ratings and test the lowest rating against AA−.
- Review exchange operational formats before filing for in-principle approval.
- Document board approval for using the exemption route.
- Re-check every condition immediately before the private placement date.
What counts in the no-default test
The circular covers default in redemption, repayment, interest or dividend relating to debt securities, non-convertible redeemable preference shares, securitised debt instruments, commercial papers, deposits or loans. The look-back covers the last three financial years and the current financial year.
The issuer must submit a statutory auditor certificate to the stock exchange. Define the covered entities and instruments carefully and reconcile the certificate to finance, trustee, lender and depository records.
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Decision table for finance teams
| Question | If yes | If no |
|---|---|---|
| All five conditions met? | Document exemption route | Appoint merchant banker |
| Multiple ratings? | Use the lowest rating | Use the sole current rating |
| Ordinary private issuer? | First or pari passu secured senior debt | Check CPSE/PSU/statutory-body exception |
| Pending LODR fine? | Exemption not available until condition is met | Proceed to next test |
| Auditor certificate ready? | File with exchange | Do not rely on internal confirmation |
Founder / Business Takeaway
The exemption can reduce issuance friction for high-rated, well-governed listed issuers, but only if the evidence is complete. Treat eligibility as a dated closing condition and keep a fallback plan to appoint a merchant banker if any test fails.
Sources and verification
https://www.sebi.gov.in/legal/circulars/oct-2026/exemption-from-the-requirement-of-mandatory-merchant-banker-appointment-for-debt-issued-through-private-placement-by-certain-listed-issuers_105080.html
https://www.sebi.gov.in/sebi_data/attachdocs/oct-2026/1791374560264.pdf
Frequently Asked Questions
Who can use SEBI’s 2026 merchant banker exemption?
A listed issuer must satisfy all five conditions in the circular, including financial-sector regulation, at least one year of listing, clean applicable LODR fines or penalties, no specified recent default, eligible security and at least AA− rating.
Does the exemption apply to every private placement of debt?
No. It relates to the framework for debt securities or non-convertible redeemable preference shares privately placed at ₹10,000 face value and only when every stated condition is met.
What rating is required?
The debt security must be rated at least AA− on the private placement date. If multiple ratings exist, the lowest rating determines eligibility.
When did the circular become effective?
The circular states that it came into force immediately on 7 October 2026.
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