SEBI Board Meeting: 5 Major Regulatory Reforms to Transform Indian Markets

The Securities and Exchange Board of India (SEBI) has announced a sweeping set of regulatory reforms designed to enhance market efficiency and ease of doing business. These decisions, spanning from share buybacks to mutual fund operations, aim to strengthen investor protection while reducing the compliance burden on market participants.

Return of Open Market Buybacks via Stock Exchanges

In a significant move for corporate actions, SEBI has approved the reintroduction of open market buybacks through stock exchanges, effective August 1, 2026. Previously discontinued due to tax regime changes, companies will now have the flexibility to choose between the tender offer route and open market purchases.

To ensure transparency and prevent delays, SEBI has implemented strict safeguards:

  • Fund Utilization: At least 40% of the earmarked buyback funds must be utilized during the first half of the buyback period.
  • Timeline: The entire buyback process must be completed within 66 working days.
  • Restrictions: Promoters and their associates are prohibited from participating, and their holdings will be frozen for the duration of the buyback.
  • Cost Reduction: To lower compliance costs, the appointment of a merchant banker for buybacks has been made optional.

Liquidity Management for Mutual Funds

To address operational hurdles, SEBI has amended Mutual Fund Regulations to allow intraday borrowing. This facility is specifically designed to manage temporary liquidity mismatches arising from settlement timing differences, foreign exchange settlements, and mark-to-market obligations in derivatives.

Crucially, the regulator has clarified that this borrowing cannot be used for leverage. All intraday loans must be repaid by the end of the trading day; any borrowing that extends overnight will remain subject to existing regulatory limits.

Speeding Up AIF Launches via GARUDA

The regulator is set to accelerate the deployment of capital through the new GARUDA (Green-Channel: AIF Rollout Upon Document Acknowledgement) mechanism. This framework aims to significantly reduce the time required to launch Alternative Investment Fund (AIF) schemes.

Under this new system, regular AIF schemes can be launched within just 10 working days. Furthermore, AI-only schemes and Angel Funds—which cater to accredited investors—can launch immediately upon registration or the filing of a placement memorandum, removing the need for a mandatory merchant banker review.

Boosting Municipal Bond Participation

To deepen the municipal debt market, SEBI has eased several regulations. Municipalities can now raise funds to refinance existing project debt and utilize pooled financing frameworks.

To encourage retail participation, issuers are now permitted to offer incentives such as additional interest or issue-price discounts to specific groups, including senior citizens, women, and retail investors. Additionally, the face value for privately placed municipal bonds has been lowered to as little as ₹10,000 under certain conditions.

SEBI has moved to reduce the procedural hardship faced by families during the transmission of securities after a holder's death. Key changes include:

  • Probate Relaxation: The mandatory requirement for probate of wills has been removed where succession laws permit.
  • Simplified Paperwork: The introduction of a combined affidavit-cum-No Objection Certificate (NOC) reduces the documentation load.
  • Digital Verification: Death certificates featuring QR codes will be accepted for faster verification, with new protocols established for certificates issued overseas.

Key Takeaways

  • Enhanced Flexibility: Companies gain more options for share buybacks, and Mutual Funds can now manage short-term liquidity via intraday borrowing.
  • Faster Capital Deployment: The GARUDA mechanism drastically reduces the launch window for AIF schemes, promoting ease of doing business.
  • Investor-Centric Reforms: Simplified security transmission and incentives for municipal bonds aim to make markets more accessible and less bureaucratic for individual investors.