Market regulator Securities and Exchange Board of India (Sebi) on Friday set out ‍a phased rollout of a new net worth requirement for existing merchant bankers (MBs). The framework, part of amendments to the Sebi (Merchant Bankers) Regulations, 1992, will come into effect from January 3, 2026, with staggered compliance timelines for existing entities

In a circular issued today, Sebi has proposed higher net-worth thresholds along with a new requirement to maintain liquid net worth —defined as unencumbered cash or near-cash assets — at all times. For Category I merchant bankers, minimum net worth requirements will rise to Rs 25 crore by January 2027 and double to Rs 50 crore by January 2028, with corresponding liquid net-worth thresholds of Rs 6.25 crore and Rs 12.5 crore (25% of these amounts).

The Category II entities will need Rs 7.5 crore and Rs 10 crore of net worth across the two phases, respectively, again with liquid buffers mandated at Rs 1.875 crore in phase-1 and Rs 2.5 crore in phase-2.
Underwriting exposure

The regulator has also capped underwriting exposure, mandating that total underwriting obligations must not exceed 20 times a merchant banker’s liquid net worth, with a two-year transition window for existing players. The MBs should comply with this requirement within two years from the effective date, i.e. by January 02, 2028.

Regular half-yearly certification by chartered accountants will be required to demonstrate ongoing compliance with capital, liquidity and underwriting limits, the circular said.The Sebi circular also tightens operational and governance standards. Merchant bankers will be required to appoint independent compliance officers, ensure principal officers have a minimum of five years’ market experience, and prevent outsourcing of core merchant banking activities beyond a short transition period. Employees and compliance officers will also need to clear specified NISM certification exams within defined timelines.

Revenue thresholds

Sebi has introduced minimum revenue thresholds from permitted merchant banking activities — Rs 25 crore over three years for Category I entities and Rs 5 crore for Category II—with the first assessment slated for FY29. Failure to meet these benchmarks could invite cancellation of registration.

The regulatory tightening comes against the backdrop of a record primary market. India emerged as the world’s second-largest equity issuance hub in 2025, raising over $21 billion through IPOs and other public issues, underscoring SEBI’s push to ensure that intermediaries managing fund raises are well-capitalised, professionally run and capable of withstanding market stress.

Overall, the phased approach seeks to balance stability with continuity—giving existing merchant bankers time to adjust, while setting a higher bar for financial strength, governance and investor protection in an increasingly vibrant IPO ecosystem

Sebi has also mandated that merchant bankers will not lead manage any public issue, where its directors, other key managerial personnel or their relatives individually or in aggregate hold more than 0.1% of the paid-up share capital or shares whose nominal value is more than Rs 10 lakh, whichever is lower.

(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)

Bonus season on Wall Street is looking grim for bankers in an industry hobbled by rising interest rates, bank failures and a dealmaking slump. Next year will probably be no better. Merger advisers could see their payouts for 2023 slide as much as 25%, according to a report on Tuesday from compensation consultant Johnson Associates. At regional banks, year-end compensation for professionals in retail and commercial businesses could fall 10% to 20%, the company found.

“Pay statements will be down moderately for most, in another disappointing year,” Alan Johnson, managing director of Johnson Associates, said in an interview. Inflation will also make the declines seem even more dramatic, he said, as costs continue to rise.

Even though bonuses will probably drop, relative pay is still high in financial services when compared to the rest of the global economy. Indeed, it’s not all doom and gloom. Some professionals-including those involved in equity underwriting and wealth management-could see a modest bump. Bigger is also often better, with retail and commercial bankers at major global banks seeing their pay flat to up 10%, rather than down like at the regionals.

“Regional banks were suffering, especially the big holders of real estate debt and longer-dated bonds that are underwater,” Johnson said.

A separate report Options Group released Tuesday found similar trends. The firm said investment bankers will see the biggest hit to compensation, down almost 22%, while wealth-management workers can expect gains of about 5%. “While it’s been a tough year, the cost of replacement is high on several levels and not just financially, but also considering the impact on overall client business and team morale,” Michael Karp, Options Group’s chief executive officer, said in a statement. “Limited talent pools in certain divisions could also mean replacement hiring is near impossible.”

Looking ahead, 2024 may be no better, Johnson said. He cited headwinds including cost pressures, interests rates and geopolitical tensions continuing to weigh on fees. Other businesses that have fared better under these circumstances, such as private equity and private credit, will be hard to get “back on the growth path that they were on,” he said.This year’s bonuses will probably take a hit from many of those same factors, along with the collapse of several regional banks. In 2022, the average Wall Street payout plunged 26% as the dealmaking slump and banks’ efforts to contain costs weighed on compensation, according to an analysis by New York State Comptroller Thomas DiNapoli. That percentage brought the average bonus closer to what employees received before the Covid-19 pandemic.

Those working in asset management may see a decline in bonuses of as much as 10% on lower profits, while payouts at wealth-management firms are projected to be up 5%, Johnson Associates said. At private equity firms both big and small, incentive compensation is likely to be flat.

Bankers in debt underwriting are poised to fare better than merger advisers, with their incentive pay flat to down 10%, according to the report.

The five biggest US banks collectively posted a seventh-straight quarter of declines in investment-banking fees in the three months through September, matching the seven quarters of heightened M&A activity during the pandemic era of easy money. The battle for talent has also eased in the finance sector, with some firms trimming headcount or freezing hiring to manage expenses.

As for the bright spots in the industry, investment bankers that work on equity-underwriting deals have fared better this year, with debt being the more costly option for companies tapping the capital markets. Those professionals could see their bonuses increase 5% to 15%, according to the report. Wealth advisers could also see their bonuses increase 5%, the report shows, with financial advice in demand.

Some desks benefit from rising interest rates and the move away from equities to lower-risk assets such as bonds or money-market funds. Fixed-income traders could see their bonuses increase as much as 5%, outperforming their equity-trading peers as initial public offerings remain muted, according to the report. Those traders could see their bonuses fall 5% to 10%.

Elsewhere in finance, incentive pay is likely to be flat or down. Those working in asset management may see a decline of 10% on lower profits, while bonuses at hedge funds are projected down 5% to up 5%, Johnson Associates said. At private equity firms both big and small, incentive compensation is likely to be flat.

State Bank of India (SBI), the country’s largest lender, plans to raise up to 100 billion rupees ($1.22 billion) through the sale of infrastructure bonds maturing in 15 years, three bankers said on Thursday.

“The bank has taken internal approvals for the issue and bidding is expected in the last week of July,” one of the bankers said.

The proposed bond issue will have a base size of 50 billion rupees, with an equivalent greenshoe option.

SBI did not reply to a Reuters email seeking comment.

ICRA has assigned a AAA rating for SBI’s infrastructure bonds.

Last week, the state-backed lender raised only the base amount of around 31 billion rupees in its first perpetual bond issue for fiscal 2024 as investors sought higher returns than the bank was willing to offer. The total issue size was 100 billion rupees.

“SBI’s infra bond issue will see demand from insurance companies, pension and provident funds. There is a dearth of supply of high-quality papers at the longer end in recent times, and hence this issue will be well bid,” another banker said. SBI last issued infrastructure bonds in January when it raised 97.18 billion rupees through 15-year bonds at 7.70%.

The latest issue comes as lenders are increasingly raising money through bonds to fund credit growth. In June, Kotak Mahindra Bank raised 19.85 billion rupees via infrastructure bonds maturing in seven years at a coupon of 7.55%.

Infrastructure bonds, with a maturity of at least seven years, are issued to finance long-term development projects. Banks do not have to maintain cash reserve ratio and statutory liquidity ratio on these bonds, according to Reserve Bank of India guidelines.