SEBI Releases Master Circular for Debenture Trustees: Consolidates Norms on Risk Management, Due Diligence & Security Monitoring [Read Circular]

The Securities and Exchange Board of India (SEBI) has issued a comprehensive Master Circular for Debenture Trustees, consolidating all relevant circulars into a single reference framework.

The document, issued on August 13, 2025 streamlines regulatory requirements across the debenture trustee ecosystem, with a particular focus on risk management, due diligence and security monitoring.

The circular is applicable to all SEBI-registered debenture trustees, issuers of debt and municipal debt securities, credit rating agencies, stock exchanges and depositories - in a move to ensure uniform compliance standards across stakeholders.

On the risk management side, the circular reiterates SEBI’s mandate for continuous oversight of security cover and financial covenants, which is facilitated through a centralized Security and Covenant Monitoring System operated by depositories.

Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

This platform enables real-time tracking of asset cover, credit ratings and payment status, and also issues alerts if any of the covenants have been breached. Each secured asset is assigned a unique Asset ID to prevent duplication and enhance accuracy in security tracking.

In the area of due diligence, the framework requires thorough pre-issue verification of security, guarantees and other contractual comforts by independent professionals, including chartered accountants, company secretaries, valuers and legal counsel.

Debenture trustees are required to submit due diligence certificates at both the draft offer and listing stages in prescribed formats, while confirming that security creation and charge registration are completed within the mandated thirty-day period. Any change in security requires no-objection certificates (NOC) from existing charge holders and updated documentation for listed securities.

The security monitoring provisions require issuers to furnish quarterly security cover certificates that are certified by statutory auditors, with separate disclosures for standalone and consolidated entities.

The circular also sets valuation norms for pledged third-party assets and requires continued verification by trustees to uphold investor protection.

Beyond the core areas, the Master Circular also incorporates governance standards for trustees, procedures for grievance handling, disclosure obligations on trustee websites, maintenance of a recovery expense fund and processes for registration changes or surrender of registration.

The Circular continues to preserve the enforcement framework in the event of defaults and sets down protocols for coordination between trustees, credit rating agencies and regulators.

SEBI’s intent behind consolidating multiple circulars into a single, cohesive framework is to provide clarity, reduce compliance fragmentation and reinforce the mechanisms that protect debenture holders.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates