SEBI Tightens Custodian Regulations with Higher Net Worth and Stronger Compliance Norms [Read Notification]
SEBI raised custodians’ net worth requirement to Rs. 75 crore and tightened governance and compliance norms effective March 2026
SEBI - custodian - regulation - Taxscan
SEBI - custodian - regulation - Taxscan
The Securities and Exchange Board of India (SEBI) issued notification dated 18 September 2025, announcing the Securities and Exchange Board of India (Custodian) (Amendment) Regulations, 2025. These amendments aim to make custodians of securities financially stronger, more accountable, and compliant with higher governance standards. The new rules will take effect six months after publication, that is, from March 2026.
A custodian is an institution that holds investors’ securities safely and provides related services to funds, institutions, and large investors. SEBI explained through the notification that the changes were needed to improve investor protection and bring custodial services in line with global best practices.
One of the most important changes is the increase in the minimum net worth requirement. Earlier, custodians were required to have a net worth of at least Rs. 50 crore. Now, the limit has been raised to Rs. 75 crore. Existing custodians have been given three years to meet this requirement. This step is aimed at ensuring that only financially sound entities can operate as custodians.
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The notification also strengthens infrastructure and governance standards. Custodians must now maintain secure facilities for physical securities, adequate office space, strong computer systems, and proper vaults. A new regulation requires custodians to adopt governance structures, risk management systems, scalable infrastructure, and a plan for orderly winding down of operations.
Other major changes include:
- Scope of services: Custodians can provide financial services in addition to custodial work, but non-banking custodians may do so only under SEBI’s conditions.
- Compliance obligations: They must follow SEBI and Reserve Bank of India (RBI) rules, as well as the by-laws of depositories and clearing corporations.
- Client protection: They must handle client complaints promptly, avoid unfair competition, and not exaggerate qualifications or hide material facts.
- Corporate governance: They must adopt sound governance practices, ensure directors and key managers are “fit and proper” persons, and empower compliance officers with adequate independence.
- Accountability: Custodians are responsible for the actions of their employees and agents and must maintain strong internal controls to prevent fraud or misconduct.
By raising financial requirements and tightening compliance norms, SEBI expects to improve the reliability and efficiency of custodial services in India.
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