3 months ago
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Markets regulator Sebi has directed non-bank custodians to segregate regulated and unregulated fiscal services done abstracted strategical concern units (SBUs), support abstracted accounts for these units and conscionable nett worthy requirements independently for these businesses.
In its circular, the regulator stated that the custodians and DDPs Standards Setting Forum (CDSSF), successful consultation with Sebi, volition specify the database of fiscal services activities custodians tin undertake.
Sebi said that custodians that are not banks, oregon subsidiaries, associates oregon associated ventures of banks, indispensable behaviour Sebi-regulated and non-Sebi-regulated fiscal services done abstracted strategical concern units (SBUs), support abstracted accounts for these units and conscionable nett worthy requirements independently of specified businesses.
"Separate accounts shall beryllium prepared and maintained for the SBUs connected an arm's-length basis; the nett worthy criteria for the custodian shall beryllium satisfied aft excludingthe books of the SBU," Sebi said successful its circular connected Wednesday (March 4, 2026).
They person been directed to disclose to clients if they supply unregulated fiscal services and get an acknowledgement that Sebi volition not grip grievances related to specified activities.
The regulator besides allowed custodians to stock manpower, infrastructure and systems crossed fiscal work activities, provided capable safeguards specified arsenic Chinese walls and conflict-of-interest controls are maintained.
Industry participants volition besides classify halfway and non-core activities done the CDSSF to guarantee consistency successful outsourcing, arsenic custodians tin outsource lone non-core functions.
To facilitate easiness of doing business, Sebi has relaxed vault requirements, stating that custodians volition not beryllium required to support vaults if they bash not clasp carnal securities.
However, if carnal securities are held, custodians are required to support vaults oregon equivalent unafraid retention facilities and disclose vault specifications arsenic portion of their quarterly reporting. Sebi has besides strengthened governance and hazard absorption standards.
Custodians are required to acceptable up board-level committees specified arsenic audit, information and remuneration, and hazard absorption committees, though slope custodians whitethorn trust connected existing bank-wide governance structures. The custodian's committee volition oversee incidents affecting marketplace functioning and capitalist protection, including information information breaches.
Also, they are required to support records of committee observations and corrective actions. In September 2025, Sebi raised the minimum nett worthy request for custodians to ₹75 crore from ₹50 crore eariler successful a bid to fortify hazard absorption systems.
Custodians supply services similar safekeeping assets, relationship maintenance, and compliance with regulations for clients specified arsenic overseas portfolio investors, communal funds, portfolio managers, and alternate concern funds. They play a captious relation successful protecting investors' assets and ensuring compliance, peculiarly with FPIs, wherever they enactment arsenic designated depository participants and enforce concern norms.
