SEBI approves sweeping reforms to boost capital markets and investor protection

The Securities and Exchange Board of India (SEBI), at its board meeting in Mumbai on 12 September 2025, cleared a wide-ranging set of reforms aimed at reshaping India's capital markets, easing compliance for corporates, and bolstering investor protection. The measures touch everything from IPO norms and related-party transactions to mutual fund rules, foreign investor access, and governance at market institutions. One of the most significant changes is the relaxation of the Minimum Public Shareholding (MPS) and Minimum Public Offer (MPO) rules for very large companies. Firms with a post-issue market capitalization above Rs 1 trillion will now face lower initial dilution requirements and can take up to 10 years to reach the mandatory 25% public float. SEBI has set graduated milestones across market cap brackets to strike a balance between liquidity and manageable dilution for corporate giants. The regulator has also revamped anchor investor norms for IPOs. The number of anchor investors will be increased, with more categories such as life insurers and pension funds getting access. The anchor quota itself will rise to 40% of the issue, with one-third of this earmarked for domestic mutual funds. On the corporate governance front, SEBI has introduced scale-based thresholds for related-party transactions (RPTs), tying approval triggers to consolidated turnover. Smaller transactions will face simplified disclosure requirements, while audit committee approvals for subsidiaries will be streamlined to reduce red tape. In a move to attract global investors, SEBI approved new categories for registration of foreign portfolio investors (FPIs), including retail schemes in International Financial Services Centres (IFSCs). Contribution norms will be aligned with IFSCA, and Indian mutual funds will be allowed to invest in overseas unit trusts with Indian exposure. A new SWAGAT-FI (Single Window Automatic and Generalised Access for Trusted Foreign Investors) framework will further ease entry by cutting registration timelines and granting 10-year validity to qualifying investors. Mutual fund investors will also benefit from the reforms. Exit loads will be capped at 3% instead of 5%, while distributor incentives will now only apply to new investors from beyond the top 30 cities and new women investors, capped at Rs 2,000 or 1% per investor. In addition, investments by mutual funds in Real Estate Investment Trusts (REITs) will be treated as equity, broadening their investment universe and opening up index inclusion potential. Other measures include widening the definition of strategic investors in REITs and InvITs to include pension funds, AIFs, family offices and regulated NBFCs, expanding SEBI’s regional presence to cities like Chandigarh, Lucknow, Bhubaneswar and Hyderabad, and easing norms for investment advisers, research analysts and registrars. Market Infrastructure Institutions such as stock exchanges and depositories will also face stricter governance, with two new executive directors mandated to oversee compliance, risk management and operations. From relaxed IPO rules for mega firms to new protections for mutual fund investors and a streamlined entry path for trusted foreign investors, SEBI’s latest reforms signal a clear intent to make Indian markets more transparent, inclusive and globally competitive while strengthening regulatory oversight at every level.