SEBI reforms 2026: Buybacks back, MF liquidity rules eased

What SEBI cleared at its June 19 board meeting

The Securities and Exchange Board of India (SEBI) approved a set of regulatory changes aimed at improving market efficiency, easing compliance requirements, and strengthening investor protection. The decisions were taken at SEBI’s board meeting held on Friday, June 19, 2026. The package spans multiple market segments, including share buybacks, mutual funds, alternative investment funds (AIFs), and securitised debt instruments.

Two measures stood out for their immediate relevance to listed companies and asset managers. First, SEBI approved the reintroduction of open-market share buybacks through stock exchanges, a route that had been discontinued after tax-related changes. Second, the regulator approved a framework to allow mutual funds to use intraday borrowings for specific operational needs, while explicitly disallowing any use of borrowing for leverage.

SEBI also cleared steps to speed up the launch of AIF schemes through a faster approval mechanism. In addition, the board approved amendments to align norms for securitised debt instruments with the Reserve Bank of India’s (RBI) securitisation framework. Beyond these, SEBI said it approved changes related to the Social Stock Exchange Capacity Building Fund, its internal code of conduct, and an independent regulatory review theme for FY27.

Open-market buybacks return from August 1, 2026

SEBI approved the reintroduction of open-market buybacks through stock exchanges from August 1, 2026. Companies will be able to choose between the tender offer route and open-market purchases executed on exchanges. SEBI described the change as bringing back an additional buyback option for companies.

The exchange-based route had been discontinued earlier following changes in the tax regime, and the reintroduction comes after the route was phased out about a year ago. SEBI’s latest framework reopens the option, but with tighter execution requirements and safeguards designed to address market integrity and investor protection concerns.

Separately, commentary linked the revival of open-market buybacks to a market context in which Indian equities have underperformed international counterparts. However, SEBI’s decision note, as described, focuses on the regulatory framework, safeguards, and timelines rather than any market call.

Tighter buyback timelines and mandatory utilisation safeguards

A central feature of the revised buyback route is a shorter and more time-bound execution schedule. Buybacks through stock exchanges must be completed within 66 working days from the opening date. This is an accelerated timeline compared with the earlier framework that allowed a longer period.

SEBI also introduced a utilisation requirement. Companies must utilise at least 40% of the earmarked funds during the first half of the buyback period. This safeguard is intended to reduce the risk of protracted buyback programmes with limited execution in the early phase, and to ensure the stated buyback size is pursued meaningfully within the time window.

These design choices indicate SEBI wants buybacks to be executed with clearer discipline, while maintaining flexibility for companies to choose the route that fits their needs. The tender offer route continues as an alternative for firms that prefer a structured participation mechanism.

Promoter participation barred and holdings to remain frozen

SEBI’s framework bars promoters and their associates from participating in open-market buybacks through stock exchanges. In addition, promoter and associate holdings will remain frozen during the buyback period. These restrictions aim to avoid conflicts of interest and reduce the risk of buyback activity being used to advantage controlling shareholders during the execution window.

SEBI also clarified a key operational point: because promoters are not allowed to participate and open-market buybacks through stock exchanges will be treated as normal trading transactions, the regulator is dispensing with the requirement of a separate trading window. SEBI also said the display of the company’s identity as purchaser on the trading screen is being dispensed with.

Together, these changes seek to balance ease of execution with guardrails around who can sell into the programme and how the buying activity is handled on-market.

Merchant banker appointment made optional

SEBI also made the appointment of a merchant banker optional for buybacks, a move the regulator said is aimed at reducing compliance costs. Under previous practices, merchant bankers often played a central role in coordinating documentation and process steps.

By making the appointment optional, SEBI is signalling a shift towards simplifying procedural requirements for listed companies, while still retaining execution and disclosure expectations under the overall buyback framework. For investors, this change matters mainly through its potential to reduce process friction and cost overheads for issuers.

The decision aligns with SEBI’s broader framing of these reforms as improving efficiency and easing compliance without diluting investor protections.

Mutual funds get intraday borrowing flexibility for operations

SEBI approved amendments to Mutual Fund Regulations to allow intraday borrowings to manage temporary liquidity mismatches. The facility is intended for operational requirements such as settlement timing differences, foreign exchange settlement needs, and mark-to-market obligations in derivatives.

SEBI clarified that such borrowing cannot be used for leverage. The borrowing must be repaid by the end of the trading day, keeping it tightly restricted to intraday liquidity management rather than any structural change in risk-taking.

For mutual fund investors, the change is positioned as a back-end operational measure. It is designed to help funds handle short-term settlement or timing issues more smoothly, particularly in scenarios where pay-in and pay-out schedules do not perfectly align within the day.

GARUDA green channel to speed up AIF scheme launches

SEBI also approved a faster mechanism for launching AIF schemes through a green-channel approach called GARUDA, short for “AIF rollout upon document acknowledgement.” Under this mechanism, AIFs can begin fundraising within 10 working days of filing their placement memorandums.

This is a shorter timeline compared with the current 30-day waiting period referenced in the proposals discussed ahead of the meeting. The intent is to reduce time-to-market for fund managers while keeping the regulatory filing process in place.

For the AIF industry, faster launches can improve operational planning and responsiveness, especially when fundraising windows are time-sensitive. For investors, the practical implication is a quicker rollout of schemes after filings are submitted and acknowledged.

Securitised debt rules aligned with RBI framework

The SEBI board approved amendments to align norms for securitised debt instruments with the RBI’s securitisation framework. While the specific technical changes were not detailed in the provided information, the headline intent is harmonisation between securities market rules and the central bank’s framework.

This matters because securitised instruments often sit at the intersection of capital markets and regulated credit markets. Alignment can reduce interpretational differences and compliance complexity for issuers and market participants who operate across both frameworks.

SEBI’s reform package indicates a preference for clearer, consistent rulebooks across regulators where market products overlap.

Key changes at a glance

Other board approvals: SSE fund move and FY27 review theme

Apart from the headline market measures, SEBI said it approved amendments relating to securitised debt instruments and the transfer of the Social Stock Exchange Capacity Building Fund to a Section 8 company. The board also cleared changes to SEBI’s internal code of conduct.

In addition, SEBI selected SME capital raising as the theme for an independent regulatory review during FY27. While details of the review were not provided, identifying a theme suggests SEBI intends to examine the SME fund-raising ecosystem more closely through the year.

These steps reinforce that the June 2026 board meeting was not limited to a single reform, but covered multiple operational and governance items.

Market impact: what changes immediately and what does not

For listed companies considering buybacks, the immediate takeaway is that open-market buybacks through stock exchanges return from August 1, 2026, with specific execution guardrails. The tighter 66-working-day completion requirement and the 40% utilisation condition introduce a more disciplined structure than the earlier framework.

For mutual funds, the intraday borrowing facility changes day-to-day cash management tools, but SEBI’s restrictions are explicit. Borrowing cannot be used to add leverage and must be repaid the same day, making it a narrow operational reform rather than a shift in investment strategy.

For AIFs, the GARUDA mechanism can shorten the time between filing and fundraising. And for securitised debt instruments, alignment with RBI’s framework points to reduced regulatory friction, though the on-ground effect will depend on the detailed amendments.

Why the SEBI package matters

SEBI’s set of decisions reflects a common regulatory direction: faster processes where possible, lower compliance friction where it does not compromise protections, and tighter guardrails where market conduct risks exist. The buyback framework shows both sides of this approach, by reintroducing a discontinued route while adding time limits, utilisation requirements, and participation restrictions.

The mutual fund intraday borrowing rule is similarly constrained, enabling operational flexibility but preventing leverage. And the AIF green channel focuses on reducing waiting time by shifting to an acknowledgement-based rollout model.

Taken together, these changes indicate SEBI’s attempt to recalibrate rules based on how markets operate in practice, while keeping a strong emphasis on process clarity and investor-facing safeguards.

Conclusion

SEBI’s June 19, 2026 board meeting cleared a broad reform set led by the return of exchange-based open-market buybacks from August 1, a limited intraday borrowing facility for mutual funds, and a faster AIF scheme rollout mechanism via GARUDA. The buyback changes come with a 66-working-day completion requirement, a 40% utilisation threshold in the first half, and strict limits on promoter participation.

Next, market participants will watch how companies choose between tender offers and exchange buybacks once the August 1 start date arrives, and how quickly AIF managers adopt the new green-channel timeline for launches.