SEBI reforms 2026: Open-market buybacks return Aug 1

What SEBI cleared at its board meeting

The Securities and Exchange Board of India (SEBI) cleared a set of reforms aimed at easing compliance, improving capital-market depth, and broadening investor access across products. The decisions include the reintroduction of open-market share buybacks through stock exchanges, a faster approval route for Alternative Investment Fund (AIF) schemes, and changes to municipal bond regulations. SEBI also allowed mutual funds a broader scope to borrow on an intraday basis from banks to manage settlement timing mismatches. In addition, the regulator aligned norms for securitised debt instruments with the Reserve Bank of India (RBI) securitisation framework. Several of these changes are framed as process simplifications, including optional use of intermediaries in specific cases. SEBI said the new norms for open-market buybacks through exchanges will come into effect from 1 August 2026.

Open-market buybacks through exchanges are back

SEBI approved amendments to the SEBI (Buy-back of Securities) Regulations, 2018 to reintroduce the open market buy-back route through stock exchanges. The exchange route had been discontinued earlier after changes in the tax regime and differential tax treatment compared with ordinary share sales. From August 1, 2026, companies can choose between the tender offer route and open-market purchases through stock exchanges, alongside other existing buyback routes. The regulator also positioned the move as an ease-of-doing-business measure, with a sharper focus on execution discipline. SEBI’s intent is to reduce instances where buybacks are announced but remain under-utilised. The framework also lays down how disclosures and trading mechanics will work during the buyback window.

Safeguards: faster timelines and minimum utilisation rules

SEBI tightened the execution calendar for exchange buybacks. Buybacks through stock exchanges must be completed within 66 working days from the opening date. The regulator mandated utilisation of at least 40% of earmarked funds during the first half of the buyback period, which SEBI also described as 33 working days being half of the duration. The buybacks will be executed through the standard trading window. SEBI also required mandatory electronic dissemination of buyback information to shareholders, increasing the emphasis on timely and uniform communication. These safeguards are designed to make the buyback process more predictable and to curb long, open-ended programmes.

Promoter participation barred and holdings to remain frozen

SEBI reiterated that promoters and their associates will not be allowed to participate in open-market buybacks through stock exchanges. Their holdings will remain frozen during the buyback period at the ISIN level, as described by the regulator. SEBI also said that since promoters are not allowed to take part and the purchases will be treated as normal trading transactions, the need for a separate trading window and display of the company’s identity as purchaser on the trading screen is being dispensed with. This is a notable operational change because it alters how the market sees the flow during the buyback window. At the same time, the restrictions on promoter dealing are intended to address conflict-of-interest concerns and maintain market integrity.

Merchant banker optional, with responsibility placed on the company

SEBI made the appointment of a merchant banker optional for buybacks through the exchange route. The regulator framed this as a way to reduce compliance costs and improve operational flexibility. Where a company does not appoint a merchant banker, SEBI indicated that competent officers will be designated to handle the necessary activities involved in the process. The move shifts more responsibility to the company and its internal compliance setup, while keeping key safeguards such as time-bound completion and utilisation thresholds. It also signals that SEBI wants the process to be simpler without diluting core investor protections.

GARUDA green channel to cut AIF scheme launch time

SEBI approved a fast-tracked method for launching AIF schemes through a green channel mechanism called GARUDA (Green-Channel: AIF Rollout Upon Document Acknowledgement). Under the new framework, regular AIF schemes can be launched within 10 working days after filing documents with SEBI unless the regulator raises objections. This is a reduction from the existing timeline of 30 days mentioned in the board’s decisions. SEBI specified that regular AIF schemes excluding Large Value Funds would be covered under the 10-working-day route. The change is aimed at shortening time-to-market for fund managers and enabling faster capital deployment where documents are in order.

Easier compliance for accredited investor schemes and angel funds

SEBI also eased compliance requirements for AIF schemes aimed at accredited investors and for angel funds investing in early-stage startups. Such schemes will no longer be required to route private placement memoranda (PPM) through merchant bankers and can file documents directly with SEBI. Accredited investor-only schemes will be able to launch immediately after registration or filing of documents. Angel funds can begin circulating PPMs and raising capital as soon as they receive registration. SEBI’s rationale, as reflected in the approvals, is that these products cater to more sophisticated investors, allowing a lighter process while maintaining regulatory filing requirements.

Mutual funds: intraday borrowing widened, but no leverage

SEBI approved amendments allowing mutual funds to avail intraday borrowing to bridge differences arising from pay-in and pay-out settlement timings within asset classes, forex settlements, and other transactions. This is in addition to the current borrowing permitted of up to 20% of the net assets of a scheme for meeting unitholder payouts such as redemptions. SEBI clarified that asset management companies will be responsible for repaying intraday borrowings by the end of the day. If the intraday borrowing converts into overnight borrowing, the scheme must comply with mutual fund regulations applicable to such borrowing. SEBI also said intraday borrowings will not be used as a source of leverage.

Municipal bonds: pooled fundraising, refinancing, and retail incentives

To deepen India’s municipal bond market, SEBI approved amendments to the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015. Municipalities will be allowed to raise funds to refinance existing project debt, with disclosure requirements on existing lenders. SEBI also cleared a framework allowing two or more municipalities to raise funds collectively through pooled finance vehicles or special purpose vehicles (SPVs). To improve retail participation, issuers will be permitted to offer incentives such as additional interest or issue-price discounts to certain categories, including retail investors, senior citizens and women. The face value for privately placed municipal bonds has been reduced to as low as Rs 10,000 under specified conditions, compared with Rs 1 lakh cited in the changes.

Securitisation norms aligned with RBI framework

SEBI also approved adjustments to securitisation standards for entities overseen by the RBI, aligning norms for securitised debt instruments with the RBI’s 2021 securitisation framework. The approved changes include enabling banks and non-banking financial companies to conduct single-asset securitisations and removing the 25% obligor concentration limit. SEBI also shifted quarterly disclosure responsibilities to servicers and proposed measures to enhance the independence of special purpose entities involved in securitisation transactions. The intent is to ensure regulatory consistency between capital market rules and the central bank’s securitisation framework.

Key changes at a glance

Why the package matters for capital markets

Taken together, the reforms touch corporate actions, private-market fundraising, municipal finance, and day-to-day fund operations. Exchange buybacks returning from August 2026 expand the toolkit for listed companies, but SEBI has coupled that flexibility with tighter timelines and minimum utilisation requirements. For AIF managers, the GARUDA mechanism and the removal of merchant banker routing for specific categories are likely to reduce administrative friction, especially for accredited investor-focused strategies and angel funds. Municipal bond changes are designed to broaden issuance by enabling pooled financing structures and by lowering the face value for privately placed bonds under specified conditions, potentially improving accessibility. And for mutual funds, intraday borrowing is framed as a settlement management tool rather than a leverage facility, with explicit end-of-day repayment responsibility.

What to watch next

The most time-specific change is the return of exchange buybacks from 1 August 2026, with a clearly defined 66-working-day completion window. Market participants will also track how quickly AIF managers adopt the GARUDA route and how SEBI operationalises document acknowledgement and objection handling under the 10-working-day schedule. In municipal bonds, the practical impact will depend on whether more issuers use pooled finance vehicles and how incentives for retail categories are structured within the permitted framework. SEBI’s alignment of securitisation norms with the RBI framework will also be watched for its effect on issuance structures and disclosure practices. For now, the board’s approvals set a firm regulatory direction: faster processes, clearer timelines, and more channels for capital formation with added safeguards where market conduct risks are higher.