Sebi Raises Net Worth Requirement for Custodians to ₹75 Cr

Markets regulator Sebi has raised the minimum net worth requirement for custodians to ₹75 crore from ₹50 crore at present in a bid to strengthen risk management systems.

Existing custodians can achieve new networth requirements within three years, Sebi said.

"A custodian, who was granted a certificate of registration prior to the commencement of the Sebi Custodian (Amendment) Regulations, 2025, shall, within three years from such commencement, raise its net worth to not less than ₹75 crore, separately and independently, of the capital adequacy requirements, if any, for each activity undertaken by it under relevant regulations," Sebi said in a notification dated September 18.

Additionally, Sebi has put in place custodians' responsibilities, including maintaining an appropriate governance structure, risk management policies, and scalable infrastructure and appropriate technical capacity.

Sebi asked custodians not to indulge in any unfair competition, which is likely to harm interests of other custodians or clients or is likely to place such other custodians in a disadvantageous position while competing for any assignment.

"The custodian shall not make any exaggerated statement whether oral or written to clients either about its qualifications or capability to render certain services or about its achievements in regard to services rendered to other clients," Sebi said.

They will have internal control procedures as well as financial and operational capabilities that can be reasonably expected to protect its operations, its clients, and other registered entities from financial loss arising from theft, fraud, and other dishonest acts, professional misconduct or omissions.

Also, they will have to ensure that all directors and key management personnel are "fit and proper persons" at all times and that the custodian should cooperate with Sebi and protect the interests of clients.

To give this effect, the Securities and Exchange Board of India (Sebi) has amended Custodian Regulations.

Custodians provide services like safekeeping assets, account maintenance, and compliance with regulations for clients such as foreign portfolio investors, mutual funds, portfolio managers, and alternative investment funds.

They play a critical role in protecting investors' assets and ensuring compliance, particularly with FPIs, where they act as designated depository participants and enforce investment norms.