Sebi takes up review of custodian norms, proposes steps to ease operations

Proposes to raise net worth criteria for the first time in nearly three decades

The capital market regulator, Securities and Exchange Board of India (Sebi), has proposed measures to ease operations and compliance for custodians—entities that manage foreign portfolio investors (FPIs).

 

The regulator has also proposed a review of the net worth criteria for custodians, which was last set at Rs 50 crore in 1996. Sebi has now proposed increasing it to Rs 100 crore. Existing custodians that do not meet the requirement will be given a three-year period to comply.

 

In a consultation paper, Sebi has proposed allowing local custodians and market participants to rely on Know Your Customer (KYC) documentation attested by global custodians to simplify operations.

 

Further, Sebi is considering increasing the obligations and monitoring requirements for custodians to ensure governance, risk management, and technical capabilities.

 

This would align their responsibilities with those prescribed for qualified stock brokers or large stock brokers deemed systemically important due to the volume they manage.

 

A working group constituted by Sebi has also recommended measures to ease requirements for custodians, including the storage of physical records, code of conduct, and the process for changes in control, among others.

 

According to Sebi data, custodians managed around Rs 278.5 trillion in assets as of September, compared with Rs 2.7 trillion in March 2002.