The regulatory landscape for Debenture Trustees (DTs) in India is evolving, with the Securities and Exchange Board of India (SEBI) issuing a new circular on November 25, 2025, outlining specific conditions for DTs undertaking activities outside SEBI’s regulatory purview. This circular follows the amendments to the SEBI (Debenture Trustees) Regulations, 1993, notified on October 27, 2025, through which regulation 9C was introduced. The amendment brings much-needed clarity to what activities a debenture trustee may engage in beyond SEBI’s domain and under what conditions.
Understanding Regulation 9C: What DTs Can Now Do
Regulation 9C allows debenture trustees to undertake the following:
- Activities regulated by another financial sector regulator—such as the Reserve Bank of India, IRDAI, PFRDA, IBBI, IFSCA, or the Ministry of Corporate Affairs—in accordance with that regulator’s guidelines.
- Fee-based, non-fund-based financial services activities that do not fall under the purview of SEBI or any other financial sector regulator.
These activities must be performed on an arm’s-length basis through separate business units (SBUs). For DTs also regulated by the RBI, the circular mandates that debenture trustee functions must operate within a distinct SBU.
An existing debenture trustee has up to six months from the date of amendment notification to transition such activities into SBUs, ensuring clear separation.
Key Conditions for DTs Offering Non-SEBI Regulated Services
The November 25 circular specifies detailed safeguards to ensure transparency, governance, and investor protection:
1. Mandatory Segregation Through SBUs
Activities not regulated by SEBI must be carried out exclusively through one or more ring-fenced SBUs, separated by a robust Chinese Wall to prevent conflicts of interest and maintain operational independence.
2. Separate Grievance Redressal Systems
DTs must provide an independent grievance redressal and escalation mechanism for non-SEBI regulated activities. These systems must function within the SBU and remain distinct from SEBI-related grievance frameworks.
3. Dedicated Records and Staff
Separate records must be maintained for non-SEBI activities. Staff handling these activities should be distinct, though cross-movement across the Chinese Wall may be allowed with board-approved procedures. Key managerial personnel are exempt from this restriction.
4. Shared Resources Allowed With Conditions
Information technology and other resources may be shared across units, but only under board-approved governance processes that ensure integrity and compliance.
5. Mandatory Website Disclosures
DTs must publish a clear list of non-SEBI regulated activities on their websites, along with a disclaimer that SEBI’s investor protection mechanisms do not apply to these services. DTs currently offering such activities must comply within 30 days of the circular.
6. Additional Disclosures for FSR-Regulated Activities
Where an activity is regulated by another financial sector regulator (FSR), the DT must disclose the name of that FSR and adhere strictly to its compliance framework—including risk management, dispute resolution, and inspection requirements.
7. Separate Marketing and Communication
All advertising, marketing material, and website content for non-SEBI activities must be kept separate from SEBI-regulated functions to avoid investor confusion.
A Strengthened Governance Framework
With these changes, SEBI aims to enhance transparency, minimize conflicts of interest, and ensure that investors clearly understand the regulatory boundaries and protections associated with a DT’s various offerings. The guidelines strike a balance between enabling operational flexibility and safeguarding investor interests in India’s expanding debt market ecosystem.