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20 October 2025

Consolidation Meets Clarity: Decoding SEBI's 2025 Master Circular On Debt Securities

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In an effort to enhance regulatory precision and operational efficiency within India's rapidly expanding debt capital market, the Securities and Exchange Board of India (SEBI) promulgated a revised Master Circular on October 15, 2025, ...
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In an effort to enhance regulatory precision and operational efficiency within India's rapidly expanding debt capital market, the Securities and Exchange Board of India (SEBI) promulgated a revised Master Circular on October 15, 2025, entitled "Master Circular for Issue and Listing of Non-Convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper" (Circular No. SEBI/HO/DDHS/DDHS-PoD/P/CIR/2025/137). This extensive document amalgamates all preceding directives and guidelines pertinent to the issuance and listing of these financial instruments, integrating revisions from circulars issued up to June 30, 2025. For issuers, investors, intermediaries, and regulatory authorities, this Master Circular functions as a comprehensive reference point, nullifying redundant provisions from prior notifications while safeguarding established rights and ongoing obligations.

The debt market in India has experienced remarkable expansion, with non-convertible debentures (NCDs) and various fixed-income instruments assuming a critical role in corporate financing. As of the fiscal year 2024-25, the issuance of non-convertible securities surpassed INR 5 lakh crore, highlighting the necessity for a cohesive regulatory framework. This Master Circular, enacted pursuant to Section 11(1) of the SEBI Act, 1992, and in accordance with the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations), aspires to promote market development, safeguard investor interests, and alleviate compliance burdens by abrogating redundancy.

Background and Evolution

The regulatory framework governing debt securities has undergone substantial transformation since the repeal of the SEBI (Issue and Listing of Debt Securities) Regulations, 2008 (ILDS Regulations), along with the SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 (NCRPS Regulations). The NCS Regulations, 2021, integrated these regulations into a cohesive framework, prioritising streamlined disclosures and expedited listing processes. Subsequent circulars have tackled specific challenges, including pricing flexibility, digital issuance methodologies, and improved governance standards for high-value debt listed entities (HVDLEs).

Previous master circulars such as the May 2024 version (SEBI/HO/DDHS/PoD1/P/CIR/2024/54) laid the foundational structure by consolidating over 50 circulars into 15 comprehensive chapters. The October 2025 revision builds upon this foundation, incorporating recent amendments such as those related to legal entity identifiers (LEI) for issuers, modifications to abridged prospectuses, and accelerated timelines for credit ratings. By revoking listed circulars in Annexure-1, SEBI ensures that future compliance is governed exclusively by the Master Circular, while transitional provisions provide protection for existing issuances. This consolidation is notably timely in light of the increasing interest in sustainable and green bonds within the non-convertible securities arena.

Structure and Key Provisions

The Master Circular is comprehensively structured into 15 distinct chapters, addressing criteria for eligibility, mechanisms for issuance, obligations pertaining to listing, requirements for disclosures, and compliance mandates following listing. Unless explicitly stated to the contrary, the provisions are applicable uniformly to NCS, while specific modifications are made for securitised debt instruments (SDIs), security receipts (SRs), municipal debt securities (MDS), and commercial paper (CP). In the following section, we outline the fundamental components, emphasising updates pertinent to stakeholders.

A. Chapter I-III: Introduction, Applicability & Eligibility

The circular commences with essential definitions, encompassing "secured debt securities" and "unsecured debt securities," in accordance with NCS Regulations. The scope of applicability encompasses all public and private placements undertaken by both listed and unlisted issuers, with the exception of government securities. Significant updates regarding eligibility entail mandatory board approvals for issuances surpassing specified thresholds and augmented due diligence for unrated securities. A prominent inclusion from the circulars issued in June 2025 is the stipulation that issuers must secure in-principle approval from stock exchanges prior to allotment, thereby mitigating delays associated with preferential issues. Regarding SRs issued by asset reconstruction companies (ARCs) pursuant to the SARFAESI Act, 2002, the circular emphasises the prioritisation of asset recovery, coupled with new provisions facilitating the digital submission of trust deeds to debenture trustees.

B. Chapter IV-VI: Price, Denomination and Mode of Issuance

Pricing remains contingent upon market conditions, with an upper limit of 100 basis points over the yield of analogous securities applicable to unlisted issuers. The update released in October introduces a degree of flexibility for green bonds, permitting premium pricing contingent upon sustainability certifications, which aligns with SEBI's advocacy for environmentally sustainable governance-linked debt.

Denomination regulations stipulate that trading must occur in demat form for NCS and SDIs exceeding a face value of INR 1 lakh, with specific exceptions made for MDS to facilitate retail municipal investors. The emphasis on digital issuance through electronic platforms is underscored, incorporating the directive established in June 2025 regarding blockchain-based tracking mechanisms for CP tenors (up to 365 days), thereby augmenting transparency in short-term financing activities.

C. Chapter VII-X: Listing Obligations and Disclosures

The requirement for public offerings to be listed on established stock exchanges is now mandatory, with timeframes compressed to T+3 days following allotment, this represents a significant modification from previous regulations. Offer documents must present disclosures in a tiered structures i.e. a simplified version for private placements not exceeding INR 50 crore, and a comprehensive version for public offerings, which must include obligatory climate risk evaluating for HVDLEs.

For SDIs, which are supported by pooled assets, the circular necessitates the submission of quarterly servicer reports and stress testing disclosures, now revised to incorporate factors pertaining to cyber risk as per the amendments enacted in May 2025. MDS issuers, specifically municipal corporations are afforded lenient regulations, such as the absence of a minimum subscription requirement, yet they are obligated to disclose the impacts of urban development.

Commercial Paper, classified as discount instruments, is subjected to strengthened rolling-over regulations, which prohibit any extensions beyond the maturity date in order to mitigate liquidity risks.

D. Chapter XI-XV: Post Issuance Compliances, Intermediary roles and Innovation

Post-listing, the provision of semi-annual interest disbursements and yearly asset coverage certifications is customary, accompanied by newly instituted mandates for continuous monitoring by stock exchanges through Legal Entity Identifier integration (Chapter XV). Intermediaries, such as merchant bankers and debenture trustees, are required to comply with standardised formats for semi-annual compliance certificates, which must be submitted by April 15 and October 15.

Innovations include repo facilities facilitated by the Limited Purpose Clearing Corporation (Chapter XIV) and initiatives aimed at enhancing awareness among retail investors regarding CP and MDS.

Specific Provisions by Instrument Type

Non-convertible securities which include NCDs and non-convertible redeemable preference shares, continue to dominate issuance in the debt market. The circular effectively refines private placement limitations to a maximum of 200 allottees per tranche and introduces expedited approvals for recurrent issuers with clean track records, consequently facilitating an accelerated fundraising process. Investors are positioned to gain from improved redemption alternatives, featuring put and call provisions explicitly associated with downgrades in credit ratings, thus enhancing liquidity and safeguarding against the declining health of issuers.

Transitioning to securitised debt instruments, which are regulated by the SEBI (SDI) Regulations, 2008, the framework underscores the necessity for a distinct segregation of underlying assets to fortify investor protections. Recent modifications intensify the emphasis on disclosures from originators, mandating comprehensive analytics of loan portfolios to more effectively mitigate default risks which is particularly beneficial for institutional investors such as mutual funds, enabling more informed portfolio decisions in the context of volatile credit market.

Security receipts which are exclusively allocated for asset reconstruction companies in accordance with the SARFAESI Act of 2002, now incorporate quarterly valuation reports conducted by independent evaluators. The update from October further enhances this framework by incorporating AI-driven stress models for the estimation of recoveries on non-performing assets, thereby providing ARCs with a technological advantage in the resolution of distressed loans, while simultaneously ensuring robust oversight for investors.

Municipal debt securities, formulated for local bodies such as municipal corporations retain their tax exemptions under section 10(15) of the Income Tax Act, 1961, rendering them appealing for infrastructure financing endeavours. The recent circular mitigates listing prerequisites by waiving net worth requirements, thus facilitating greater access to financial resources for urban development projects. However, it retains the need for credit enhancement mechanisms, such as guarantees or insurance, to reinforce investor confidence in these public-interest instruments.

Ultimately, commercial paper, categorised as short-term unsecured discount instruments, benefits from obligatory electronic issuance protocols that enhance operational efficiency and diminish bureaucratic documentation. Revised tenor caps are closely associated with the stipulations set forth by the Reserve Bank of India (RBI), in addition to mandates for rating renewals occurring biannually, thereby ensuring continuous market discipline and minimising rollover risks within this rapid-paced sector of the debt market.

Recent Updates and Compliance Timelines

The master circular encompasses six principal circulars spanning the period from January to June 2025, which include modifications to the governance of HVDLE as outlined in chapter VA of the LODR Regulations, along with revised formats with abridged prospectuses. With immediate effect, it necessitates the implementation of system upgrades by December 31, 2025 to ensure digital compliance. Failure to adhere to these stipulations may result in sanctions pursuant to the provisions outlined in the SEBI Act, with stock exchanges designated as the primary entities responsible for enforcement.

Implications for Stakeholders

For issuers, comprising corporations and municipalities, the integrated framework reduces documentation requirements by 30%, thereby facilitating expedited capital acquisition. Nevertheless, the augmented disclosure requirements necessitate the establishment of rigorous internal controls, particularly concerning ESG reporting. Investors, both retail and institutional, reap advantages from enhanced pricing transparency and risk metrics, which cultivate confidence in a market anticipated to reach INR 10 lakh crore by the year 2027. Mutual funds and insurance companies are now positioned to depend on standardised servicing data for SDIs. Intermediaries including merchant bankers, trustees, and credit rating agencies experience streamlined responsibilities yet must allocate resources towards technological advancements for LEI integration and surveillance measures. Stock exchanges and depositories are mandated to oversee compliance, which may lead to an increase in audit costs while simultaneously mitigating unethical practices. In summary, this circular serves to align India's debt market with international benchmarks, reminiscent of International Organisation of Securities Commissions (IOSCO) principles, while simultaneously addressing domestic issues such as NPA resolutions.

Read circular here: SEBI Master Circular

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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