Sebi overhauls merchant banker rules; new capital, net worth, activity norms

• Sebi has overhauled merchant banker rules, introducing capital adequacy and liquid net worth criteria to ensure financial stability and improve risk management.
• New rules allow merchant bankers to undertake activities outside Sebi's purview under specific conditions, relaxing an earlier requirement to hive off such activities.
• Merchant bankers are now categorized: Category 1 requires Rs 50 cr net worth for all activities, while Category 2 needs Rs 10 cr for all except main-board equity issues.
• Mandatory liquid net worth of at least 25% of minimum net worth and underwriting obligations capped at 20 times liquid net worth have been introduced.
• Sebi also replaced merchant bankers with independent registered valuers for the valuation of Employee Stock Option Plans (ESOP) and Sweat Equity.

Why It Matters: Sebi's new rules enhance market stability, risk management, and ease of doing business.