SEBI Eyes Bold Moves to Boost Investment and Market Accessibility

Mumbai, June 18, 2025: The Securities and Exchange Board of India (SEBI), chaired by Tuhin Kanta Pandey, is conducting a pivotal board meeting today to examine a series of sweeping regulatory reforms. These potential changes are designed to enhance ease of doing business, improve investor engagement, and strengthen India’s evolving capital markets.

Big Shift: REITs and InvITs May Soon Be Treated as Equity

A major proposal under consideration is the reclassification of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as equity instruments. If approved, this move could open the door for their inclusion in equity indices, bringing Indian market structures closer to global standards.

In parallel, SEBI is suggesting that mutual fund equity schemes be allowed to raise their investment cap in REITs and InvITs from 10% to 20%. However, debt schemes will continue to have a 10% limit, maintaining risk safeguards for fixed-income portfolios.

PSUs May Get Exclusive Voluntary Delisting Path

SEBI is likely to introduce a dedicated delisting framework for Public Sector Undertakings (PSUs) where the government holds 90% or more. Many such PSUs deal with outdated operations and limited public float, making the current delisting route cumbersome and financially inefficient.

To address these challenges, SEBI had earlier issued a consultation paper and is now considering simplified regulations that would ease the exit process for qualifying state-owned firms.

Startups to Gain From Relaxed ESOP Norms for Founders

Another critical reform on the agenda relates to ESOPs for startup founders. SEBI is reviewing amendments to its 2021 Share-Based Employee Benefits and Sweat Equity Regulations to permit startup promoters to hold or exercise ESOPs issued up to one year prior to their IPO.

Current rules prohibit promoters from receiving such benefits, creating a gap that discourages entrepreneurial incentives. The proposed relaxation seeks to bridge this disconnect and encourage startup participation in public markets.

Discussions Also Cover FPIs and AIFs — But No Clearing Corp Split Yet

The board may also explore potential revisions impacting Foreign Portfolio Investors (FPIs) and Alternative Investment Funds (AIFs), as part of broader reforms to deepen foreign and institutional participation in Indian markets.

However, the expected demerger of clearing corporations is not on today’s agenda, as the subject requires further deliberation and clarity before formal evaluation.

What This Means for Markets: Simpler, Smarter, and More Inclusive

If approved, these proposals will significantly streamline regulatory processes, provide greater flexibility to institutional and retail investors, and modernise India’s capital markets to attract long-term participation. The outcomes of today’s board meeting could mark a decisive step toward investor-friendly policy reforms and a more dynamic financial ecosystem.

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