Description

SEBI amends regulations for non-convertible securities to allow issuers to offer incentives to specific investor categories including senior citizens, women, armed forces personnel, and retail individual investors.

Summary

SEBI has issued the SEBI (Issue and Listing of Non-Convertible Securities)(Amendment) Regulations, 2026, notified on January 20, 2026, and effective from the date of publication in the official gazette. The amendment introduces a new definition for “Retail Individual Investor” and permits issuers to offer incentives to specific investor categories when issuing debt securities.

Key Points

  • New definition added: “Retail Individual Investor” means an investor who applies or bids for debt securities up to a value of Rs. 2 lakh
  • Issuers can now offer incentives (such as additional interest or discount to issue price) to specific investor categories
  • Eligible categories for incentives: senior citizens, women, serving and retired armed forces personnel, widows/widowers of deceased armed forces personnel, retail individual investors, and other categories specified by SEBI from time to time
  • Incentives are only available to those who receive initial allotment of debt securities
  • Incentives cannot be transferred - they are not available after transfer or transmission of securities post-allotment
  • Amendment to Regulation 2(1) adds clause (chhchak) defining retail individual investors
  • Amendment to Regulation 31 adds two provisos allowing incentive structures

Regulatory Changes

The amendment modifies the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 by:

  1. New Definition (Regulation 2): Insertion of clause (chhchak) defining “Retail Individual Investor” as investors applying for debt securities up to Rs. 2 lakh value

  2. Incentive Framework (Regulation 31): Addition of provisos that explicitly permit issuers to provide incentives to priority investor segments, including:

    • Additional interest payments
    • Discounts to issue price
    • Other forms of incentives

  3. Restriction on Incentive Transfer: Incentives are strictly limited to original allottees and cannot be passed on through subsequent transfers or transmissions

Compliance Requirements

  • Issuers of non-convertible securities may structure their offerings to include incentives for eligible investor categories
  • Incentive schemes must be clearly disclosed in offer documents
  • Issuers must ensure incentives are provided only to initial allottees and not extended after transfer/transmission
  • Market intermediaries and stock exchanges should update their systems and processes to accommodate differential pricing/incentive structures
  • Compliance with amended regulations is mandatory from the date of gazette publication

Important Dates

  • Notification Date: January 20, 2026
  • Effective Date: Date of publication in the official gazette (January 20, 2026)
  • Gazette Reference: CG-MH-E-21012026-269490
  • SEBI Notification Number: SEBI/LAD-NRO/GN/2026/296

Impact Assessment

Market Impact: The amendment is designed to increase participation of retail investors and priority segments in debt securities markets by allowing issuers to offer attractive incentives. This could enhance liquidity in the debt market and broaden the investor base.

Investor Impact: Positive for retail individual investors (investing up to Rs. 2 lakh), senior citizens, women, and armed forces personnel who can now receive preferential terms such as higher interest rates or discounted prices on debt securities.

Issuer Impact: Provides issuers with flexibility to design targeted incentive structures to attract specific investor segments, potentially reducing cost of debt capital by tapping underserved investor categories.

Operational Impact: Market infrastructure institutions, registrars, and intermediaries will need to update systems to handle differential pricing and incentive allocation mechanisms while ensuring incentives are not transferred post-allotment.

Regulatory Intent: The amendment reflects SEBI’s focus on financial inclusion and encouraging retail participation in debt markets while protecting priority investor segments.

Impact Justification

Regulatory amendment allowing issuers to provide incentives to specific investor categories, potentially making debt securities more attractive to retail and priority segments but with limited immediate market-wide impact