Issuing Authority: Securities and Exchange Board of India (SEBI) | Date of Notification: 3rd July 2026 | Comes into Force: 1st October 2026 | Shifts custodian fee from annual to monthly
Quick Reference — SEBI (Custodian) (Amendment) Regulations, 2026
SEBI Custodian Fee Shifts from Annual to Monthly (2026 Amendment)
The Securities and Exchange Board of India (SEBI) has, through Notification No. SEBI/LAD-NRO/GN/2026/308 dated 3rd July 2026, notified the SEBI (Custodian) (Amendment) Regulations, 2026, in exercise of powers conferred by Section 30 of the SEBI Act, 1992. The notification was published in the Gazette of India, Part III—Section 4, as Notification No. 435 dated 3rd July 2026.
The amendment further modifies the SEBI (Custodian of Securities) Regulations, 1996 — originally published in the Gazette on 16th May 1996 and most recently amended on 23rd September 2025. The core change is a shift in the custodian fee payment cycle from annual to monthly, along with a corresponding recalibration of the fee amount and formula, and transitional arrangements for both new and existing custodians.
The Regulations will come into force on 1st October 2026, giving registered custodians and applicants roughly three months to prepare for the transition before the new monthly billing cycle takes effect.
Terminology Change — Regulations 9(d) and 26(i)
The amendment makes a direct terminology substitution in two core regulations governing custodian fee obligations. In Regulation 9(d), the word "annual" is substituted with the word "monthly". The same substitution — "annual" replaced by "monthly" — is made in Regulation 26(i).
These two regulations set out the custodian's fee payment obligation and the basis on which the Board levies its fee. By replacing "annual" with "monthly" in both, SEBI converts the underlying obligation from a once-a-year payment to a recurring monthly one, consistent with the revised Second Schedule discussed below.
Second Schedule, Part A — The New Fee Formula
Clause (iii) of Part A of the Second Schedule previously fixed the custodian fee at Rs. 10,00,000 annually, or 0.0005% of the custodian's assets under custody, whichever is higher. Under the amendment, this is replaced with a monthly fee of Rs. 85,000, or 0.0000416% of assets under custody (AUC), whichever is higher.
Old (annual): ₹10,00,000 or 0.0005% of AUC, whichever higher. New (monthly): ₹85,000 or 0.0000416% of AUC, whichever higher. The monthly percentage figure is approximately one-twelfth of the former annual percentage rate.
Second Schedule, Part B — Payment Mechanics
Clause (II) of Part B, which governs "Payment of annual fee," is retitled to "Payment of monthly fee", and its sub-clauses are substantially rewritten to set out the new payment cycle.
Sub-clause (1) — The General Rule
From the date the amendment comes into force, the monthly fee shall be payable with reference to each month, within 15 days of completion of that month.
Sub-clause (2) — Custodians Registered On or After 1st October 2026
A custodian granted registration on or after the commencement date shall pay a proportionate monthly fee for the month in which registration is granted, and thereafter the full monthly fee for every subsequent month during which the registration subsists.
Sub-clause (3) — Custodians Already Registered Before Commencement
A custodian registered before the commencement date shall pay a proportionate annual fee for the financial year in which the amendment commences, and full monthly fee thereafter for every subsequent month of continued registration. This proportionate annual fee is payable within 15 days of commencement. Any annual fee already paid before commencement, to the extent it relates to a period falling after commencement, will be proportionately adjusted against the amount payable under this provision.
Sub-clause (4) — Reporting Requirement
Sub-clause (4) is also amended, with the word "annual" substituted by "monthly" — aligning the periodic asset-under-custody reporting obligation that accompanies the fee payment with the new monthly cycle.
Commencement and Signatory
The notification is signed by Amit Pradhan, Executive Director, and carries the reference ADVT.-III/4/Exty./204/2026-27. A note appended to the Gazette confirms the SEBI (Custodian of Securities) Regulations, 1996 were originally published on 16th May 1996 (S.O. No. 344(E)) and were last amended on 23rd September 2025 via Notification No. SEBI/LAD-NRO/GN/2025/267 — this 2026 amendment is the next revision in that chain.
Key Changes — Old vs New Custodian Fee Framework
Compliance Checklist — SEBI Custodian Fee Transition
☑ Identify whether your custodian registration predates or postdates 1st October 2026, since the transition rule differs for each.
☑ If already registered, calculate the proportionate annual fee for FY 2026-27 and be ready to pay it within 15 days of 1st October 2026.
☑ Check whether any annual fee already paid for a period extending beyond 1st October 2026 needs to be adjusted against the new proportionate fee.
☑ Rework internal billing systems and MIS to calculate and process fees on a monthly — not annual — basis from October 2026 onward.
☑ Build a recurring internal process to compute and remit the monthly fee (Rs. 85,000 or 0.0000416% of AUC, whichever higher) within 15 days of each month-end.
☑ Update the periodic asset-under-custody reporting process that accompanies fee payment to match the new monthly cadence.
☑ Brief finance, compliance, and operations teams on the new fee formula and payment timelines well ahead of the 1st October 2026 commencement date.
CorpLawUpdates Analysis
The SEBI (Custodian) (Amendment) Regulations, 2026 represent more than a cosmetic word swap from "annual" to "monthly" — they restructure the cash-flow rhythm of the custodian fee regime entirely. Moving from a single annual payment to twelve monthly payments changes how custodians budget for regulatory costs, and the proportionate-fee mechanics for both new and existing registrants suggest SEBI has thought carefully about avoiding double-counting during the transition quarter.
The most operationally significant provision is arguably sub-clause (3), which requires already-registered custodians to pay a proportionate annual fee for FY 2026-27 within 15 days of commencement, while also adjusting for any annual fee already paid that overlaps the post-commencement period. Getting this reconciliation right will require custodians to maintain precise records of what has already been paid and for which period, since an incorrect adjustment could result in either an underpayment flag or an unnecessary overpayment.
Practitioners advising custodians should also flag the shift in the reporting cadence — since asset-under-custody details tied to the fee payment now presumably need to be furnished monthly rather than annually, this is a meaningfully higher-frequency compliance obligation, even though the per-instance amount is smaller. Firms should treat this as a process and systems change, not just an accounting change.
With three months' lead time before the 1st October 2026 commencement, custodians would be well advised to run a parallel calculation exercise now — comparing what their fee would have been under the old annual formula versus the new monthly formula — to validate their internal billing logic before the switch takes effect.
This article is for informational and educational purposes only and does not constitute legal or regulatory advice. Verify with primary regulatory sources before acting.
