SEBI Master Circular for Debenture Trustees 2026: Key Changes, Deadlines and Compliance Requirements

SEBI has issued a new Master Circular for Debenture Trustees, bringing years of separate regulatory instructions together in one place. The circular covers everything from registration and due diligence to security monitoring, investor complaints, defaults, outsourcing and anti-money laundering requirements.

The SEBI Master Circular for Debenture Trustees consolidates existing SEBI circulars into 17 chapters and replaces the Master Circular dated August 13, 2025. It also contains requirements for issuers of listed debt securities, credit rating agencies, stock exchanges and depositories.

🔎 The Numbers You Should Know First

📢 What Changed in the New SEBI Master Circular?

The new circular is primarily a consolidation of the existing framework. SEBI says it brings together the circulars issued up to September 28, 2026, while also reflecting the substantial modifications introduced since the August 13, 2025 Master Circular.

There is no redline comparison in the circular. Therefore, where the source does not restate an earlier requirement, it is better to say that the earlier position is “not restated” rather than assume that it has changed.

👥 Who Needs to Comply?

Registered debenture trustees carry most of the requirements, but they are not the only entities addressed by the circular.

Are debenture holders directly addressed? Debenture holders are not listed as direct addressees of the Master Circular. However, Annex-IXA contains an Investor Charter setting out specific investor rights and obligations, including keeping depository details updated, staying informed about information in the public domain, participating in meetings, cooperating with the Debenture Trustee and responding to requests or notices within the specified time.

📅 When Does the Master Circular Apply?

The circular is dated September 28, 2026. On issuance, it rescinds the August 13, 2025 Master Circular. It does not specify a separate commencement date.

That does not mean every requirement has the same deadline. Several provisions carry their own dates and reporting timelines.

📚 Chapter-by-Chapter Breakdown

Chapter I: Registration and Business Conduct

Registration applications, surrender requests and other requests must be submitted through the SEBI Intermediary Portal. Declarations and undertakings forming part of application forms are submitted physically for record purposes. Where fees or penalties are paid digitally, the payment must be reported to SEBI in the prescribed format, with a copy emailed to the Treasury and Accounts division.

For an unlisted trustee, transfers of shareholding among immediate relatives and transmission of shares, whether to a relative or not, are not treated as a change in control. "Immediate relative" follows Regulation 2(l) of the SEBI (SAST) Regulations, 2011. Incoming shareholders must nevertheless satisfy the fit and proper criteria in Schedule II of the SEBI (Intermediaries) Regulations, 2008.

Transfer of business. A transferee that is not registered in the same capacity must obtain fresh registration before the transfer. SEBI issues a new registration number in transfer-of-business cases. Where fresh registration follows a change in control of the same legal entity, the registration number is retained.

A transferor transferring its entire business, or ceasing to exist, must surrender its certificate. A partial transfer allows the certificate to be retained. For voluntary surrender, the trustee must first transfer client accounts to another registered trustee at no additional cost to clients and then apply using the Annex-IA format.

Additional surrender formalities: The surrender application also requires confirmation that a public notice has been issued in a widely circulated national and regional daily and that the Depositories and relevant Stock Exchanges have been notified about the surrender of the Debenture Trustee's registration.

Designated email: Each trustee must maintain a non-person-specific email ID for regulatory communication and submit the details in an Excel file to [email protected].

CorpLawUpdates analysis: The reproduced wording of paras 8.2(f) and 8.2(j) refers to 30 days and six months from "the date of this circular", which is wording carried over from the original November 25, 2025 circular. The Master Circular does not restate which calendar date those periods run from. Read alongside para 8.4, the safer approach is to treat October 27, 2026 as the outer date for the requirements under para 8 and to verify the related sub-deadlines against the November 25, 2025 and April 28, 2026 circulars.

Chapter II: Due Diligence for Secured and Unsecured Debt Securities

Chapter II is the largest operational chapter. At the debenture trustee agreement stage, the issuer has to provide details of the assets proposed to be charged, including title deeds or a legal title report and registration evidence with the Sub-registrar, ROC or CERSAI.

For free assets, the issuer must provide an undertaking confirming there is no encumbrance. For encumbered assets, it must provide details of existing charges along with NOCs from existing charge holders and unsecured lenders holding a negative lien.

The trustee must independently verify the position with the ROC, Sub-registrar, CERSAI and Information Utilities. Where an existing charge holder has given conditional consent, the trustee checks its validity and informs the existing charge holders, giving them five working days to communicate comments or objections.

The trustee may use practising chartered accountants, company secretaries, registered valuers or legal counsel, but responsibility remains with the trustee. Due-diligence records and documents must be retained for five years from redemption of the debt securities, unless applicable law or an enquiry or proceeding requires their retention for a longer period.

Certificates: Annex-IIA applies at the draft offer document or placement memorandum stage for secured issues, while Annex-IIB applies at listing application. For unsecured issues, Annex-IIC and Annex-IID apply at the corresponding stages. For shelf prospectuses where security is not finalised, a partial certificate may be issued first, followed by a full certificate at the tranche stage. The stock exchange lists secured debt securities only after receiving the Annex-IIB certificate.

Charge registration: The issuer must create the charge and execute the debenture trust deed before applying for listing. The charge must be registered with the Sub-registrar, ROC, CERSAI or depository within 30 days of creation. Failure to register or independently verify the charge is a breach of covenants or terms of issue.

The offer document must state that debt securities are secured only where the charged asset has been registered or can be independently verified by the trustee.

Encumbrances: Listed debt securities must have encumbrances created only through the depository system. The circular defines encumbrance broadly and includes pledge, hypothecation, mortgage, lien, negative lien, non-disposal undertakings and arrangements of a similar nature.

Changing security on listed debt (para 2.7): The trustee issues an NOC after due diligence. The issuer then creates and registers the charge within 30 days, executes a supplemental debenture trust deed and files the NOC, deed and trustee undertaking with the depositories and exchanges.

The depository assigns a new ISIN only after these submissions. Adding security, changing security or securing a previously unsecured issue does not by itself amount to a change in structure. A new ISIN is therefore not assigned unless maturity, coupon, face value, redemption schedule or secured/unsecured status also changes.

Independent professionals (para 2.8): The trustee must have a board-approved engagement policy and conflict policy, and both must be available on its website. The conflict policy must prevent appointment of professionals who had a pecuniary relationship with the issuer during the three years before the issue opens. The trustee pays the professional directly.

Chapter III: Security and Covenant Monitoring System

Depositories host a distributed-ledger-based system where issuers, trustees and rating agencies record and verify security creation, covenants, payments and ratings.

Issuers must record all details before ISIN activation, and depositories allot or defreeze an ISIN only after confirming that the data has been recorded.

• Covenants and the debenture trust deed: issuer records within 5 working days of signing; trustee validates within 7 working days.
• Payment status: issuer records within 1 working day of the due date; trustee validates within 2 working days.
• If the issuer fails to report, the trustee independently assesses and updates the system within 7 working days of an interest due date or 9 working days of maturity or redemption, followed by action under Chapter X.
• Rating actions: issuer records within 1 working day of the press release; discrepancies are corrected within 2 working days.
• Events reducing security cover below the Regulation 54 limit are "trigger events" and must be recorded immediately.
• The trustee reconciles the asset list and removes duplicates yearly.

Annexes IIIA to IIIE specify the asset-registration fields, charge-update details, payment data fields, Asset ID format and duplicate-check parameters. The requirement for existing outstanding securities to be entered by January 31, 2023 by issuers and verified by February 28, 2023 by trustees is recorded for reference.

Chapter IV: Recovery Expense Fund

An issuer listing debt securities must deposit the REF with the Designated Stock Exchange named in the offer document. Cash or cash equivalents, including bank guarantees, can be provided at the listing application stage.

The exchange invests the cash in government securities, treasury bills, scheduled bank fixed deposits, gilt or overnight mutual fund schemes, with the income accruing to the fund.

• A bank guarantee must remain valid for six months after maturity and be renewed at least seven working days before expiry. Otherwise, the exchange invokes it.
• For a scheme of arrangement, the exchange ensures that the REF amount is in place before giving its no-objection letter.
• In a default, the trustee or Lead Debenture Trustee may be reimbursed for enforcement and legal costs, including consents, voting, meetings, court applications, legal fees and asset recovery services, without prior holder approval. Holders are informed by email and on the trustee's website.
• Other uses need prior holder consent and intimation to the exchange.
• Reimbursement requires an independent auditor's certificate, and the exchange releases funds within five working days of the intimation.
• A Lead Debenture Trustee is one selected by the other trustees or one representing holders of more than 50% of outstanding value.
• The balance is refunded to the issuer on maturity or exercise of a call or put after the trustee issues an NOC and confirms there is no default on any other listed debt of the issuer.
• The trustee must independently confirm REF creation from the exchange or another independent source and cannot rely only on the issuer. Exchanges publish REF amounts half-yearly.

Chapter V: Security Cover Certificate

Under Regulation 54 read with Regulation 56(1)(d) of the LODR Regulations, the issuer prepares a quarterly security cover certificate, while the statutory auditor certifies the book values.

Market values are shown with a reference date. If market value cannot be determined for loans, receivables or similar assets, book value may be used for that quarter with written justification. Where SEBI has not specified the valuation frequency for an asset class, valuation is quarterly.

• If there is more than one trustee, a separate certificate is prepared for each.
• Unpaid assets cannot be counted towards security cover.
• For third-party, subsidiary, group or holding-company assets, the issuer provides standalone and net consolidated tables. The third party's statutory auditor certifies the assets, and all encumbrances must be listed for pari-passu, second or third charges.
• The certificate must include a column titled "Debt not backed by any assets offered as security" covering unsecured, subordinated and other lower-priority debt.
• The trustee certifies market value each quarter for security it holds and records reasons for any reduction from the previous quarter.
• Trustees of the same issuer may use one independent professional.
• Certificates must carry a UDIN where applicable.
• Qualifications or disclaimers must not impair holders' rights, and the trustee must take corrective action if they do.

Annex-VA gives the prescribed format and separate formulas for exclusive and pari-passu security cover ratios.

Chapter VI: Periodic and Continuous Monitoring

The debenture trust deed must contain the monitoring terms. The reporting process essentially works in two stages: the issuer reports to the trustee first, and the trustee then reports to the stock exchange.

Where several trustees have a pari-passu charge over the same assets, a lead trustee can be selected based on charge amount to carry out valuation. Issuers must also provide quarterly financial covenant compliance status certified by the statutory auditor.

Trustees need a board-approved covenant monitoring policy covering defined roles and delegation, along with a category-wise covenant list and monitoring frequency. Annex-VIA provides guidance. There should also be a clear process for dealing with breaches, including accelerated payment, borrowing restrictions, dividend bars or declaration of an event of default.

Monitoring must also consider public sources such as stock-exchange disclosures, company filings and media. A quarterly status report on breaches and actions taken must be placed on the website and sent to the exchange.

Within two working days: trustees must disclose to the exchange any NOC, no-dues certificate, consent or permission issued to an issuer, including consent for further borrowing, as well as any breach of minimum security cover.

Chapters VII & VIII: Website Disclosures, Trust Deeds and Information Sharing

Compensation disclosures: trustees must disclose the nature of fee arrangements, including minimum fee, whether stated as an absolute amount or percentage of issue size, and the factors used to determine it.

Interest and redemption calendar: ISIN-wise details for the financial year must be placed within five working days of the start of the year. New issues must be added within five days of closure. Payment status must be updated within one day of the due date and marked "delayed payment" where applicable.

Annex-VIIA contains eight tables covering these disclosures.

Trust deeds: Chapter VIII provides that clauses which limit or extinguish the trustee's obligations to holders, or conflict with the DT Regulations, are null and void in existing as well as new trust deeds.

Chapter IX: Investor Grievance Redress

• The Investor Charter (Annex-IXA) must be publicised on websites, by email and in offices. TAI must also publish it.
• Monthly complaint data in Annex-IXB must be published by the 7th of the following month.
• A dedicated grievance email ID must be displayed prominently.
• SCORES credentials must be obtained within one month of registration.
• A SCORES complaint must be resolved within 30 days, with an Action Taken Report and proof of dispatch uploaded.
• A complaint is treated as resolved only when SEBI closes it on SCORES.
• Missing the 30-day ATR deadline is treated as failure to furnish information and failure to redress the grievance.

Chapters X to XII: Breach, Default and Remedies

For privately placed securities, the process is:

Majority means approval of not less than 75% of holders by value of the outstanding debt and 60% of holders by number, measured at the ISIN level.

For enforcement of security, the notice contains a negative-consent mechanism. For signing an Inter Creditor Agreement (ICA), the process requires positive consent. Where the required majority opposes enforcement, the Debenture Trustee shall not enforce the security. Where the required majority consents to entering into the ICA, the Debenture Trustee shall enter into the ICA. A representative committee of holders may also be formed.

For public issues, the negative-consent provision and the enforcement meeting requirement do not apply (para 3.3.4).

Conditions for signing an ICA (para 4.1): Signing must be in holders' interest and lawful. The trustee may exit as though it had never signed if the plan contains non-compliant conditions, if it is not finalised within 180 days from the end of the review period, or if a signatory breaches the approved plan.

Any extension requires investor approval and the total period cannot exceed 365 days from the start of the review period. The ICA must contain these exit rights before signing.

Nominee director: Issuer companies must have Articles requiring appointment of the trustee's nominee. Other issuers provide an undertaking that a non-executive or independent director, trustee or governing-body member will be designated.

Defaulted securities after maturity: The trustee informs exchanges and depositories about payment status within nine working days of maturity. If payment is not received, trading remains restricted.

The trustee reassesses the position by the seventh working day of April each year. Restructuring, NCLT or NCLAT proceedings, repayment and similar developments must be reported within one working day. Chapter XII requires default history to be verified and updated in the centralised database within seven days of knowledge of a default.

Chapters XIII to XVII: Reporting, Outsourcing, Conduct and AML

⚖️ Exceptions and Important Carve-Outs

• Public issues are excluded from negative consent and the enforcement meeting requirement.
• A default cured between notice and meeting removes the need for the meeting.
• Additional or changed security on listed debt does not require a new ISIN if no other terms change.
• Transfers among immediate relatives and share transmissions are not treated as a change in control for unlisted trustees.
• Book or carrying value may be used where market value cannot be ascertained, with justification.
• The Chinese Wall does not apply to key managerial personnel.
• A trustee may approach SEBI to dispense with the Regulation 33B surrender procedure.

🎯 What Does This Mean in Practice?

For trustees that also carry on consultancy, agency or other non-SEBI-regulated businesses, this means setting up the SBU, separating staff and records, establishing grievance arrangements, making website disclosures and obtaining client or stakeholder acknowledgements within the applicable timelines.

CorpLawUpdates analysis: There is a difference in periodicity within the Master Circular. Chapter III, paragraph 5.5 refers to a half-yearly certificate by the statutory auditor for the Security and Covenant Monitoring System, with periodicity linked to the financial results under Regulation 52 of the LODR Regulations. Separately, Chapter V requires the issuer to prepare the security cover certificate on a quarterly basis, and Chapter VI sets out quarterly submission timelines.

The Master Circular does not expressly reconcile these provisions. The article therefore presents both requirements rather than treating one as a replacement for the other. Compliance teams should verify the applicable requirement for their specific workflow where the two provisions overlap.

Issuers also have several immediate compliance points: REF funding at listing, 30-day charge registration, system entries within one to five working days and REF bank guarantee renewals at least seven working days before expiry. Failure to meet the charge registration timeline is itself treated as a covenant breach.

[INTERNAL LINK: SEBI (Debenture Trustees) Regulations, 1993] · [INTERNAL LINK: SEBI NCS Regulations, 2021] · [INTERNAL LINK: LODR Regulation 54 security cover] · [INTERNAL LINK: Form SH-12 debenture trust deed]

✅ Compliance Checklist

❓ Frequently Asked Questions

What is the SEBI Master Circular for Debenture Trustees 2026?

It is SEBI's consolidated compilation of circulars applicable to debenture trustees as on September 28, 2026, issued under Section 11(1) of the SEBI Act, 1992. It contains 17 chapters plus annexures and is available on SEBI's website under Legal framework and Master Circulars.

Does it replace the August 2025 Master Circular?

Yes. The Master Circular dated August 13, 2025 stands rescinded. Actions already taken and applications pending under it are treated as being under the corresponding provisions of the new circular, while earlier rights, liabilities, penalties and proceedings remain unaffected.

Who must comply with the new circular?

Registered debenture trustees must comply. Issuers of listed debt securities and municipal debt securities, credit rating agencies, recognised stock exchanges and depositories also have specific duties.

When does the circular come into force?

The circular gives no separate commencement date. It is dated September 28, 2026, and the earlier Master Circular is rescinded on issuance. Certain provisions have their own timelines, especially October 27, 2026 for Regulation 9C implementation.

What must debenture trustees do by October 27, 2026?

They must implement Regulation 9C and the conditions under para 8.2, including conducting non-SEBI-regulated activities through Separate Business Units ring-fenced by a Chinese Wall, with separate records, staff, grievance mechanisms, marketing and website disclosures.

How much must an issuer deposit in the Recovery Expense Fund?

The issuer must deposit 0.01% of the issue size, subject to a maximum of ₹25 lakh per issuer, with the Designated Stock Exchange named in the offer document. Cash, cash equivalents and bank guarantees are accepted.

What are the security cover certificate deadlines?

Issuers must submit the certificate to the debenture trustee within 60 days of each quarter-end, or 75 days for the last quarter. The trustee must then submit it to the stock exchange within 75 days, or 90 days for the last quarter.

What must a trustee do when an issuer defaults?

For privately placed securities, the trustee must notify holders within 3 days, allow 15 days for consent and convene a meeting within 30 days unless the default is cured first. Enforcement or ICA decisions require approval of 75% by value and 60% by number at ISIN level. For public issues, the negative-consent step and enforcement meeting requirement do not apply.