In-depth Impact Analysis of India's SEBI New Capital Rules for Investment Banks

Based on the information provided by you and data from brokerage APIs, the Securities and Exchange Board of India (SEBI) has officially issued new regulatory rules for investment banks (merchant bankers) [0], with key requirements including:

• By 2027
  : Minimum net worth will be raised from the current standard to
  250 million rupees
  (approximately 3 million US dollars)
• By 2028
  : Further raised to
  500 million rupees
  (approximately 6 million US dollars)

• By 2027
  : Minimum net worth to reach
  75 million rupees
  (approximately 0.9 million US dollars)
• By 2028
  : Reach
  100 million rupees
  (approximately 1.2 million US dollars)

The new rules provide a

, giving market participants sufficient time for capital replenishment and business adjustments [0].

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• Higher capital requirements will accelerate industry consolidation, and leading institutions will gain larger market shares
• Large local investment banks (such as Kotak, ICICI Securities, SBI Caps, etc.) will benefit from their capital advantages
• The industry will shift from fragmented competition to an oligopolistic competition pattern

• A higher capital base will support larger-scale underwriting transactions
• Improve service capabilities for large enterprises’ IPOs and bond issuances
• Enhance risk absorption capacity and reduce systemic risks

• Enhanced capital strength will improve competitiveness against international major banks
• Provide stronger support for cross-border businesses
• Helpful for participating in global M&A transactions

• Need to raise a large amount of capital by 2027 (small institutions need 500 million rupees)
• May dilute existing shareholders’ equity
• Increase financing costs and financial leverage

• Need to establish a more comprehensive risk management system
• Increase compliance and reporting costs
• Impose a heavier burden on small institutions

• The requirements of 250 million rupees (2027) and 500 million rupees (2028) are huge thresholds for small institutions
• It is estimated that
  30-50%
  of small investment banks will fail to meet the new standards
• May face the fate of being forced to exit the market or being acquired

• Insufficient capital will limit business scale and types
• Difficult to participate in bidding for large projects
• May be squeezed into niche markets

• Need to find strategic investors or partners
• May be acquired by large institutions
• Some may transform into professional consulting institutions

• Can focus on specific industries or service areas
• Find survival space through differentiated competition
• Form complementary relationships with large institutions

• Become acquisition targets of large institutions
• Realize value through M&A
• Gain a larger development platform after integration

Based on India’s banking industry development trends and web search information [1], the following integration models are expected to emerge:

• Horizontal Integration
  : Large investment banks acquire small peers
• Vertical Integration
  : Commercial banks acquire investment banking businesses
• Strategic Alliance
  : Local institutions cooperate with foreign banks
• Market Exit
  : Institutions that fail to meet the new rules are forced to exit

India’s banking regulatory authority has explored issuing new bank licenses in 2025 to create more, larger, and stronger banks [2], which forms policy synergy with this investment bank capital new rule to jointly promote the integration and strengthening of the financial system.

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• Global Capital Advantage
  : The capital scale of international large investment banks (such as Goldman Sachs, Morgan Stanley, JPMorgan Chase, etc.) far exceeds the 500 million rupees requirement
• Parent Company Support
  : Can obtain funding support from parent companies to easily meet capital requirements
• Global Resource Allocation
  : Can flexibly allocate global capital based on market opportunities

• International Compliance System
  : Already adapted to international regulatory standards such as Basel III [3]
• Mature Risk Control System
  : Have sound risk management and compliance systems
• Regulatory Response Experience
  : Operate in multiple jurisdictions and are familiar with regulatory requirements

• Advanced Trading Systems
  : Have globally leading trading and settlement systems
• Data Analysis Capabilities
  : Strong quantitative analysis and research capabilities
• Digital Services
  : Mature electronic trading and customer service platforms

• Compliance Complexity
  : Need to adapt to India’s specific regulatory requirements
• Cultural Differences
  : Need to understand local business culture and customer needs
• Political Risks
  : Face challenges in policy coordination with Indian regulatory authorities

Recent cases show that there are regulatory disputes between Indian regulatory authorities and foreign financial institutions; for example, the European Central Bank is discussing additional capital rules for sovereign bond clearing houses with India [4], reflecting the compliance complexity faced by foreign institutions in India.

• Stronger Local Competitors
  : Large local investment banks improve competitiveness through capital replenishment
• Price Competition
  : Local institutions may launch price wars using cost advantages
• Customer Relationships
  : Local institutions have inherent advantages in customer relationships

Based on the analysis of India’s financial market opening trends [5], foreign institutions may adopt the following strategies:

• Increase capital investment in the Indian market
• Expand business scope and customer base
• Strengthen cooperative relationships with local enterprises

• Establish joint ventures with local institutions
• Acquire local small investment banks
• Establish strategic alliance relationships

• Focus on cross-border M&A and overseas financing
• Serve multinational enterprises’ businesses in India
• Focus on high-end financial products and services

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• Industry concentration will increase significantly
• Form a market pattern dominated by large institutions
• Improve overall operational efficiency

• Large institutions provide comprehensive financial services
• Medium-sized institutions focus on niche markets
• Small institutions shift to specialized services

Based on the regulatory principles of international capital adequacy standards (such as Basel III) [3], raising capital requirements will bring about the following changes:

• Enhanced Risk Absorption Capacity
  : A higher capital base improves risk absorption capacity
• Reduced Systemic Risk
  : Reduce the probability of financial institution failures
• Improved Financial Stability
  : Enhance the stability of the entire financial system

• Comply with international regulatory standards
• Improve the international status of Indian financial institutions
• Attract more international investors

• Support larger-scale transactions
• Provide more comprehensive financial services
• Meet the diversified financing needs of enterprises

• Market volatility may occur during the transition period
• Exit of small institutions may affect market liquidity
• M&A integration may bring uncertainty

• Rising capital costs may lead to higher service prices
• Financing costs for small and medium-sized enterprises may increase
• Reduced market competition may affect service efficiency

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• Large Local Investment Banks
  : Main beneficiaries of industry integration
• Commercial Banks
  : May expand investment banking businesses through acquisitions
• Fintech Companies
  : Increased demand for digital services

• Financial Integration
  : Accelerated industry M&A integration
• Capital Adequacy
  : Institutions with high capital adequacy ratios benefit
• Internationalization
  : Institutions with international competitiveness get valuation upgrades

• Policy Implementation Risk
  : Uncertainty in policy implementation intensity and timeline
• Market Volatility Risk
  : Market may fluctuate during the transition period
• Liquidity Risk
  : Exit of small institutions may affect market liquidity

• Competitive Pattern Change
  : Foreign institutions may intensify competition
• Regulatory Policy Adjustment
  : Future regulatory policies may be further adjusted
• Economic Cycle Impact
  : Changes in macroeconomic environment affect industry performance

Based on India’s financial reform direction and banking industry development trends [2][5], it is expected that within the next 1-2 years:

• Accelerated Industry Integration
  : A large number of M&A transactions will occur in 2026-2027
• Foreign Institution Expansion
  : Foreign investment banks may increase investment in India
• Continuous Regulatory Strengthening
  : Capital requirements may be further raised
• Accelerated Digitalization
  : Fintech applications will be more widespread
• Increased Internationalization
  : India’s financial market will be more open

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India’s SEBI new capital rules for investment banks are an important measure in India’s financial system reform, with main impacts including:

• Large institutions: Benefit from industry integration and improve market position
• Small institutions: Face survival pressure and will be integrated or eliminated
• Industry overall: Develop towards scale and specialization

• Short-term: Capital requirements have limited impact on them
• Long-term: Face stronger local competitors
• Opportunities: Can expand market through M&A and cooperation

• Overall: Improve financial stability and international competitiveness
• Structure: Accelerate industry integration and market concentration
• Services: Improve service capabilities and quality

• Pay attention to investment opportunities in large local investment banks
• Be alert to investment risks of small institutions
• Seize M&A opportunities brought by industry integration

• Formulate capital replenishment plans as soon as possible
• Actively seek strategic partners
• Improve professional capabilities and service quality

• Ensure a smooth transition in policy implementation
• Pay attention to market liquidity and service coverage
• Balance financial stability and market vitality

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[0] Jinling API Data - India’s SEBI New Capital Rules for Investment Banks
[1] Bloomberg - “India’s Big-Bang Financial Reforms Target Wave of Foreign Money” (December 19, 2025)
[2] Bloomberg - “India Mulls First New Bank Permits in Decade to Fund Growth” (July 11, 2025)
[3] Investopedia - “Basel III: What It Is, Capital Requirements, and Implementation”
[4] Bloomberg - “ECB Weighs Reprieve for Banks in Indian Bond Clearing Dispute” (September 29, 2025)
[5] Bloomberg - “India Set to Open $40 Billion M&A Market to Local Bank Funding” (October 1, 2025)