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SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
SEBI revises operational framework for municipal debt securities
SEBI, vide circular dated August 11, 2026, has specified operational changes to the regulatory framework for municipal debt securities, following amendments to the SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015. The key changes are as follows:
- the face value of each privately placed municipal debt security is to be INR 1,00,000 (Indian Rupees one lakh) or INR 10,000 (Indian Rupees ten thousand), as deemed fit (previously the face value of municipal debt securities was disclosed in offer document or placement memorandum in the manner as specified by SEBI). Securities issued at a face value of INR 10,000 (Indian Rupees ten thousand) are required to have a fixed maturity and are to be without any structured obligations. The trading lot of such listed securities traded on a stock exchange must be always equal to the face value of the security. The above face value requirements apply only to privately placed municipal debt securities and not public issues;
- a two-step escrow account mechanism is introduced, where the listed entity is a pooled finance vehicle or Special Purpose Vehicle (“SPV“) set up under the Pooled Finance Development Fund Scheme of the Government of India. The constituent municipalities are required to create the prescribed escrow accounts and comply with all related requirements. The SPV or pooled finance vehicle is required to maintain an interest payment account (which is required to maintain an amount equivalent to 1 (one) year’s interest obligation throughout the tenure of the municipal debt securities) and a sinking fund account, to which funds from the respective accounts of the constituent municipalities are to be transferred as per the agreement between the SPV and the constituent municipalities; and
- the deadline for submission of half-yearly unaudited financial results by listed municipalities has been extended from 45 (forty-five) days to 60 (sixty) days from the end of the first half year. The deadline for submission of annual audited financial results by listed municipalities has been extended from 60 (sixty) days to 90 (ninety) days from the end of the financial year along with the audit report.
SEBI revises Z-score threshold for stress testing of commodity derivatives
SEBI, vide circular dated August 12, 2026, has modified the provisions relating to the Z-Score threshold applicable to stress testing under the historical scenario framework for the commodity derivatives segment. The circular amends Part A (historical scenarios) of paragraph 22 (standardised stress testing for commodity derivatives) of Annexure O of the SEBI Master Circular for Commodity Derivatives Segment dated August 4, 2023, which prescribes norms related to the Core Settlement Guarantee Fund. The revised threshold for replacing extreme price movements in peak historical returns has been reduced from 10 (ten) to 5 (five). The revised threshold will apply to price movements over the applicable margin period of risk based on returns observed over the preceding 15 (fifteen) years, with the mean and sigma of such returns used for calculating the Z-score.
Framework for calculation of net distributable cash flows for Infrastructure Investment Trusts
SEBI, vide circular dated August 14, 2026, has revised the framework for calculation of net distributable cash flows for Infrastructure Investment Trusts (“InvITs”) under the Master Circular for InvITs dated July 11, 2025. The revised framework allows add-back of payments made towards major maintenance expenses for road projects to the extent funded by external debt.
The framework, inter alia, requires unitholder approval, with at least 60% of the votes cast in favour, appropriate disclosures regarding the proposed borrowing and its impact on distributions, certification by the statutory auditor that the major maintenance expenses are in accordance with the concession agreement and funded through external borrowings, and separate disclosure of borrowing attributable to major maintenance expenses in the InvIT’s financial and periodic reports. The amendments also clarify that surplus cash arising from such debt-funded major maintenance expenses may be distributed subject to the specified conditions.
Revision of application form for mutual fund registration
SEBI, vide circular dated August 17, 2026, has revised the application form for registration of mutual funds. The existing requirement of submitting Form A for in-principle approval and Forms C and D for final registration has been replaced by a single revised and consolidated application form for registration of mutual funds. The revised Form A is structured into 2 (two) stages, where stage I covers the in-principle approval application and stage II covers the application for final registration of the Asset Management Company (“AMC”). Further, stage I requires the sponsor to furnish, identification and constitution details, shareholding pattern and ultimate beneficial owner details, capital structure, proposed net worth contribution to the AMC, and audited financial statements for the last 5 (five) financial years along with the item-wise compliance under the elected eligibility route. Stage II requires, inter alia, particulars of the AMC (including its name, capital structure, net worth, board composition and key management personnel), additional particulars where an existing AMC is proposed and annexures covering the detailed business plan, information technology infrastructure, cybersecurity measures, the business continuity plan, disaster recovery framework, conflict of interest and insider trading policies.
Acceptance of digitally signed power of attorney from Foreign Portfolio Investors
SEBI, vide circular dated August 20, 2026, has amended the know your customer requirements applicable to Foreign Portfolio Investors (“FPIs”) under the Master Circular for FPIs, Designated Depository Participants and Eligible Foreign Investors dated May 30, 2024, to facilitate digitalisation of the FPI onboarding process. FPIs can now submit the power of attorney granted to custodians, either in the existing notarised, apostilled or consularised form or by using a digital signature in accordance with the Information Technology Act, 2000.
Enabling sharing of information by Know Your Client Registration Agencies with entities regulated by the International Financial Services Centres Authority
SEBI, vide circular dated August 20, 2026, has enabled sharing of information between SEBI registered Know Your Client (“KYC”) Registration Agencies (“KRAs”) and entities regulated by International Financial Services Centres Authority (“IFSCA”). In terms of Regulation 16A(1) of the SEBI (KYC (Know Your Client) Registration Agency) Regulations, 2011 (“SEBI KRA Regulations”), entities regulated by other regulators in the financial sector specified by SEBI may access the system of KRAs for undertaking KYC of their clients who engage them for financial services.
Some of the key features of the circular are as follows:
- IFSCA has been specified for the purpose of Regulation 16A(1) of the SEBI KRA Regulations to enable interoperability and facilitate sharing of information between SEBI registered KRAs and entities regulated by IFSCA;
- all such entities accessing the system of KRAs must follow the guidelines specified in the Master Circular on KYC norms for the securities market dated October 12, 2023 (as amended from time to time); and
- in respect of clients registered as FPIs, all entities accessing the system of KRAs must follow the guidelines for ‘Data Security’ specified in SEBI’s Master Circular for FPIs, Designated Depository Participants and Eligible Foreign Investors dated May 30, 2024 (as amended from time to time).
Modernising the portfolio management framework: SEBI’s comprehensive review of the portfolio managers regulations
The July 2026 consultation paper issued by SEBI proposes a comprehensive overhaul of the SEBI (Portfolio Managers) Regulations, 2020, to align India’s rapidly expanding Portfolio Management Services (“PMS”) industry with evolving investor needs while reinforcing investor protection. The proposals expand the investment universe to include overseas securities, unlisted debt, and broader derivatives exposure. It introduces a lower-threshold mutual fund-only PMS category for mass-affluent investors, simplifies regulatory provisions, strengthens governance and capital requirements, and improves investor mobility through streamlined switching between portfolio managers. Overall, SEBI seeks to create a more proportionate, globally competitive and innovation-friendly regulatory framework that balances operational flexibility with stronger accountability and risk management.
For a detailed analysis, please refer to the JSA Prism of August 5, 2026.
MINISTRY OF LAW AND JUSTICE (MoLJ)
Micro, Small and Medium Enterprises Development (Amendment) Act, 2026
MoLJ, vide notification dated August 13, 2026, has enacted the Micro, Small and Medium Enterprises Development (Amendment) Act, 2026 (“MSMED Amendment Act”), amending the Micro, Small and Medium Enterprises Development Act, 2006 (“MSMED Act”). The MSMED Amendment Act aims to strengthen the framework for Micro, Small, and Medium Enterprises (“MSMEs”) by enhancing payment discipline, facilitating dispute resolution, and promoting the use of the Trade Receivables Discounting System (“TReDS”) for invoice settlements. Some of the key features of the amendment are as follows:
- the amendment mandates that settlement of invoices by buyers to MSME suppliers must be routed through TReDS platforms, authorised by the Reserve Bank of India for buyers belonging to specified categories as may be notified by the Central Government;
- the amendment introduces time-bound mediation and arbitration, including completion of mediation within 90 (ninety) days from the date fixed for first appearance and issuance of awards within 90 (ninety) days from completion of pleadings. It provides for online dispute resolution mechanisms, and enables recovery of mediated settlements and arbitral awards as arrears of land revenue;
- the amendment requires specified Central and State public sector enterprises and other notified entities to disclose details of invoices routed and settled through TReDS;
- the definition and scope of ‘buyer’ has been expanded to include entities beyond buyers of goods and services for their own manufacturing or use, and to include buyers purchasing for resale or commercial purposes; and
- the timeline for payment by buyers to MSME suppliers continues to be governed by Section 15 of the MSMED Act, which prescribes a maximum payment period of 45 (forty-five) days from the date of acceptance of goods or services.
DIRECTORATE GENERAL OF FOREIGN TRADE (DGFT)
Framework for inventory-based cross-border e-commerce exports
DGFT, vide notification dated August 5, 2026, has introduced an Inventory-based Cross-border E-Commerce Facilitation Framework under the Foreign Trade Policy 2023, pursuant to the inventory-based export model permitted under Press Note No. 3 (2026 Series). The framework enables eligible e-commerce entities, other than marketplace e-commerce entities, to undertake export-only inventory operations through a separately registered Exporter-on-Record (“EOR”) with DGFT. The EOR may procure Indian-origin goods from registered Sellers-on-Record (“SORs”) and hold such goods as export inventory only against confirmed export orders from overseas buyers, further speculative inventory build-up is not permitted under the framework. The framework requires segregation and digital traceability of export inventory, payment to SORs within 7 (seven) days of acceptance or deemed acceptance of goods, and proportionate pass-through of export rebates and refunds, including duty drawback, remission of duties and taxes on exported products, and rebate of State and Central taxes and levies, to the relevant SORs after deduction of an administrative charge. Returned or rejected consignments are required to be managed through reverse logistics by the EOR and cannot be sold in the domestic market. The framework also provides for the utilisation of notified E-Commerce Export Hub infrastructure, where practicable.
MINISTRY OF FINANCE (MoF)
Notification of rules and forms under the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026
MoF, vide notification dated August 14, 2026, has notified the Foreign Assets of Small Taxpayers Disclosure Scheme Rules, 2026 (“FASTDS Rules”). The FASTDS Rules prescribe the framework for determining the fair market value of foreign assets and income, valuation methods for different categories of foreign assets, the manner of conversion of foreign currency into Indian rupees and the procedure for making declarations under the FASTDS Rules. The FASTDS Rules provide for a simplified disclosure mechanism for specified foreign assets and income, subject to prescribed thresholds of INR 1,00,00,000 (Indian Rupees one crore) for the aggregate value of undisclosed foreign assets and income and INR 5,00,00,000 (Indian Rupees five crore) for specified foreign assets. For eligible declarations, tax is payable at 30% of the fair market value of undisclosed assets and undisclosed foreign income, along with penalty equal to 100% of the aggregate tax, or a flat fee of INR 1,00,000 (Indian Rupees one lakh) in certain specified cases. They also prescribe Forms 1 to 4 for declaration, determination of the amount payable, intimation of payment and certification of the validity of the declaration and payment, respectively. The valuation date for assets and income is March 31, 2026, and the last date for filing a declaration is December 31, 2026.
JSA UPDATES
Supreme Court of India clarifies the limitation period under Section 34, pending an application under Section 33 of the Arbitration and Conciliation Act, 1996
The Supreme Court of India has clarified that the limitation period for challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996 commences from the date on which a Section 33 application is disposed of. This applies irrespective of whether the application is ultimately found to be maintainable. The ruling provides welcome certainty on the computation of limitation in post-award proceedings. It also cautions parties against using Section 33 applications to delay the arbitral process.
For a detailed analysis, please refer to the JSA Prism of August 28, 2026.
Delhi High Court rules that the use of publicly available news content for training prima facie constitutes fair dealing
The Delhi High Court has delivered the first substantive Indian ruling on the intersection of Artificial Intelligence (“AI”) training and copyright law. Dismissing the interim injunction application, the Delhi High Court, on a prima facie basis, held that the use of freely accessible copyrighted material to train large language models may fall within the fair dealing provision under Section 52(1)(a) of the Copyright Act, 1957. This applies where the use is limited to training and the outputs do not substantially reproduce the original works. While, the ruling provides early guidance for AI developers in India, the ruling is not a general license to use all copyrighted material for AI training. Different facts, such as the use of pirated datasets, circumvention of access controls, persistent storage for purposes other than training, or proof that an AI service substitutes the copyright owner’s product, may lead to a different result. While the Delhi High Courts’ preliminary ruling in relation to the injunction application is in the respondent’s favour, in the court’s own words, the observations in the interim ruling will have no bearing on the final outcome of the suit filed by the appellant.
For a detailed analysis, please refer to the JSA Prism of August 6, 2026.
This Newsletter has been prepared by:
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Prakriti Jaiswal |
Mahi Jaiswal |
For more details, please contact km@jsalaw.com
