SEBI Shifts Custodian Fee and Reporting Framework to Monthly Basis Effective October 2026

Overview of the Amendment

The Securities and Exchange Board of India has introduced a significant structural change to the regulatory framework governing custodians operating in India's securities markets. Through Notification No. SEBI/LAD-NRO/GN/2026/308 dated 3rd July 2026, SEBI has formally notified the Securities and Exchange Board of India (Custodian) (Amendment) Regulations, 2026, which bring about a fundamental shift in how custodians report and remit their registration fees — moving the entire framework from an annual cycle to a monthly cycle.

These amendments modify the Securities and Exchange Board of India (Custodian) Regulations, 1996, and are scheduled to take effect from 1st October 2026. The change affects registered custodians across India and carries immediate compliance obligations, particularly for those already holding registrations prior to the commencement date.

Why This Change Matters

The transition from annual to monthly reporting and fee payment is not merely a procedural adjustment — it represents a deliberate regulatory philosophy of enhanced oversight and more frequent accountability for custodians entrusted with holding securities on behalf of clients. By requiring monthly fee payments and monthly disclosures, SEBI aims to align custodian compliance cycles with the broader move toward real-time regulatory monitoring across India's financial markets.

For custodians, this means recalibrating internal treasury, compliance, and reporting workflows to accommodate a 12-payment cycle per year instead of a single annual payment.

Key Amendments at a Glance

1. Reporting Frequency — Regulations 9(d) and 26(i)

Two core regulations within the SEBI (Custodian) Regulations, 1996 have been amended:

• **Regulation 9(d)😗* The word "annual" has been replaced with "monthly", changing the reporting obligation from once a year to once every month.
• **Regulation 26(i)😗* Similarly, the word "annual" has been substituted with "monthly", extending the monthly reporting requirement to the applicable obligations covered under this regulation.

These substitutions ensure that the fundamental compliance and reporting duties of custodians are now measured and fulfilled on a month-by-month basis rather than on an annual basis.

2. Revised Fee Structure — Second Schedule, Part A

The amendment brings a direct modification to the fee quantum specified in Part A, Clause (iii) of the Second Schedule:

The revised monthly fee of Rs. 85,000 or 0.0000416 (whichever is applicable) reflects a recalibrated structure that, when annualised, aligns broadly with the erstwhile annual fee obligation. This substitution ensures that the total regulatory cost burden over a year remains within a comparable range, while improving the regularity and predictability of SEBI's fee collections.