SEBI Strengthens Debenture Trustee Role with Expanded Powers and Enhanced Accountability
SDG 16: Peace, Justice and Strong Institutions | SDG 9: Industry, Innovation and Infrastructure
Institutions: Securities and Exchange Board of India (SEBI) | Ministry of Finance
The Securities and Exchange Board of India (SEBI) has amended the SEBI (Debenture Trustees) Regulations, 1993, effective October 27, 2025, to significantly expand the operational scope of Debenture Trustees (DTs) while simultaneously strengthening their rights and investor protection safeguards. These reforms are aimed at enhancing the trust, efficiency, and robustness of India’s rapidly growing corporate bond market.
Key Regulatory and Governance Changes
Expanded Permitted Activities (New Regulation 9C): DTs are now allowed to diversify their activities by undertaking services regulated by other financial sector regulators (FSRs), such as the RBI, or other related non-fund-based, fee-based financial services not regulated by SEBI.
Safeguards: To prevent conflicts of interest and ensure investor protection, DTs must transfer these permitted non-SEBI activities to separate business units within six months. The DT’s statutory net worth must be ring-fenced to safeguard it from any adverse financial impact arising from these other activities.
Enhanced Rights and Monitoring: New provisions empower DTs to effectively discharge their fiduciary duties and safeguard debenture holders’ interests. DTs now have explicit rights to:
Inspect the issuer’s books, records, and trust property.
Call for information and documents from issuers and specified intermediaries.
Regulatory Alignment and Transparency:
Trust Deed: The new regulations mandate that debenture trust deeds must conform to the Companies Act, 2013, and Form SH-12 requirements. Issuers must now disclose any deviation from the prescribed trust deed format in the offer document, along with a rationale, enhancing transparency.
Timely Information: Issuers are now obliged to furnish necessary information to DTs within 24 hours of an event’s occurrence.
Recovery Expense Fund (REF): The regulations clarify the utilization of the Recovery Expense Fund (REF), allowing DTs to use the fund for enforcement/legal proceedings with debenture holders’ consent.
Policy Relevance: These amendments signify SEBI’s strategic goal to strengthen the enforcement ecosystem of the corporate debt market. By formally expanding DTs’ operational flexibility while simultaneously implementing strict internal segregation and net worth ring-fencing, SEBI enhances the independence and accountability of DTs, reducing investor risk and reinforcing confidence in the growing non-convertible securities market. These amendments focus on making the corporate debt market safer and more reliable for investors.
What is a Debenture Trustee (DT)?→ A Debenture Trustee (DT) is a financial intermediary appointed by a company issuing debentures (debt securities) to the public or privately. The DT acts as a fiduciary, holding the security on behalf of the debenture holders (investors) and is legally responsible for ensuring that the issuing company complies with all terms of the deb trust deed and SEBI regulations to protect the debenture holders’ interests.
Follow the full update here: SEBI Notifies 2025 amendments to Debenture Trustees Regulations