Sebi plans fresh market reforms for IPO disclosures, short selling and SME listings

India's capital markets regulator is preparing a fresh round of reforms covering initial public offering disclosures, small enterprise listings, corporate bond trading and short-selling rules.

Sebi Chairman Tuhin Kanta Pandey announced the measures on Thursday at the Financial Express Modern BFSI Summit 2026 in Mumbai. He said the regulator is conducting a full review of the Listing Obligations and Disclosure Requirements framework to simplify compliance for businesses while ensuring strong protections for retail investors.

The regulatory push comes alongside rapid growth across domestic financial markets, driven by stable governance and expanding retail participation over the past decade.

Overhauling IPOs and SME rules

Sebi is strengthening its oversight of how companies deploy capital raised through public issues. Pandey said the regulator has already proposed tighter monitoring of issue proceeds to make corporate spending transparent and accountable.

The SME listing framework is also being revised. The goal, Pandey said, is to help genuine businesses raise funds while maintaining proper safeguards for investors who participate in smaller public offers.

To lighten the regulatory burden on existing entities, Sebi has already scrapped 52 redundant mutual fund reports and notices, streamlined reporting for stockbrokers and rationalised penalty structures across stock exchanges.

Under the GARUDA framework, the approval timeline for alternative investment fund schemes has dropped from 30 days to 10 working days, with eligible funds aimed at accredited investors permitted to launch immediately upon filing.

Digital bonds, AI testing and short selling

Sebi is also taking steps to deepen trading in corporate debt. The regulator is introducing Fixed Income Channel Partners to expand retail participation via regulated online bond platforms.

Through its Demat 2.0 initiative, Sebi is testing distributed ledger technology to issue, settle and service tokenised corporate bonds. The project's second phase will enable secondary-market trading of these tokenised bonds, which Pandey said could boost market liquidity and shorten settlement times.

For technology adoption, Sebi plans to launch an AI Sandbox where market participants can test artificial intelligence tools under regulatory supervision. Dedicated working groups have also been set up to draft a technology roadmap for market infrastructure institutions covering trading, clearing, cybersecurity and surveillance.

To improve cash market liquidity and price discovery, Sebi is reviewing rules governing short selling and Securities Lending and Borrowing. The regulator has also proposed net settlement of funds for mutual fund schemes to cut funding costs, alongside streamlined digital onboarding and KYC procedures for foreign portfolio investors.