SEBI Issues Governance and Risk Framework for Custodians

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SEBI guidelines for custodians

Circular No. HO/19/(1)2025-AFD-FPICELL/I/5928/2026, Dated 04.03.2026

The SEBI has issued guidelines prescribing the operational modalities and compliance framework for Custodians pursuant to amendments to the SEBI (Custodian) Regulations, 1996.

The circular provides for segregation of financial service activities through SBUs, governance and committee oversight, risk management and operational integrity measures, scalable infrastructure and technology requirements, business continuity and disaster recovery framework, and an orderly wind-down mechanism.

To strengthen the compliance and governance framework for Custodians, the SEBI vide Gazette notification dated September 18, 2025, inter alia, inserted Regulation 19B in the Custodian Regulations, mandating certain obligations and responsibilities. The following are specified regulations

  1. The Custodian shall have committees of the Board of Directors.
  2. A custodian, which is a bank or subsidiary/ associate/ joint venture of a bank, may not be required to formulate separate specific committees for custody business.
  3. The Board of Directors or analogous body or committee appointed/delegated by such body of the Custodian shall exercise oversight over incidents/vulnerabilities having an impact on the functioning of the Custodian in the securities market and investor protection.
  4. The Chief Financial Officer (CFO) or analogous person of the Custodian shall submit to the audit committee or analogous body or committee appointed/delegated by the Board of Directors, details in respect of the financial status of the entity.
  5. The custodian shall devise a clear and well-documented risk management policy which encompasses all relevant risks that may have to be borne for custodian activities, such as operational risk, legal risk, risks such as mis-utilisation of clients’ sensitive information, etc., after taking inputs from the Risk Management Committee.
  6. The Custodian shall maintain adequate human resources, systems, processes and procedures for the seamless running of operations and protection of investor data.
  7. The Custodian shall maintain adequate human resources, systems, processes and procedures for seamless running of operations and protection of investor data.
  8. The risk management policy shall be reviewed every year or on an ad-hoc basis in case of material changes by the Custodian.
Click Here To Read The Full Circular

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied