SEBI has unveiled a new automatic approval framework for MIIs, capping fund deployment at 5% of net worth per year.
Under Route A, MIIs can invest in intra‑group share transfers and deploy operating earnings; Route B covers activities through entities regulated by other financial authorities, provided SEBI has pre‑approved the nature of the business.
The cap equals the lower of 5% of the MII’s net worth as of March 31 of the previous fiscal year or the regulator’s minimum net‑worth requirement. After deployment, the MII’s net worth must stay at least 1.5 times the regulatory minimum.
Each new activity or fund deployment must receive prior board approval, and MIIs must set up standard operating procedures approved by the board. Half‑yearly reports detailing automatic‑route activities must be filed within 30 days of the half‑year end.
The current framework forces MIIs to obtain SEBI approval for every activity, even modest treasury investments; the automatic route aims to reduce compliance drag, especially for smaller transactions that support market operations.
SEBI will publish comments on the draft until Nov 12; if accepted, MIIs will need to overhaul governance and reporting processes, and may see eased operational costs.