Sebi to reintroduce open market share buybacks via exchanges; eases intra-day borrowing rules for MFs

The SEBI board approved the reintroduction of open market share buybacks through stock exchanges, effective from August 1, 2026, reversing a 2022 decision to...

What Happened

The SEBI board approved the reintroduction of open market share buybacks through stock exchanges, effective from August 1, 2026, reversing a 2022 decision to phase out this route.
The board eased intraday borrowing norms for mutual funds, reducing compliance burdens for fund managers during daily operations.
SEBI approved the GARUDA mechanism (Green-Channel: AIF Rollout Upon Document Acknowledgement), reducing the scheme launch waiting period for Alternative Investment Funds (AIFs) from 30 days to 10 working days.
The board simplified the securities transfer procedure for an investor's death and introduced a green channel for faster processing.
Buybacks through stock exchanges must now be completed within 66 working days, with at least 40% of earmarked funds deployed during the first half of the buyback period.

Static Topic Bridges

A share buyback (or repurchase) occurs when a listed company buys back its own shares from existing shareholders — either from the open market via stock exchanges, or through a tender offer (a fixed-price offer to all shareholders). Buybacks reduce the number of outstanding shares, thereby increasing earnings per share (EPS) and often boosting share price. They are also used by companies to return surplus cash to shareholders and signal confidence in their valuation. In India, buybacks are governed by the SEBI (Buy-back of Securities) Regulations, 2018.

Two routes in India: (1) Tender Offer — company offers to buy at a fixed price; shareholders tender shares; (2) Open Market — company buys shares through stock exchange like any market participant.
SEBI phased out the open market route in December 2022, citing concerns about price manipulation and lack of equitable access for retail investors.
The 2026 reintroduction comes with stricter safeguards: 66-working-day time limit and mandatory 40% utilisation in the first half of the buyback window.
Tax treatment change: Budget 2024-25 shifted buyback taxation from company level to shareholder level (shareholder pays capital gains tax on buyback proceeds), making buybacks relatively less attractive vs. dividends — the reintroduction aims to compensate by providing greater operational flexibility.
Companies must utilise the funds earmarked for buyback — partial completion is not permitted beyond specified thresholds.

Connection to this news: The reintroduction of the open-market route, with updated safeguards, responds to market feedback that the tender offer route is procedurally cumbersome for smaller buybacks, while new time-bound execution rules address earlier manipulation concerns.

Securities and Exchange Board of India (SEBI): Role and Powers

SEBI is India's statutory capital markets regulator, established under the Securities and Exchange Board of India Act, 1992. It has three-fold functions: protective (investor protection), developmental (market development), and regulatory (regulating market intermediaries and practices). SEBI's board, chaired by a Chairperson and consisting of whole-time members plus government nominees, meets periodically to approve regulatory changes. SEBI regulations have statutory force and are binding on all market participants.

SEBI Act, 1992: empowers SEBI to regulate stock exchanges, brokers, depositories, mutual funds, and other intermediaries.
SEBI headquarters: Mumbai. It also has regional offices in Delhi, Kolkata, Chennai, and Ahmedabad.
SEBI has quasi-judicial powers: can hold inquiries, impose penalties, issue cease-and-desist orders, and debar market participants.
SEBI (Mutual Fund) Regulations, 1996: primary regulatory framework for mutual funds in India.

Connection to this news: The SEBI board meeting on June 19, 2026 exercised SEBI's regulatory authority under multiple regulations — Buy-back Regulations, MF Regulations, and AIF Regulations — demonstrating the board's broad oversight role.

Alternative Investment Funds (AIFs) and the GARUDA Mechanism

AIFs are privately pooled investment vehicles that collect funds from sophisticated investors to invest in non-traditional asset classes — private equity, venture capital, hedge funds, infrastructure, real estate, etc. They are governed by the SEBI (Alternative Investment Funds) Regulations, 2012. AIFs are categorised into three categories: Category I (venture capital, SME funds, social venture funds), Category II (private equity, debt funds), and Category III (hedge funds, complex trading strategies). The GARUDA mechanism aims to speed up new AIF scheme launches by enabling fundraising to commence within 10 working days of filing the Placement Memorandum (PPM), down from 30 days.

AIF Regulations 2012: Three categories; minimum corpus Rs 20 crore; minimum investment by a single investor Rs 1 crore (Category I/II) or Rs 5 crore (Category III).
India's AIF industry has grown rapidly — total commitments exceed Rs 12 lakh crore as of 2025-26 [Unverified: exact current figure].
GARUDA: Green-Channel AIF Rollout Upon Document Acknowledgement — reduces regulatory friction for experienced fund managers with a clean compliance track record.
The 10-working-day window applies to filing of Placement Memorandums (PPMs) for new schemes by registered AIFs.

Connection to this news: GARUDA reflects SEBI's "ease of doing business" agenda for sophisticated investors — faster scheme launches free up capital deployment timelines without compromising investor disclosure requirements.

Mutual Funds: Intraday Borrowing

Mutual funds in India are permitted to borrow for short periods to meet redemption pressures. Intraday borrowing allows a fund to temporarily borrow cash within a trading day (typically to settle outflows before corresponding asset sales settle). The easing of intraday borrowing norms reduces the operational complexity funds face due to settlement timing mismatches — a structural issue that became more prominent after SEBI introduced T+1 settlement in equity markets (fully implemented by January 2023).

SEBI (Mutual Fund) Regulations permit borrowing up to 20% of net assets for up to 6 months for redemption purposes.
T+1 settlement cycle (equity): India became one of the first major markets to implement T+1 settlement globally, reducing counterparty risk but creating intraday liquidity management challenges.
Open-ended mutual funds face daily redemption obligations; intraday borrowing bridges the gap between outflow timing and asset sale proceeds.

Connection to this news: The relaxation directly addresses a liquidity management friction created by the shift to T+1 settlement, allowing fund managers to handle redemptions more efficiently without distress-selling of assets.

Key Facts & Data

Open market share buyback reintroduction: effective August 1, 2026
Buyback completion timeline: 66 working days from opening
Mandatory fund utilisation: at least 40% in the first half of the buyback window
SEBI (Buy-back of Securities) Regulations: 2018 (governing framework)
GARUDA mechanism: reduces AIF scheme launch waiting period from 30 days to 10 working days after PPM filing
SEBI AIF Regulations: 2012; three categories (I, II, III)
SEBI established: 1992 (SEBI Act, 1992); headquartered in Mumbai
India's T+1 equity settlement: fully implemented January 2023 (among first globally)
SEBI Mutual Fund Regulations: 1996; permits borrowing up to 20% of net assets for up to 6 months
SEBI board meeting date: June 19, 2026