Sebi Issues Guidelines for Non-Bank Custodians on Regulated and Unregulated Services

The Securities and Exchange Board of India (Sebi) has issued guidelines requiring non-bank custodians to separate regulated and unregulated financial services into distinct strategic business units (SBUs) with independent accounts and net worth requirements. Custodians must disclose unregulated services to clients and obtain acknowledgements that Sebi will not address related grievances. The Custodians and DDPs Standards Setting Forum (CDSSF), in consultation with Sebi, will define permissible activities and classify core and non-core functions, with outsourcing allowed only for non-core tasks. Sebi also relaxed vault requirements for custodians not holding physical securities, permitting shared resources across SBUs with safeguards to prevent conflicts of interest.