SEBI Mandates Major Shift: Annual Fees Replaced by New Monthly Charges for Custodians Effective October 2026

SEBI Mandates Major Shift: Annual Fees Replaced by New Monthly Charges for Custodians Effective October 2026​

The Securities and Exchange Board of India (SEBI) has introduced significant amendments to the framework governing custodians, signaling a structural overhaul in operational fee charging across the industry. These changes mandate the transition from annual fee structures to monthly payments, directly impacting registered custodian firms starting in Q4 of next year.

The new regulations address key aspects of fee computation and payment timelines for all custodial entities. The amendment ensures greater transparency and alignment with ongoing service delivery, replacing previous periodic fee calculations.

Fee Structure Revolution: Custodial Fees Shift from Annual to Monthly Basis​

Effective October 1, 2026, the landscape of custodian fees is set for a major shift. SEBI has explicitly replaced various annual fee references with monthly counterparts across multiple regulations.

The Second Schedule details the revised fee structure for Part A. The previous maximum annual fee of Rs. 10,00,000 or 0.0005% of assets under custody is now governed by a monthly standard. This new threshold is set at Rs. 85,000 or 0.0000416%, whichever amount is higher.

Furthermore, Regulation 26(i) has been updated to reflect this change, substituting the word 'annual' with 'monthly'. These changes aim to provide a more granular and predictable fee framework for both custodians and regulated entities.

Payment Mechanics: Strict Deadlines Set for Monthly Fee Remittance​

A crucial aspect of the amendment pertains to the timing of fee payments, imposing clear deadlines on all custodians. The monthly fees must be paid within 15 days of the end of the corresponding month.

The regulations also define specific obligations regarding fee payment for firms granted registration before the commencement date. These existing custodians are required to pay a proportionate annual fee for their financial year upon commencement. This initial charge is due within 15 days following the implementation of the amendment.

Compliance Mandates: Documentation and Verification for Assets Under Custody​

The updated regulations introduce stringent requirements regarding documentation during the monthly fee payment process. The filing format must now include detailed records of assets under custody, as prescribed by SEBI.

A designated function head from the custody services department must authenticate this documentation. This validation ensures the accuracy and completeness of the asset data provided, reinforcing oversight over custodial activities.

Key Changes Explained: Obligations for New and Existing Custodians​

The amended regulations define distinct payment obligations based on a custodian's registration status vis-à-vis the effective date. Firms granted new registration on or after October 1, 2026 must pay a proportionate monthly fee corresponding to the month of their registration. They are also responsible for paying the full monthly fee for every subsequent month their registration remains active.

Conversely, custodians registered prior to this effective date must fulfill two parts of payment. First, they pay a proportionate annual fee based on the financial year of commencement. Second, they pay the full monthly fee for every subsequent month their registration subsists. Any pre-paid annual fees paid before the amendment's start will be proportionately adjusted against the payable amount under this new clause.