SEBI Proposes Easier Board Rules for India Market Infra

In a consultation paper on Wednesday, the Securities and Exchange Board of India said current rules are too restrictive, especially for conglomerates and holding companies whose affiliates may be ring-fenced by internal information barriers. Under the present framework, an individual can be blocked from serving on an MII board even if only a separate subsidiary in the same corporate group operates as a trading member, clearing member or depository participant. Sebi said that has narrowed the field for directors, including public interest directors, without necessarily reducing conflicts of interest.

The regulator has proposed an exemption for companies with well-diversified shareholding, defined as those in which no shareholder — excluding public-sector entities — owns 10% or more of equity or voting rights, either alone or with concert parties, or exercises management control. That change would open the door to more candidates from large corporate groups while still trying to preserve governance safeguards.

Sebi is also moving to standardize hiring for crucial operational posts such as the chief technology officer, chief information security officer, compliance officer and chief risk officer. Those roles have become more important as exchanges and depositories carry more technology risk and market surveillance obligations. Yet Sebi said there is no uniform framework setting minimum qualifications, experience or certifications for those positions.

Under the proposal, MIIs would need standard operating procedures for those roles, drawn up with inputs from statutory committees, and any vacancy would have to be filled within three months. The aim is to prevent prolonged vacancies in posts that can affect technological resilience, cybersecurity and compliance at institutions that underpin market integrity.

For investors, the issue is less about governance housekeeping than about operational reliability. Better board-level and management access could support stronger oversight at exchanges and depositories, which in turn reduces the risk of outages, control failures or regulatory friction. It also signals Sebi’s willingness to adapt rules to the realities of a market where the talent pool for highly specialized governance and technology roles is tighter than the rulebook assumes.

The bullish case for the change is that it makes MIIs easier to govern without materially weakening independence, especially if Chinese walls and diversified ownership can meaningfully reduce conflicts. The bearish case is that broader exemptions could invite pressure to loosen guardrails further, particularly if the definition of diversification proves too permissive in practice.

The consultation comes as India’s capital-markets ecosystem continues to deepen and infrastructure operators face rising demands for speed, cyber defense and risk management. If adopted, the framework would likely make it easier for exchanges and depositories to recruit experienced directors and executives, while giving Sebi a more practical model for overseeing institutions that have become too important to be left short-staffed.