SEBI has notified a comprehensive reform of the merchant banking framework, mandating phased increases in net worth and introducing Liquid Net Worth as a key requirement to ensure capital quality. The regulations prohibit outsourcing of core merchant banking functions, require strict segregation of non-SEBI regulated activities, and mandate independent Compliance Officers with NISM certification. Minimum cumulative revenue thresholds and caps on underwriting exposure have also been prescribed. These changes, effective from January 3, 2026, are expected to consolidate the sector, raise governance standards, and reduce systemic risk from under-capitalised or over-leveraged intermediaries.