SEBI related party transactions thresholds revised 2025 to simplify compliance and strengthen investor protection. Learn the new turnover-based RPT rules and disclosure norms.
SEBI Revises Materiality Thresholds for Related-Party Transactions: What You Need to Know
What Changed under the New SEBI Framework
The Securities and Exchange Board of India (SEBI) has recently overhauled the rules governing “related-party transactions” (RPTs) for listed companies.
Earlier, SEBI had a fixed threshold: any RPT exceeding ₹1,000 crore or 10% of the company’s consolidated turnover (whichever was lower) was deemed “material” and required heightened scrutiny.
Under the new regime (effective November 2025), SEBI has replaced this “one-size-fits-all” approach with a turnover-based, tiered threshold system, making compliance more proportionate and aligned with the size of the company.
How the New Tiered Thresholds Work
Depending on a listed entity’s annual consolidated turnover, a related-party transaction will now be considered “material” if it crosses the following limits:
| Turnover Slab of Listed Entity | Materiality Threshold for RPTs |
|---|---|
| Up to ₹20,000 crore | 10% of annual consolidated turnover |
| ₹20,001 – ₹40,000 crore | ₹2,000 crore + 5% of turnover exceeding ₹20,000 crore |
| Above ₹40,000 crore | ₹3,000 crore + 2.5% of turnover exceeding ₹40,000 crore; subject to a upper ceiling of ₹5,000 crore |
This ensures that for very large firms, “material” changes scale in line with their business size — avoiding trivial but high-volume transactions being flagged unnecessarily.
Other Reforms: Disclosure Relaxation and Subsidiary-Level Transparency
Along with revised thresholds, SEBI has simplified disclosure norms for smaller or recurring related-party dealings. Under the new norms:
- If the total value of RPTs with a related party in a financial year (including ratified transactions) does not exceed 1% of consolidated turnover or ₹10 crore (whichever is lower), then only simplified disclosures — rather than full shareholder/audit-committee filings — are required.
- For transactions involving subsidiaries (especially unlisted ones), SEBI has clarified that subsidiary-level RPTs will now also be subject to thresholds aligned with the parent listed entity.
What Prompted the Change: Addressing Governance and Practical Concerns
The previous fixed-cap model had been criticised for being rigid and disproportionate: large companies often had to seek shareholder approval for routine transactions merely because their value crossed ₹1,000 crore — even if such transactions were trivial relative to their overall scale of business.
By introducing a scale-aware system, SEBI aims to balance governance and investor protection with operational efficiency and ease of doing business. The new norms also aim to prevent misuse of subsidiary-level transactions to bypass oversight.
Why This News Matters
Relevance for Governance and Corporate Transparency
The revised framework by SEBI has major implications for corporate governance in India. By tying related-party transaction thresholds to company size, SEBI ensures that the compliance burden is proportional and practical. This will reduce unnecessary regulatory friction for large companies carrying out routine business, while still safeguarding minority investors and preventing misuse of corporate transactions.
Significance for Exam Aspirants (Banking, Finance, General Awareness)
For students preparing for government or competitive exams — banking, civil services, railways, or others — this update is directly relevant under sections covering corporate governance, capital markets regulation, and business environment. Understanding this change helps answer questions related to the role of regulatory bodies, safeguards for investors, and evolving compliance in Indian capital markets.
Broader Economic & Business Impact
The shift reflects a broader trend in Indian regulatory policy: enabling ease of doing business without compromising transparency. This may encourage more firms to list and operate at scale, potentially fostering corporate growth, improved disclosures, and stronger investor confidence across sectors.
Historical Context
- The requirement for regulating related-party transactions for listed companies in India stems from concerns that firms may misuse such transactions to favour promoters, insiders, or subsidiaries at the expense of minority shareholders.
- Under previous regulations (post amendments to LODR in 2022), a “material” RPT was defined using a twin threshold: any transaction exceeding ₹1,000 crore or 10% of consolidated turnover (whichever lower) triggered mandatory disclosure and shareholder approval.
- However, as many stakeholders — corporate executives, legal experts, market analysts — pointed out, that “one-size-fits-all” threshold was often impractical. Large but routine transactions of big firms got caught under “material RPT” even when they posed no real risk.
- Over the past few years, under continuous review and public consultation, SEBI’s working group proposed a move towards turnover-linked thresholds to align regulation with corporate scale — leading to the current amendment in November 2025.
Thus, this change marks a milestone in the evolution of corporate-governance norms in India: shifting from rigid caps to a flexible, scalable approach based on company size and operations.
Key Takeaways from SEBI’s RPT Threshold Revision
| # | Key Takeaway |
|---|---|
| 1 | SEBI has replaced the fixed ₹1,000 crore/10% turnover threshold with a tiered, turnover-based framework for materiality of Related Party Transactions (RPTs). |
| 2 | For companies with turnover up to ₹20,000 crore — RPTs are material if they exceed 10% of consolidated turnover. |
| 3 | For turnover between ₹20,001–₹40,000 crore — the materiality threshold is ₹2,000 crore + 5% of the excess over ₹20,000 crore. |
| 4 | For turnover above ₹40,000 crore — threshold is ₹3,000 crore + 2.5% of excess turnover (capped at ₹5,000 crore). |
| 5 | Disclosure norms have been relaxed for smaller RPTs (up to 1% of turnover or ₹10 crore), and subsidiary-level transactions are now more strictly regulated. |
FAQs: Frequently Asked Questions
1. What is a Related Party Transaction (RPT)?
A Related Party Transaction (RPT) is a transfer of resources, services, or obligations between a company and its related parties such as promoters, subsidiaries, key management personnel, or relatives of such individuals. RPTs require proper disclosure to avoid conflicts of interest.
2. Why did SEBI revise the materiality thresholds for RPTs?
SEBI revised the thresholds to make compliance proportional to the size of the company. The earlier fixed ₹1,000 crore/10% of turnover limit often created unnecessary regulatory burden for large firms.
3. How are the new thresholds determined for RPTs?
The new thresholds are tiered based on the company’s annual consolidated turnover:
- Up to ₹20,000 crore: 10% of turnover
- ₹20,001–₹40,000 crore: ₹2,000 crore + 5% of excess turnover
- Above ₹40,000 crore: ₹3,000 crore + 2.5% of excess turnover (capped at ₹5,000 crore)
4. Are there any relaxations in disclosure norms under the new SEBI rules?
Yes. RPTs up to 1% of consolidated turnover or ₹10 crore (whichever is lower) now require simplified disclosures instead of full audit committee or shareholder approvals.
5. How do these changes impact exam preparation for government exams?
Questions on corporate governance, SEBI regulations, capital markets, and investor protection may feature in banking, civil services, railways, and defense exams. Awareness of tiered thresholds, compliance norms, and SEBI reforms is important for general awareness sections.
6. What is the historical context behind these amendments?
Earlier regulations imposed a rigid threshold of ₹1,000 crore or 10% of turnover, which was not proportional to company size. SEBI’s amendment introduces turnover-linked thresholds to make compliance more practical while ensuring transparency.
7. Are subsidiary-level transactions affected by these new rules?
Yes. Subsidiary-level RPTs are now aligned with the parent company’s thresholds to prevent circumvention of disclosure requirements.
Some Important Current Affairs Links
