What activities can a debenture trustee undertake?

The activities a debenture trustee can undertake were rewritten in October 2025. SEBI now permits a trustee to run other financial-sector businesses, but only fee-based ones, only at arms length, and only through separate business units, with the trusteeship net worth ring-fenced from whatever those units do. This guide covers the two permitted categories, the separate business unit requirement, the RBI proviso, and the transition period. It is not investment advice.

What does Regulation 9C permit?

Two categories, and the conditions attached to the second one are the substance. Regulation 9C(1) of the SEBI (Debenture Trustees) Regulations, 1993 provides that a debenture trustee may also undertake:

• Activities which fall under the purview of any other financial sector regulator specified by SEBI, in accordance with the regulations or guidelines issued by that regulator
• Activities that do not fall under the purview of SEBI or any other financial sector regulator, which shall be fee-based, non-fund based and pertain to the financial services sector

Both are permitted only on an arms-length basis, through separate business units of the debenture trustee, in such manner and subject to such other conditions as SEBI may specify.

Three words carry the limit on the second category. Fee-based rules out anything earning a spread rather than a fee. Non-fund based rules out committing the trustee's own balance sheet. Financial services sector rules out unrelated commercial ventures. An activity has to clear all three, not one.

Which regulators are financial sector regulators here?

The Explanation to Regulation 9C defines the term rather than leaving it open. It means the Reserve Bank of India, the Insurance Regulatory and Development Authority of India, the Pension Fund Regulatory and Development Authority, the International Financial Services Centres Authority, the Insolvency and Bankruptcy Board of India, the Ministry of Corporate Affairs, and such other authorities as SEBI may specify.

The Ministry of Corporate Affairs in that list is worth noting, since it is a ministry rather than a regulator in the usual sense, and it brings Companies Act administered activity inside the definition.

What is the separate business unit requirement?

A structural separation, applied in two directions.

Read the second row carefully, because it inverts the first. For an RBI regulated entity the rule is not that the other business goes into a separate unit. It is that the debenture trusteeship goes into one. The provision states that a debenture trustee which is also regulated by the Reserve Bank of India shall carry out the activity of debenture trustee through a separate business unit of such debenture trustee. Banks and NBFCs acting as trustees are the entities that provision is aimed at.

There is also a capital condition. Regulation 9C(2) requires the debenture trustee to ensure that the net worth specified under the regulations is ring-fenced from any adverse impact that may arise from undertaking permitted activities. The trusteeship capital cannot be exposed to losses in the other units.

How long do existing trustees have to reorganise?

Six months, with an extension available at SEBI's discretion. The second proviso to Regulation 9C(1) provides that a debenture trustee which already holds a certificate of registration may transfer its activities to separate business units within six months from the notification of the SEBI (Debenture Trustee) (Amendment) Regulations, 2025 in the Official Gazette, or such extended period as SEBI may specify.

The clock runs from gazette notification of the amendment, not from the date a trustee decides to start a new line of business.

Why does this sit next to the conflict of interest rules?

Because permitting other businesses widens the surface where a conflict can arise, and SEBI regulates that separately. A debenture trustee monitors an issuer on behalf of holders while being paid by that issuer, and adding other financial-sector lines to the same group adds more relationships to manage.

Chapter XVI of SEBI's Master Circular for Debenture Trustees, SEBI/HO/DDHS-PoD-1/P/CIR/2025/117 dated August 13, 2025, sets out conflict of interest guidelines for trustees and their associated persons. The half yearly compliance certificate at Annex-XIIIA opens with exactly this question, requiring the trustee to certify that the activities other than debenture trusteeship it performs are not in conflict with debenture trustee activities, and that appropriate systems and policies are in place to protect the interests of debenture holders.

So Regulation 9C's arms-length and separate-unit conditions are the structural half of the answer, and the conflict guidelines plus the half yearly certification are the conduct half.

Related reading

The conduct rules that govern the resulting relationships are covered in debenture trustee conflict of interest rules, and the related question of what work can be handed to a third party is in can a debenture trustee outsource its work. The core obligations that must not be diluted are in duties of a debenture trustee, and the trustee's own rights are in what rights does a debenture trustee have.

The activities a debenture trustee can undertake are now defined by regulation, bounded by an arms-length and separate-unit structure, and backed by a net worth ring-fence. Flock reports what issuers and trustees disclose, with the source and the date attached. It is not investment advice.