SEBI Reviews PMS Rules Amid Rapid Industry Growth

India’s portfolio management services (PMS) industry may soon see regulatory changes as the Securities and Exchange Board of India (SEBI) begins reviewing the SEBI (Portfolio Managers) Regulations, 2020.

SEBI Chairman Tuhin Kanta Pandey recently said the regulator is preparing a consultation paper on possible changes, which may be released by June. The proposals will first be discussed with industry stakeholders before they are placed before SEBI’s board.

Why Is SEBI Reviewing PMS Regulations Now?

According to SEBI data, assets managed under PMS have increased from around ₹5 trillion in FY21 to about ₹10.5 trillion as of 31 January 2026.

Investor participation has also risen. The number of PMS clients has reached roughly 2.15 lakh, which is close to 50% higher than the levels seen in 2022. During the same period, the number of registered portfolio managers increased from 361 to 501.

Distributor participation has expanded as well, with more than 7,000 individual distributor registrations added in FY26.

Pandey said the purpose of the review is to ensure the regulatory framework remains effective and aligned with evolving market conditions. The regulator plans to examine whether existing rules continue to serve investors and industry participants as the segment grows.

Will The ₹50 Lakh Minimum Investment Rule Be Reviewed?

The PMS industry is also hoping SEBI will examine the ₹50 lakh minimum investment requirement.

The rule was introduced to ensure that PMS products are used mainly by investors who understand the risks involved. PMS portfolios are usually more concentrated than mutual funds and can see larger swings in returns.

However, some industry participants believe the rule limits participation from investors who want to gradually build their PMS investments instead of starting with ₹50 lakh at once.

Under current regulations, investors must maintain at least ₹50 lakh in their PMS account. Partial withdrawals are allowed only if the portfolio value remains above that level. If the portfolio value falls below ₹50 lakh because of market movements, investors are not required to top up the account.

Industry participants say reviewing this rule could make the segment accessible to a wider set of investors while still maintaining safeguards.

Could Compliance And Onboarding Processes Become Simpler?

Portfolio managers must submit monthly performance reports to SEBI and quarterly reports to clients covering fees, risks, and portfolio performance. They must also conduct annual audits of compliance and performance.

Industry executives say the reporting structure can be time-consuming and costly, especially for smaller firms. They are seeking a simpler filing mechanism and a reduction in redundant reporting.

The biggest issue is that a new demat account is required when a portfolio manager is changed. This is creating unnecessary administrative and tax issues. Simplifying this process is essential for a smooth transition.

Some in the industry are seeking a digital onboarding process for non-resident Indians (NRIs). Currently, NRIs have to be present in India for parts of the process, unlike resident Indians who can complete the process online using Aadhaar and e-signature.

Also Read - Elfin Agro India IPO Opens For Subscription; Listing On March 12

What Should Investors Take Away From This Review?

The review has important implications for investors. It suggests SEBI is examining whether changes are needed to PMS rules as the sector grows.

The changes could help improve operations. This may include areas such as account transfers and account onboarding. The debate over the entry level may also have implications for how easy it is to invest in PMS products.

The consultation paper to be released in the coming months will outline SEBI’s proposals for changes to rules in the PMS segment. Investors interested in PMS may be advised to monitor developments in this space to see how rules in the segment may be shaped.

Sources:

Moneycontrol

Financial Express