SEBI Revises Materiality Thresholds for Related Party Transactions

The Securities and Exchange Board of India (SEBI) has introduced a new turnover-based framework for determining the materiality of related party transactions (RPTs). Announced on November 18, 2025, the revision addresses long-standing concerns over the rigidity of the earlier ₹1,000 crore cap, aiming to offer a more practical, scalable, and context-specific approach for listed companies under the Listing Obligations and Disclosure Requirements (LODR) regulations.

Key Changes in SEBI’s New RPT Framework

1. Turnover-Based Materiality Thresholds

SEBI has replaced the one-size-fits-all ₹1,000 crore threshold with a tiered system based on the annual consolidated turnover of listed entities.

Revised Thresholds,

• Turnover up to ₹20,000 crore: RPT is material if it exceeds 10% of annual consolidated turnover.
• Turnover ₹20,001–₹40,000 crore: Threshold = ₹2,000 crore + 5% of turnover exceeding ₹20,000 crore.
• Turnover above ₹40,000 crore: Threshold = ₹3,000 crore + 2.5% of the excess over ₹40,000 crore,
• Subject to an upper ceiling of ₹5,000 crore.

This tiered system ensures larger entities are not unduly burdened by small transactions, while still maintaining materiality safeguards.

2. Simplified Disclosures for Smaller Transactions

SEBI has also introduced a relaxation in disclosure requirements for RPTs of lesser value. If the total value of RPTs with a related party in a financial year (including ratified transactions) does not exceed,

• 1% of the listed entity’s annual consolidated turnover, or ₹10 crore, whichever is lower, then simplified disclosures will suffice for audit committee and shareholder approvals.
• This move reduces compliance burden for minor or recurring transactions, especially for mid-cap and small-cap firms.

3. Omnibus Approvals and Validity Periods

SEBI has clarified norms related to omnibus approvals for RPTs.

• Approved in Annual General Meeting (AGM): Valid until the next AGM.
• Approved in General Meeting (non-AGM): Validity up to one year from the date of approval.

These timelines provide a clear approval window and reduce ambiguity around shareholder consent for recurring or long-term transactions.

The Old Framework

Previously, any RPT exceeding ₹1,000 crore or 10% of annual consolidated turnover (whichever was lower) was deemed material. This led to unintended consequences where,

• Even routine or minor transactions in large companies required detailed scrutiny.
• Smaller firms had to comply with the same financial threshold, disproportionately affecting operations.

Stakeholder Feedback

• Stakeholders argued that a flat ₹1,000 crore cap lacked flexibility, disregarded company size and turnover, and hindered operational efficiency. The new model ensures proportionality, enabling more risk-based compliance.

What is an RPT?

A Related Party Transaction (RPT) refers to any transaction between a company and its related entities or individuals, which may pose a conflict of interest. These include transactions with subsidiaries, promoters, directors, or entities with significant control.

About SEBI

• Established: 1992
• Regulates: Securities market in India
• Key role: Investor protection, market development, fair practices, compliance enforcement

About LODR Norms

• Listing Obligations and Disclosure Requirements govern listed companies’ reporting and corporate governance practices.
• SEBI routinely updates LODR to align with market evolution and stakeholder expectations.

SEBI’s Governance Focus

• Promotes transparency in corporate transactions
• Protects minority shareholder rights
• Strengthens audit and board oversight mechanisms