Archive · 8 Jan 2026
SEBI's New RPT Rules May Increase Tunnelling Risks
SEBI, the organization that oversees the stock market in India, has proposed new rules for related-party transactions (RPTs).
These are deals between a company and its related parties, like promoters or directors.
The old rule said that any RPT above Rs 1,000 crore needed shareholder approval.
The new rule makes this threshold higher for bigger companies, depending on their size.
The authors of the article studied how these rules affect two types of RPTs: business RPTs (routine operational exchanges) and opaque RPTs (financial transfers, loans, and advances).
They found that the old rule was effective in curbing opaque RPTs in large firms, but the new rule might make it easier for these firms to engage in tunnelling, which is when company insiders use RPTs to take money out of the company for their own benefit.
The authors suggest that SEBI should keep the strict Rs 1,000-crore threshold for opaque RPTs to prevent this.
SEBI's proposed 2025 RPT rules introduce scale-based thresholds, replacing the previous uniform Rs 1,000 crore threshold.
The new rules aim to ease compliance for business RPTs but may increase tunnelling risks for opaque RPTs in large firms.
Under the old rules, opaque RPTs in large firms (> Rs 40,000 crore revenue) were worth Rs 425,000 crore in FY25, but this dropped to Rs 238,000 crore under the new rules.
The authors suggest a bifurcated approach: scaled thresholds for business RPTs and a strict Rs 1,000-crore threshold for opaque RPTs.
The authors warn that loosening oversight on opaque RPTs could revive the kind of opacity that enabled the Satyam scandal.
- Who
- The Securities and Exchange Board of India (SEBI) and large Indian firms.
- What
- SEBI's proposed changes to the rules governing related-party transactions (RPTs).
- When
- The changes are proposed to take effect in 2025.
- Where
- India.
- Why
- To ease compliance for business RPTs while potentially increasing tunnelling risks for opaque RPTs.
- Related-Party Transactions (RPTs)
- Transactions between a company and its related parties, such as promoters, directors, or family members.
- Tunnelling
- The practice of expropriating minority shareholder wealth through RPTs.
- Material Transaction
- An RPT that crosses a prescribed value threshold and requires shareholder approval.
- Old RPT Rule
- Any RPT above Rs 1,000 crore or 10% of turnover was considered material.
- New RPT Rule (2025)
- Scale-based thresholds for material RPTs, ranging from 10% of turnover to Rs 5,000 crore, depending on company size.
- Business RPTs
- Routine operational exchanges between related parties.
- Opaque RPTs
- Financial transfers, loans, and advances between related parties, often used for tunnelling.
- Satyam Scandal
- A major accounting fraud in India where RPTs were used to mask massive diversion of funds.