India’s Block Deal Reforms: What Investors and Institutions Need to Know

Introduction: A New Era for Block Deals in India

If you’ve ever watched India’s equity markets, you know how dynamic they have become. But did you know that behind the scenes, large institutional trades often happen quietly through something called block deals? These trades are like a backstage pass to the stock market: huge volumes change hands without disrupting prices for everyone else.

Now, the Securities and Exchange Board of India (SEBI) is proposing major changes to how these block deals operate. The regulator is considering raising the minimum trade size from ₹10 crore to ₹25 crore, adjusting price bands, and refining the reference-price mechanism.

Why does this matter? Because these tweaks can affect mutual funds, insurance companies, foreign investors, promoters, and even retail participants indirectly. In short, India’s capital markets may soon look a bit different, especially for big-ticket trades.

In this article, we’ll unpack SEBI’s proposed reforms in simple language, explore their implications, and offer actionable insights for investors, auditors, and finance professionals.

 

Understanding Block Deals: The Basics

Before diving into the reforms, let’s break down what a block deal really is.

Definition: A block deal is a pre-negotiated trade executed in a special window on the stock exchange, designed to prevent massive price swings. Unlike regular market orders, which flow through the general trading system, block deals allow large volumes to move discreetly.

Key Features:

• Executed in designated trading windows (typically 15 minutes, twice daily).
• Minimum trade size historically ₹10 crore.
• Pre-agreed price range relative to a reference price.
• Mandatory delivery of shares—no squaring off or reversing trades.

Think of it like a private room in a busy restaurant. While the main hall is bustling, these deals happen quietly, ensuring large trades don’t disturb the “market diners” outside.

Who uses block deals?

• Institutional investors: Mutual funds, insurance companies, foreign institutional investors.
• Promoters and large shareholders: For stake restructuring or exits.
• High net-worth individuals: Occasionally, to move large stakes discreetly.

Historically, block deals have been essential in preserving market stability while enabling liquidity for large participants.

 

Why SEBI is Revising Block Deal Rules

Markets are not static. Over the past decade:

• India’s benchmark indices have soared multiple times.
• Institutional participation has increased dramatically.
• Trading volumes are much higher than they were in 2017.

Here’s the problem: the old ₹10 crore minimum now captures smaller trades that aren’t really “block-deal worthy”. The windows intended for mega transactions are being diluted, which can impact both efficiency and transparency.

SEBI’s rationale for the reforms:

1. Facilitate genuine large trades. Only significant trades should occupy block-deal windows.
2. Protect smaller investors. Trades under ₹25 crore now move to regular markets, enhancing fairness.
3. Increase transparency and reduce manipulation. More consistent reference prices and mandatory delivery reduce risks.

Put simply, SEBI is seeking a modernized, structured approach that reflects today’s market scale.

 

Key Proposed Changes in Detail

1. Raising the Minimum Trade Size

Current threshold: ₹10 crore
Proposed threshold: ₹25 crore

Why it matters:

• Trades smaller than ₹25 crore will no longer qualify as block deals.
• This ensures the windows remain exclusive to institutional participants, rather than being used by smaller investors.
• In FY 2025, most block deals already exceeded ₹14 crore, making the old threshold outdated.

Example: Imagine a mutual fund wants to sell ₹15 crore worth of shares. Under the new rules, this trade will move to the regular market, potentially affecting price discovery and execution planning.

 

2. Adjusting Price Bands

What are price bands?

A price band is the allowed range around a reference price in which a block deal can execute.

Current regime: ±1% around reference price
Proposed changes:

• Non-F&O stocks: ±3%
• F&O stocks: remain at ±1%

Reasoning:
Non-F&O stocks are often less liquid, so allowing a slightly wider band gives institutional investors flexibility to negotiate discounts or premiums. F&O stocks already benefit from derivatives and liquidity, so no change is necessary.

Tip: Investors should now factor in potential price variation when negotiating deals in non-F&O stocks.

 

3. Reference-Price Windows

SEBI proposes maintaining two windows:

• Morning: 8:45 a.m. – 9:00 a.m., reference price = previous day’s close
• Afternoon: 2:05 p.m. – 2:20 p.m., reference price = volume-weighted average price (VWAP) from 1:30 p.m. – 2:00 p.m.

Additional proposal: unify reference-price duration to 30 minutes for both windows, reducing execution risk and improving consistency.

Important: All block deals must result in actual delivery of shares, reinforcing market discipline.

 

4. Enhancing Transparency

Exchanges may be required to disclose after-market:

• Scrip name
• Client names
• Quantity and trade price

Benefit: Increased visibility reduces manipulation risk and allows market participants to analyze institutional activity more accurately.

 

Who Benefits from These Changes?

1. Large Institutional Investors

• Wider ±3% bands for non-F&O stocks give more negotiation flexibility.
• Higher thresholds ensure less clutter in trading windows, improving execution efficiency.

2. Promoters and Large Shareholders

• Transparent reference prices and mandatory delivery make stake restructuring smoother without destabilizing stock prices.

3. Retail Investors

• Smaller trades shift to regular markets, improving liquidity and enhancing price discovery.

In other words, everyone gains clarity, efficiency, and fairness—but the key beneficiaries are those executing truly large trades.

 

Potential Challenges

Despite the advantages, some stakeholders may face hurdles:

1. Mid-sized investors / HNIs
   Trades between ₹10–25 crore now move to the regular market, losing anonymity and facing execution risk.
2. Companies with lower liquidity
   Wider price bands may require buyers or sellers to accept discounts or premiums, affecting transaction economics.
3. Compliance burden
   Auditors, chartered accountants, and brokers must update internal protocols, verify thresholds, and track settlements meticulously.

 

Practical Implications for Stakeholders

For Businesses and Promoters

• Plan trades according to minimum ₹25 crore threshold.
• Ensure delivery-only execution to avoid open-market exposure.
• Failure to comply could cause market price impact or reputational risk.

For Investors and Taxpayers

• Capital gains, stamp duty, and settlement charges still apply.
• Advanced planning is crucial due to limited trading windows.

For Auditors and Compliance Professionals

• Verify whether trades qualify under new rules.
• Confirm delivery obligations and maintain audit trails.
• Monitor exchange disclosures for compliance and transparency.

For Market Intermediaries

• Update systems for new thresholds, price bands, and windows.
• Educate clients on eligibility criteria and execution planning.

 

Common Misunderstandings

Misconception	Reality
Any large trade qualifies as a block deal	Only pre-negotiated trades in designated windows qualify
Normal trades get block-deal benefits	Only block-deal window trades enjoy anonymity and negotiated pricing
Price band is uniform	±1% for F&O, ±3% for non-F&O
Minimum trade size is fixed	SEBI proposes increase to ₹25 crore
Block deals always cost less	Wider bands may increase cost if counterparties negotiate premiums

 

Expert Commentary

“The review of block deals is both timely and necessary. Markets have evolved since 2017, with higher indices, larger volumes, and increased institutional participation. Raising the minimum order size preserves block deals for genuine institutional trades, while wider bands for non-F&O stocks allow negotiation flexibility. Delivery-only rules enforce discipline and transparency.”
— Market Analyst with 20+ years in Indian securities markets

Takeaway: Operational planning is now critical. Market participants must check thresholds, align settlements, and coordinate with counterparties before executing trades.

 

Action Steps for Market Participants

1. Review trades to see if they exceed ₹25 crore.
2. Decide on trading window: block-deal or regular market.
3. Prepare for delivery-only execution.
4. Update compliance protocols and maintain documentation.
5. Negotiate within new price bands with brokers and counterparties.
6. Track SEBI’s consultation process and submit feedback by 15 September 2025.

 

Looking Ahead: What Could Change Next?

SEBI may introduce:

• Separate regimes for SME-listed companies.
• Extended trading windows.
• Offer-for-sale alternatives for non-promoter exits.

For now, participants must adapt to the evolving block-deal framework, ensuring efficiency, fairness, and transparency.

 

FAQs: Block Deals Made Simple

Q1: What is a block deal?
A pre-negotiated trade executed in a designated trading window, with mandatory delivery.

Q2: Why revise the rules now?
Markets have grown significantly. Most block deals exceed ₹10 crore, making the old threshold outdated.

Q3: What are the key changes?

• Minimum trade size: ₹25 crore
• Price bands: ±3% for non-F&O, ±1% for F&O
• Delivery-only execution
• Defined reference-price mechanisms and trading windows

Q4: How does this impact smaller trades?
Trades below ₹25 crore shift to regular markets, losing anonymity and requiring careful execution planning.

Q5: When will changes take effect?
SEBI seeks feedback by 15 September 2025, with implementation 30–60 days after final notification.

 

Conclusion: Preparing for a Smarter, Fairer Market

India’s capital markets are maturing rapidly, and block deals are evolving with them. SEBI’s proposals—raising thresholds, adjusting price bands, and ensuring delivery—reflect the need for a transparent, efficient system for large trades.

For institutional investors and promoters, careful planning and adherence to rules are now more important than ever. Auditors and compliance professionals must update processes to align with the new framework. And for the broader market, these reforms may improve price discovery, liquidity, and fairness.

At Manika TaxWise, we believe understanding these regulatory changes is crucial not just for compliance but for strategic market decision-making. By staying informed and proactive, investors can navigate India’s block-deal landscape confidently while optimizing efficiency and transparency.

 

References

1. Reuters, “India’s markets regulator proposes changes to the country’s block deal framework,” 22 Aug 2025
2. Moneycontrol, “SEBI tweaks reference price range, increases minimum order size for block deals,” 22 Aug 2025
3. Taxmann Blog, “SEBI Issues Draft Circular to Revise Block Deal Framework,” 25 Aug 2025
4. Business Standard, “SEBI may raise minimum block deal size, widen permissible price range,” 21 Aug 2025
5. Moneycontrol, “Mutual funds push for non-disclosure of block deals,” Aug 2025