CSCRF is a scaled framework. What a MII must do is not what a mid-size mutual fund must do. The five-tier categorisation is therefore the single most consequential decision under CSCRF. Get it right and you have a proportionate compliance programme. Get it wrong and you either over-invest by ten times or under-invest and get flagged in your next SEBI inspection.
The five tiers
| Tier | Who | CCI required? | Audit cadence |
|---|---|---|---|
| MII | Stock exchanges (NSE, BSE), clearing corporations (NCL, ICCL, MCX Clearing), depositories (NSDL, CDSL) [L3-C1] | Yes, minimum 71 (Manageable); half-yearly third-party | Twice a year |
| Qualified RE | QRTAs (KFin, CAMS), KRAs (5 — moved from MII in Apr 2025), large brokers, large mutual funds, large depository participants, large custodians | Yes, minimum 61 (Developing); annual self-assessment | Twice a year |
| Mid-size RE | AIFs, PMS, merchant bankers, debenture trustees, credit rating agencies, RTAs, IAs and RAs above threshold | No | Once a year (twice if IBT or Algo) |
| Small-size RE | Below Mid threshold | No | Once a year |
| Self-Certification RE | Brokers < 1,000 clients AND < ₹1,000 crore annual trading volume (April 2025 clarifications) [L3-C2]. Very small IAs, RAs, similar | No | Exempt from periodic audit; VAPT-only + self-certification |
The Broker Exemption threshold (April 2025)
The 30 April 2025 clarifications introduced a dual-parameter test that carved out the smallest brokers from full CSCRF. A broker qualifies as Self-Certification only if it meets BOTH conditions:
- Fewer than 1,000 active clients, AND
- Annual trading volume below ₹1,000 crore
A broker that meets one condition but not the other falls into Small-size RE, not Self-Certification. Watch this in year-end reviews. A rapidly growing broker that crosses either threshold mid-year must re-categorise at the start of the next financial year.
The KRA reclassification (April 2025)
The 30 April 2025 clarifications moved KYC Registration Agencies (KRAs) from MII status to Qualified RE status. Five KRAs are affected: CVL, NDML, DOTEX, CAMS-KRA, and Karvy-KRA (plus KFin's new KRA registration IN/KRA/007/2025). Consequences of the move:
- CCI submission moves from half-yearly third-party to annual self-assessment.
- Minimum CCI drops from 71 to 61.
- The dedicated in-house 24×7 SOC requirement relaxes to permit M-SOC.
- Audit cadence remains twice a year (same as MII).
Practitioner check: your KRA-linked filings for FY 2024-25 may reference MII obligations. Filings from FY 2025-26 onwards align to Qualified RE. This transition is subtle but material for evidence packs.
How to categorise your entity
A three-step test:
- What type of entity are you? Broker, DP, MF, AMC, PMS, IA, RA, RTA, KRA, custodian, exchange, clearing corp, depository. This determines the applicable category ladder.
- What is your scale? Client count, AUM, trading volume, or the metric applicable to your entity type. Cross-check against the April 2025 clarifications and the categorisation annexure to the master circular.
- What is your business complexity? Do you offer Internet-Based Trading (IBT) or Algorithmic Trading (Algo)? If yes, your audit cadence moves to twice a year regardless of other Mid/Small categorisation.
Category placement is annual
Category placement is fixed at the start of the financial year using prior-year data. A Mid-size RE that grows into Qualified RE thresholds mid-year does not re-categorise until 1 April of the next financial year. This creates a planned window to build the additional obligations of the new tier.
Consequences of getting it wrong
Over-categorising (claiming Qualified RE when you are Mid-size): you spend money on obligations you do not owe. Under-categorising (claiming Mid-size when you are Qualified RE): SEBI inspection findings, potential SEBI Act §15HB penalty up to ₹1 crore per violation, and reputational damage that flows into the CCI in the next cycle.
The rule of thumb: when in doubt, up-categorise. It is cheaper to over-comply than to defend an under-categorisation in a SEBI inspection.