Module: | Specialized Audits, Tech & ESG Disclosures
Q89: Consider the following statements regarding the revised materiality thresholds for Related Party Transactions (RPTs) introduced under Schedule XII of SEBI LODR in late 2025:
1. The SEBI LODR (Fifth Amendment) Regulations, 2025 replaced the flat Rupees 1000 Crore materiality limit with a new Schedule XII that uses a graded, turnover-linked framework.
2. For a listed entity with a consolidated turnover exceeding Rupees 40,000 Crore, the materiality threshold is calculated as Rupees 3,000 Crore plus 2.5 percent of the turnover in excess of Rupees 40,000 Crore.
3. The maximum overall cap for determining a material related party transaction under the new graded framework is set at Rupees 10,000 Crore.
Which of the above statements is/are correct?
2. For a listed entity with a consolidated turnover exceeding Rupees 40,000 Crore, the materiality threshold is calculated as Rupees 3,000 Crore plus 2.5 percent of the turnover in excess of Rupees 40,000 Crore.
3. The maximum overall cap for determining a material related party transaction under the new graded framework is set at Rupees 10,000 Crore.
Which of the above statements is/are correct?
✅ Correct Answer: A
🎯 Quick Answer:
A. Only 1 and 2 are correct.Structural Breakdown: Statement 1 is correct; SEBI officially recast the RPT materiality limit in November 2025, discarding the old "lower of 10% or 1000 Cr" rule in favor of Schedule XII.
Statement 2 is correct; this is the exact mathematical formula introduced for mega-corporations in the top bracket.
Statement 3 is incorrect; the 5th Amendment explicitly caps the maximum materiality threshold at Rupees 5,000 Crore, not 10,000 Crore.
Historical/Related Context: The Rs 1000 Crore flat threshold introduced in 2021 caused immense operational grief for India's largest conglomerates (like Tata and Reliance), where 1000 Crore represented less than a fraction of a percent of their turnover, forcing routine subsidiary transactions into shareholder votes.
Causal Reasoning: A graded threshold tied to consolidated turnover ensures that regulations scale logically with the size of the business.
A Rs 2000 Crore transaction is a systemic risk for a mid-cap company, but a daily operational reality for a mega-cap company, hence the mathematical scaling.