Soybean lecithin has potential as a multifunctional additive for food, pharmaceutical and industrial applications. An effective way to improve water dispersability or enhance emulsifying properties of vegetable lecithins for o/w system is hydroxylation.The inventors used very high concentration of hydrogen peroxide for the hydroxylation reaction and the phospholipids may get degraded due to the exposure of the lecithin to higher temperatures for longer reaction periods. The objective of the present invention is to provide an improved process for the hydroxylation of crude soybean lecithin using lower concentrations of hydrogen peroxide solution with higher conversion rates at lower reaction times. The Iodine Value reduction of the crude soybean lecithin through microwave-assisted reaction in 40 minutes is about 37%, which could not be achieved using the conventional heating even after 18 hr in similar reaction conditions. Similarly less than 5 minutes time is sufficient to achieve 10% reduction in IV of hydroxylated lecithin.