The RBI has increased the maximum amount that banks may lend against shares from Rs 20 lakh to Rs 1 crore per individual.
On October 1, the Reserve Bank of India said that it will relax some of the limits placed on banks’ ability to lend against listed shares while permitting them to lend for acquisitions. Governor Sanjay Malhotra said on Wednesday that the Reserve Bank of India would provide an enabling framework that will enable banks to fund acquisitions by Indian corporations.
In his post-MPC meeting statement, Malhotra said, “It is recommended to abolish the regulatory cap on lending against listed debt instruments and boost ceilings for lending by banks against shares from Rs 20 lakh to Rs 1 crore per person, and for IPO financing from Rs 10 lakh to Rs 25 lakh per person.” In order to enable banks to fund acquisitions, State Bank of India has asked the banking industry regulator.
Malhotra said that banks would be granted a grace period to adapt to the new framework before a stricter exempted credit loss (ECL) structure took effect in 2027. According to Malhotra, the Basel 3 capital structure would likewise take effect in 2027.