The RBI has postponed the rollout of its Amendment Directions on Capital Market Exposures by three months, moving the effective date from 1 April 2026 to 1 July 2026. The move comes after banks, CMIs, and industry bodies sought clarification on operational aspects.
Key Developments
- Effective date shifted to 1 July 2026 after stakeholder representations.
- Clarifications added on acquisition finance, loan limits against securities, and financing to CMIs.
- Caps introduced on loans to individuals: ₹1 crore against eligible securities and ₹25 lakh for IPO/FPO/ESOP subscriptions.
- Bank financing for proprietary trading by CMIs now allowed against 100 % cash or cash‑equivalent collateral.
- Removal of the ban on financing market makers against securities they trade.
Important Provisions
Acquisition finance definition expanded to cover mergers and amalgamations. Finance can be extended only for acquiring control of a non‑financial target. If the target is a holding company, the “potential synergy” test must be satisfied collectively for all subsidiaries. The acquiring firm may on‑lend to an Indian or overseas subsidiary for the purchase.
Refinancing of acquisition finance is permitted only after the acquisition is fully completed and control is established; the refinance must be used solely to retire the original debt. A corporate guarantee from the acquiring entity is now mandatory when finance is routed through a subsidiary or special purpose vehicle.
For REITs and InvITs, the loan‑against‑securities ceiling is ₹1 crore per individual, while IPO/FPO/ESOP subscription limits are ₹25 lakh per individual across the banking system.
Regarding CMIs, banks may now provide financing for proprietary trading against fully cash‑backed collateral. The earlier prohibition on funding market makers against the very securities they trade has been lifted, enhancing liquidity provision.
UPSC Relevance
Understanding these amendments is crucial for GS‑III (Economy) and GS‑II (Polity) questions on financial sector regulation, credit flow to the corporate sector, and the role of the central bank in balancing market stability with growth. The changes illustrate how regulatory feedback loops operate and how policy adjustments can affect credit availability to capital‑market participants.
Way Forward
Stakeholders are expected to align their internal credit policies with the revised guidelines before the July deadline. Banks will need to update risk‑assessment models for acquisition finance and revise loan‑against‑securities limits. Monitoring the impact on broker financing and market‑making activities will be essential for assessing whether the deferment provides the intended temporary relief without compromising systemic risk.