RBI Defers Implementation Of New Capital Market Exposure Rules To July 1 After Requests From Brokers

The Reserve Bank of India (RBI) has delayed the implementation of the changes on capital market exposures for banks to July 1, 2026. This move could serve as a temporary relief to banking credit lines for brokers.

The RBI has issued the Amendment Directions on Capital Market Exposure in February, which were aimed at providing an effective framework for banks lending to Indian corporates for financial acquisitions. The changes in the framework provide lending limits for banks to individuals against shares, units of real estate investment trusts (REITs), infrastructure investment trusts (InvITs), etc. The rules aim for a more principle-based framework for lending to capital market intermediaries (CMIs).

These rules were to become effective on April 1, 2026. However, after receiving requests from banks and various industry stakeholders, the RBI decided to defer the implementation date to July 1, 2026.

“The Reserve Bank has since received representations from banks, CMIs, and various industry associations seeking an extension of the effective date, and also flagging certain operational and interpretational issues for clarification,” the RBI said in the circular issued March 30.

The RBI has clarified certain provisions related to acquisition finance and exposures to capital market intermediaries in the amendment, modifying the definition of “acquisition finance” to include mergers and amalgamations. Acquisition finance only includes taking over the majority stake or control over a non-financial target company. If the target company is a holding or a parent company, the criteria of ‘potential synergy’ must be met among the parent as well as for the subsidiaries for acquisition finance.

If all the criteria are met, the acquiring company can avail acquisition finance for on-lending to an Indian or overseas subsidiary, for the acquisition of a target company. Additionally, the acquiring company will be eligible for refinance of acquisition finance only after the initial funds have been fully concluded and the establishment of control of the target company. The refinance of the funds can only be used to repay the debt on the original acquisition finance, the RBI clarified.

Moreover, the RBI has also put limits on loans against financial assets to individuals, capping it at Rs. 1 crore per individual against eligible securities. The loans against subscription of shares under IPO, FPO, or under ESOP have been capped at Rs. 25 lakh per individual, at the banking system level.

The RBI has also said that bank financing to CMIs for proprietary trading can be taken against full collateral consisting of cash or cash equivalents. Further, banks can now extend loans to market makers against securities in which the market-making operations are undertaken.

The delay in the implementation of the amendment will allow brokers to continue using bank guarantees backed by 50 per cent collateral. This will provide them with temporary relief amid volatility in markets due to the ongoing Iran war.