RBI Proposed Risk-Based Deposit Insurance and Lending Reforms to Boost Banking Stability

On Wednesday, October 1, the Reserve Bank of India (RBI) unveiled a set of reforms focused on deposit insurance, designed to encourage stronger risk management practices among banks. 

Expanded Lending Framework to Boost Credit Access

RBI Governor Sanjay Malhotra announced that the central bank intends to introduce risk-based deposit insurance premiums. This move aims to reduce costs for banks with superior credit ratings, thereby rewarding prudent financial management. 

Alongside the deposit insurance overhaul, the RBI also revealed proposed updates to lending regulations aimed at expanding financing options. The central bank plans to widen acquisition finance, enabling banks to offer a broader range of credit opportunities.

Higher Lending Limits for Shares and IPO Financing

Key regulatory adjustments include lifting the cap on lending against listed debt securities, increasing the lending limit against shares from ₹20 lakh to ₹1 crore per individual, and raising the limit for IPO financing from ₹10 lakh to ₹25 lakh per person.

Governor Malhotra emphasised that these initiatives are designed to strengthen risk management frameworks, encourage responsible lending, and enhance operational flexibility for banks, all while safeguarding depositors’ interests.

Also Read: RBI Holds Benchmark Interest Rate Unchanged at 5.5% for Second Consecutive Meeting

The announcement coincided with the RBI’s decision to maintain the repo rate at 5.5% for the second consecutive review. By keeping the benchmark rate steady, the central bank aims to preserve monetary stability and support a steady flow of credit to businesses and households alike.

As a result, existing borrowers can expect their EMI payments to remain unchanged in the near term, while new borrowers will benefit from stable home loan and other credit rates.

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