RBI Eases Rules to Allow Banks to Finance Acquisitions and Boost Share-Backed Lending

The Reserve Bank of India (RBI) has unveiled a set of measures to expand the lending capacity of banks, including allowing them to finance acquisitions and easing restrictions on loans against shares and debt securities. The announcements were made by Governor Sanjay Malhotra following the October Monetary Policy Committee (MPC) meeting.

Key Lending Reforms

In a significant move, the RBI said it would provide a framework that enables banks to fund corporate acquisitions, a long-standing request from the banking industry, particularly from the State Bank of India. Additionally, the central bank will remove the regulatory ceiling on lending against listed debt securities.

Loan limits against listed shares have been raised sharply from ₹20 lakh to ₹1 crore per individual. For IPO financing, the permissible limit per person has been increased from ₹10 lakh to ₹25 lakh. These changes are expected to boost liquidity and provide corporates with greater flexibility in accessing funds for expansion and strategic deals.

Regulatory Timeline and ECL Framework

Governor Malhotra further clarified that the expected credit loss (ECL) framework will be introduced in 2027, giving banks a longer transition period to adapt. Similarly, the Basel III capital framework will also come into effect in 2027, providing institutions with sufficient time to align their systems and capital requirements with global norms.

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

Conclusion

By easing restrictions on acquisition financing and expanding credit availability against shares and IPOs, the RBI is signalling its intent to support corporate growth and deepen financial markets. At the same time, by pushing back the implementation of stricter regulatory norms, the central bank is balancing reform with stability in the banking sector.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.