RBI Delays Implementation of Capital Market Exposure Amendments

The Reserve Bank of India (RBI) has announced a three-month delay in the implementation of its Amendment Directions regarding capital market exposures. The new effective date is set for July 1, 2026. This decision comes in response to requests from banks, capital market intermediaries (CMIs), and industry associations who flagged operational and interpretational issues regarding the amendments.

Originally issued on February 13, 2026, the Amendment Directions aimed to establish a framework for banks to finance corporate acquisitions and to rationalise lending limits for individuals against shares and units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). These regulations were initially scheduled to be effective from April 1, 2026.

In a recent circular dated March 30, 2026, the RBI noted that it had conducted a review following consultations with stakeholders, leading to the extension of the effective date. The RBI also made several clarifications to the Amendment Directions that are relevant to acquisition finance and exposures to CMIs.

Specifically, modifications to the definition of acquisition finance now include mergers and amalgamations. The RBI confirmed that acquisition finance can only be provided for acquiring control over a non-financial target company. If the target is a holding or parent company that controls subsidiary companies, the acquiring firm must meet 'potential synergy' criteria for the financing.

Furthermore, acquiring firms may now use acquisition finance to lend to subsidiaries, both within India and abroad, for acquiring target companies. Refinancing of acquisition finance is permitted only after the successful completion of the control acquisition, with the refinancing strictly directed towards paying off the original acquisition debt. A corporate guarantee from the acquiring firm is required if the acquisition finance is extended to a subsidiary or a Special Purpose Vehicle (SPV).

In terms of individual loans against financial assets, the RBI has placed a cap of ₹1 crore per individual for loans secured against eligible securities. For subscriptions to shares during Initial Public Offerings (IPOs), Follow-on Public Offers (FPOs), or Employee Stock Ownership Plans (ESOPs), a limit of ₹25 lakh per individual has been established.

Additionally, the RBI clarified new instructions for credit facilities to CMIs. Specifically, financing for proprietary trading may be conducted against 100% collateral composed of cash or cash equivalents. The prohibition on providing financing to market makers for securities used in such operations has been lifted.

Lastly, it was stated that intraday facilities for non-debt mutual funds, secured by guaranteed receivables due on the same day, will not be classified as capital market exposure.

This delay and the accompanying clarifications have been interpreted by some analysts as a temporary reprieve for the banking sector, especially in relation to credit facilities extended to brokers involved in capital markets.