Reserve Bank of India Issues Amendment Directions on Capital Market Exposure

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Reserve Bank of India Issues Amendment Directions on Capital Market Exposure

The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Credit Facilities) Amendment Directions, 2026, amending the existing credit facility framework applicable to commercial banks. The amendments have been issued under Sections 21 and 35A of the Banking Regulation Act, 1949 and shall come into force from April 1, 2026, or an earlier date when adopted by a bank in entirety.


Key Amendments on Loans Against Eligible Securities

Banks may extend credit facilities against eligible securities, as per their Board-approved policy.

Eligible securities include:

  • Listed Group-1 equity shares and preference shares

  • Government Securities, including Treasury Bills and Sovereign Gold Bonds

  • Listed debt securities rated BBB or higher

  • Units of mutual fund schemes which are listed or where repurchase/redemption facility is available

  • Units of Exchange Traded Funds (excluding gold, silver and other commodity ETFs)

  • Units of REITs and InvITs

Loan-to-Value (LTV) Limits for Individuals

  • Loans against listed shares and listed convertible debt securities are capped at 60% LTV.

  • Loans against mutual funds (excluding debt mutual funds), ETFs, REITs and InvITs are capped at 75% LTV.

  • Loans against debt mutual funds are capped at 85% LTV.

  • Loans against listed debt securities:

    • Rated AAA: 85% LTV

    • Rated AA to BBB: 75% LTV

  • Loans against Government Securities (including Treasury Bills) shall be subject to LTV as per bank’s policy.

  • Loans against Sovereign Gold Bonds shall be as applicable in case of loans against gold and silver collateral.

LTV shall be monitored on an ongoing basis and breaches shall be rectified immediately, but not later than seven working days.


Prudential Limits and Purpose-Based Lending

Banks may fix their own prudential limits for loans against:

  • Government Securities

  • Listed debt securities

  • Units of debt mutual fund schemes

Loans against eligible securities other than the above shall be capped at ₹1 crore per individual.

Within the above limits, loans up to ₹25 lakh per individual may be granted for acquisition of securities in the secondary market.

Banks may grant loans up to ₹25 lakh per individual for IPO, FPO and ESOP subscriptions, subject to:

  • Loan amount not exceeding 75% of the subscription value

  • Minimum 25% cash margin from the borrower

  • Creation of lien and pledge on securities upon allotment


Restrictions on Lending

Banks shall not grant:

  • Loans against partly paid shares

  • Loans against securities under lock-in requirements

  • Loans against Indian Depository Receipts (IDRs)

  • Loans against Commercial Papers and Non-Convertible Debentures of original or initial maturity up to one year


Lending to Non-Individuals

Banks may extend credit to non-financial entities against eligible securities, in addition to other collateral, for:

  • Working capital requirements

  • Other productive purposes

Banks may provide bridge finance to non-financial corporates against eligible securities or immovable properties for financing promoters’ stake in new companies, subject to a Board-approved policy and end-use monitoring.


Credit Facilities to Capital Market Intermediaries (CMIs)

A new chapter governs lending to Capital Market Intermediaries (CMIs).

Banks may provide:

  • Working capital facilities

  • Financing for margin trading

  • Overdraft or credit line facilities for settlement-related timing mismatches

  • Market making facilities

Banks shall not provide finance to CMIs for acquisition of securities on their own account for proprietary trading or investments, except as permitted under the Directions.

Credit facilities to CMIs shall generally be provided on a fully secured basis, with a minimum haircut of 40% in case of equity shares accepted as collateral.


Effective Date

The amended Directions shall come into force from April 1, 2026, or an earlier date when adopted by a bank in entirety.

Existing loans and guarantees may continue until maturity; however, fresh or renewed facilities after adoption shall comply with the amended framework.

Consequential amendment directions relating to capital adequacy, concentration risk management, financial statements and undertaking of financial services have been issued separately.


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