RBI Raises Loan Limits for Shares & IPO Financing

Mumbai, Oct 1 (PTI) The Reserve Bank on Wednesday proposed to raise the lending limit for banks against shares to Rs 1 crore and for IPO financing to Rs 25 lakh per person, a move that will increase the availability of credit to investors.

Currently, banks can lend up to Rs 20 lakh against shares and Rs 10 lakh towards IPO financing.

Unveiling the bi-monthly monetary policy, RBI Governor Sanjay Malhotra also proposed to provide an enabling framework for Indian banks to finance acquisitions by Indian corporates.

"It is proposed to remove the regulatory ceiling on lending against listed debt securities and enhance limits for lending by banks against shares from Rs 20 lakh to Rs 1 crore and for IPO financing from Rs 10 lakh to Rs 25 lakh per person," the Governor said.

The RBI proposes to enhance limits for lending by banks against shares, REITs and InvITs while removing the regulatory ceiling altogether on lending against listed debt securities.

Capital market exposures (CME) of banks and other regulated entities, which include lending against securities to individuals and lending to capital market intermediaries, are subject to regulations governing sectoral and individual borrower limits as well as margin requirements.

The RBI on Wednesday said there has been significant growth and development in the capital market structure, along with the strengthening of the banking system in recent years.

With the objective of rationalising the extant guidelines and broadening the scope for capital market lending by banks and other regulated entities, RBI proposed to provide an enabling framework for banks to finance acquisitions by Indian corporates.

Under existing norms, bank finance for the acquisition of shares is generally disallowed.

Furthermore, the central bank plans to put in place a principle-based framework for lending to capital market intermediaries.

The draft guidelines shall be issued shortly, it added.