RBI defers Capital Market Exposure Amendment Directions to July 1, 2026

New Delhi: The Reserve Bank of India has deferred the implementation of its Amendment Directions on Capital Market Exposure by three months to July 1, 2026, following representations from banks, capital market intermediaries, and industry associations seeking more time and clarity on operational issues.

The central bank had originally issued the final Amendment Directions on February 13, 2026, after public consultation, with the rules scheduled to take effect from April 1, 2026. The framework aims to enable banks to finance acquisitions by Indian corporates, rationalise limits on lending to individuals against financial securities, and establish a more principle based structure for bank exposure to capital market intermediaries.

After reviewing stakeholder feedback and conducting further discussions, the RBI decided to extend the timeline and issue a set of clarifications and revisions to the directions.

Clarifications on acquisition finance

The RBI revised the definition of acquisition finance to explicitly include mergers and amalgamations. It specified that acquisition finance may be extended only for acquiring control over a non financial target company.

Where the target is a holding or parent company with subsidiaries, the RBI requires that the criteria of potential synergy be collectively met. The directions also allow an acquiring company to use acquisition finance for on lending to a subsidiary in India or overseas for acquiring a target company.

Refinancing of acquisition finance is permitted only after the acquisition is fully completed and control over the target company is established. Such refinancing can be used only to retire the original acquisition debt.

In cases where acquisition finance is extended to a subsidiary or a special purpose vehicle of the acquiring company, a corporate guarantee from the acquiring company will be mandatory.

Clarifications on loans against financial assets

The RBI clarified that caps on loans to individuals against eligible securities, fixed at ₹1 crore per individual, and loans for subscribing to shares under IPO, FPO, or ESOP schemes, capped at ₹25 lakh per individual, will apply at the banking system level rather than per bank.

These eligible securities include shares and units of Real Estate Investment Trusts and Infrastructure Investment Trusts.

Clarifications on bank funding to capital market intermediaries

Banks may now provide financing to capital market intermediaries for proprietary trading, provided the exposure is backed by 100 percent collateral in the form of cash or cash equivalents.

The RBI removed the earlier prohibition on extending finance to market makers against the same securities in which market making operations are undertaken.

It also clarified that intraday facilities extended to non debt mutual funds, secured by guaranteed receivables due the same day from maturity proceeds of government securities, treasury bills, state development loans, interest receipts from government securities, or maturity proceeds of TREPS from the Clearing Corporation of India, will not be counted as capital market exposure.

Revised directions issued

The RBI has issued revised versions of multiple amendment directions applicable to commercial banks and small finance banks. These include directions on credit facilities, concentration risk management, prudential norms on capital adequacy, financial statement disclosures, and undertaking of financial services.

The revised directions now replace the earlier versions and will come into force on July 1, 2026.