RBI Proposes 20% Cap on Banks’ Capital Market and Acquisition Finance Exposure

  • Blog|News|FEMA & Banking|
  • < 1 minute
  • By Taxmann
  • |
  • Last Updated on 27 October, 2025

Latest from Taxmann

RBI banks exposure cap

PR No. 2025-2026/1378; Dated: 24.10.2025

The Reserve Bank of India (RBI) has released draft directions proposing limits on banks’ exposure to capital markets and acquisition finance. The move aims to strengthen financial stability and promote prudent lending practices in the banking sector.

1. Key Proposals

  • Direct Investments Limit – Banks’ total direct investments in capital markets and acquisition finance must not exceed 20% of their Tier 1 capital.
  • Aggregate Capital Market Exposure – The overall exposure of banks to capital markets should not exceed 40% of their Tier 1 capital, including direct and indirect exposures.

2. Objective

The draft guidelines are intended to:

  • Mitigate concentration risk arising from excessive exposure to volatile capital markets,
  • Encourage responsible lending and investment practices, and
  • Enhance the resilience of banks against market fluctuations and financial shocks.

3. Next Steps

Stakeholders and banks are expected to review the draft directions and provide feedback to the RBI as per the consultation process before the final guidelines are issued.

Click Here To Read The Full Press Release

Disclaimer: The content/information published on the website is only for general information of the user and shall not be construed as legal advice. While the Taxmann has exercised reasonable efforts to ensure the veracity of information/content published, Taxmann shall be under no liability in any manner whatsoever for incorrect information, if any.

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that’s easy to read and remain consistent across all imprint and digital publications are applied

Leave a Reply

Your email address will not be published. Required fields are marked *

«
»

Everything on Tax and Corporate Laws of India

To subscribe to our weekly newsletter please log in/register on Taxmann.com

Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied