RBI Revises Capital Market Exposure and Lending Norms

Press Release: 2025-2026/2117, Dated: 13.02.2026

The Reserve Bank of India (RBI) has issued Amendment Directions on Capital Market Exposure applicable to commercial banks and small finance banks, following stakeholder feedback on the draft directions released on 24 October 2025.

The amendments aim to provide greater operational flexibility while strengthening prudential oversight in capital market-related lending.

1. Objective of the Amendments

The revised directions seek to:

• Provide an enabling framework for financing acquisitions by Indian corporates
• Enhance lending limits in certain categories
• Remove specific quantitative ceilings to allow greater flexibility
• Introduce a more principle-based approach to capital market exposure

These changes are intended to support capital market development while maintaining risk management safeguards.

2. Enabling Framework for Financing Acquisitions

The amendments introduce provisions to facilitate:

• Financing of acquisitions by Indian corporates
• Structured lending arrangements for such transactions

This move aims to support corporate restructuring, consolidation, and investment activity within a prudential framework.

3. Enhancement of Lending Limits

The revised framework enhances limits for certain categories of lending linked to capital market exposure, allowing banks greater flexibility in extending credit within defined risk management parameters.

This is expected to improve credit flow to market-linked activities while ensuring adequate oversight.

4. Removal of Ceiling on Lending Against Listed Debt Securities

A key amendment is the:

• Removal of the ceiling on lending against listed debt securities

This provides banks with additional flexibility to extend loans secured by such instruments, subject to internal risk management and prudential norms.

5. Principle-Based Framework for Lending to Intermediaries

The amended directions introduce a more principle-based framework for lending to:

• Capital market intermediaries
• Related entities engaged in market activities

Instead of rigid quantitative restrictions, banks are required to rely on:

• Board-approved policies
• Internal risk assessment
• Prudential exposure norms

This approach aligns with evolving market practices and risk-based supervision.

6. Key Takeaway

The RBI’s amended capital market exposure framework provides enhanced flexibility for banks in financing acquisitions, lending against listed debt securities, and extending credit to capital market participants, while shifting toward a principle-based, risk-sensitive regulatory approach.

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