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RBI Caps Share Loans at ₹1 Crore
1 Apr
Summary
- Individual share loan limit capped at ₹1 crore.
- IPO loan limit set at ₹25 lakh per individual.
- RBI deferred new capital market rules to July 1.
The Reserve Bank of India (RBI) has clarified lending limits for capital market exposures, capping loans to individuals for share purchases at ₹1 crore across the entire banking system. For loans taken to subscribe to shares through initial public offerings (IPOs), follow-on offers, or employee stock option plans (ESOPs), the limit is set at ₹25 lakh per individual.
These system-level caps are intended to prevent excessive borrowing during market booms and mitigate the credit risk for banks by reducing concentration. The central bank has also mandated that banks obtain a corporate guarantee from the acquiring company when extending acquisition finance to subsidiaries or special purpose vehicles.
Further clarifications include expanding the definition of acquisition finance to cover mergers and amalgamations, and restricting such lending to acquisitions that result in control of a non-financial target company. The RBI had previously announced an April 1 start date for these amendments, but has deferred their rollout by three months to July 1, 2026, following industry requests for more time and clarity on operational issues.
