The Reserve Bank of India on Wednesday proposed that banks will be allowed to fund acquisitions and raised the cap on loans taken for buying shares at IPOs as part of as many as 22 measures spanning banking regulation, credit flow, ease of doing business, consumer protection and rupee internationalisation.
“It is proposed to remove the regulatory ceiling on lending against listed debt securities and enhance limits for lending by banks against shares from ₹20 lakh to ₹1 crore and for IPO financing from ₹10 lakh to ₹25 lakh per person,” RBI governor Sanjay Malhotra said.
The move, seen as timely amid a surge in public offers, echoes recent calls from industry, including SBI chairman C.S. Setty, who had urged that Indian banks be allowed to fund mergers and acquisitions, as practised globally.
An enabling framework is being proposed by the central bank to allow commercial banks to finance acquisitions by Indian corporates.
The RBI governor announced the withdrawal of the 2016 framework that restricted lending to large borrowers with bank credit of ₹10,000 crore and above. A discussion paper on licensing new urban co-operative banks will also be issued.
The governor said the Expected Credit Loss (ECL) provisioning framework will be implemented from April 1, 2027, for scheduled commercial banks (excluding small finance, payment and regional rural banks), with a glide path until March 2031 for easier provisioning by banks.
The central bank has also proposed lower credit risk weights for MSMEs and residential real estate, including home loans, reducing banks’ capital requirements. A risk-based deposit insurance premium will replace the current flat-rate system.
Ease of doing business measures include consolidating 9,000 regulatory circulars, relaxing rules on transaction accounts, extending repatriation timelines for exporters and rationalising FEMA regulations.
On consumer protection, digital banking will be extended to basic savings bank accounts, while the internal ombudsman mechanism will be strengthened and the ombudsman scheme expanded to rural co-operatives.
RBI will also permit Rupee lending to non-residents in Bhutan, Nepal and Sri Lanka for trade and publish reference currency rates.