RBI Gives Banks 3 More Months to Comply With New Market Lending Rules

Mumbai, April 1: The Reserve Bank of India has pushed back the deadline for banks to follow its new capital market lending rules by three months — from April 1 to July 1, 2026. The central bank said the extension was granted after banks, brokers, and industry groups raised concerns about the short timeline and asked for more clarity on how the rules should be applied.

What the Rules Are About

The RBI had originally announced these rules on February 13, 2026. At their core, they govern how much money banks can lend when the borrowing is connected to the stock market — whether that is a company buying another company, an individual borrowing against shares, or a stockbroker needing funds for trading operations. The RBI’s goal was to make these lending norms cleaner, clearer, and better structured across the banking system.

Why the Delay

After the rules were announced, banks and financial intermediaries flagged several practical problems. Some provisions were unclear in their interpretation. Others were difficult to implement operationally within the original one-and-a-half month window. The RBI reviewed the feedback, held further discussions with stakeholders, and decided that three additional months was a reasonable extension to get things right.

What Has Changed in the Rules

Along with the deadline extension, the RBI has also revised and clarified several specific provisions. On company acquisitions, banks can now lend to help a company acquire another company — but only if the target is a non-financial business. The definition has also been broadened to include mergers and amalgamations. Importantly, a company can also borrow to pass on funds to its subsidiary in India or abroad to complete an acquisition. However, any refinancing of such a loan can only happen after the acquisition is fully completed and control of the target company has been established.

Lending Against Shares and Securities

For individuals borrowing against their investments — such as shares, REITs, or InvITs — the RBI has clarified that the cap of ₹1 crore per person applies across the entire banking system, not just at a single bank. Similarly, loans taken to subscribe to shares under an IPO or employee stock option plan are capped at ₹25 lakh per individual across all banks combined.

Easing Rules for Brokers and Market Makers

For stockbrokers and trading firms, the RBI has eased conditions. Banks can now lend to brokers for proprietary trading if the loan is fully backed by cash or cash equivalents as security. An earlier restriction that prevented banks from lending to market makers against the very securities they were making markets in has also been removed — a move that reduces friction for institutions that play a key role in keeping markets liquid.

The revised directions apply to commercial banks as well as small finance banks, and have been issued across five separate regulatory frameworks covering credit, concentration risk, capital adequacy, financial disclosures, and financial services.

Source: https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=62476