RBI’s 3-month breather for new rules on capital market exposures

At the fag end of the financial year, just before the Amendment Directions on Capital Market Exposures (originally issued on 13th February, 2026) were to become effective, the 30th March 2026 Press Release by RBI has the effect of deferring the applicability of and substituting the same with Revised Amendment Directions to address certain representations from the stakeholders. 

Revised Applicability Date: 

• Effective from 1st July 2026 instead of 1st April 2026
• Banks may opt for early adoption in its entirety

This would mean an additional window of 3 months towards implementation of the revised rules on capital market exposures. 

Acquisition Finance: clarifications on mergers and amalgamation, on-lending for acquisition permitted: target not to be a financial entity

• Mergers and amalgamations permitted within acquisition finance, definition amended [Para 4(1)(ia)]
  • This is a clarificatory change
• Target can be non-financial entity only [Para 170A]
  • Restriction extends to indirectly acquiring control over financial entities who are subsidiaries/ JV of target entity [proviso to Para 170B]
  • Earlier Directions referred to restriction on the Acquiring entity as a financial entity, the Revised Directions extends the restrictions on the target company too, thus limiting the scope of companies that may be acquired through 
• On-lending by Acquiring entity to subsidiaries for acquiring control permitted [Para 170E(2)]
  • Earlier, lending was permitted to subsidiary/ SPV based on strength of Acquiring company by the bank, now, the Revised Directions further permit on-lending by the Acquiring entity to its subsidiary
• Potential synergies to be collectively met for all companies of a group acquired pursuant to acquisition finance [Para 170B]
• Lending to subsidiary/ SPV based on strength of Acquiring company, corporate guarantee to be provided by Acquiring company

Capital Market Intermediaries: relief that does not last long

• Bank financing for proprietary trading permitted subject to 100% collateral in the form of cash and cash equivalents [third proviso to Para 219ZA]
  • While the proviso enables bank finance, in view of the 100% liquid security requirements, the industry participants does not seem to consider this a favourable change towards meeting the working capital requirements. However, the 3-months’ breather may be considered a favourable step. 
• For non-debt Mutual Funds, intraday facilities secured by guaranteed receivables not to be considered as Capital Market Exposure
  • Receivables guaranteed on account of maturity proceeds of G Secs, T-Bills, SDL, or interest from G-Sec and SDLs held by such mutual funds, or maturity proceeds of TREPS from CCIL

Lending to individuals: limits to be monitored at banking system level

• Cap of Rs. 1 crore on lending against eligible securities and Rs. 25 lacs for IPO/ FPO/ ESOP financing to be applicable at banking system level
  • While the borrower-level limits stand increased on an individual basis, the application of such limits at a banking system level will ensure that excessive borrowings are not done by an individual borrower for capital market dealings

See a detailed article on the Amendments on Capital Market Exposures here.