By Suresh P Iyengar

Copyright thehindubusinessline

The banking regulator, RBI, has proposed enhancing banks’ credit flow to the stock market and corporates by increasing prevailing limits and easing regulations.

After receiving comments from the industry, RBI will announce its final regulations soon.

The RBI credit policy has proposed an enabling framework for banks to finance acquisitions by Indian corporates. It has also removed the regulatory ceiling on lending against listed debt securities and enhanced 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.

2016 lending framework to be withdrawn

The RBI has also proposed to withdraw the framework introduced in 2016, which disincentivised lending by banks to specified borrowers (with a credit limit from the banking system of ₹10,000 crore and above).

Sanjay Malhotra, Governor, RBI, stated that while the Large Exposure Framework has been implemented for banks to address credit concentration risk to a particular entity or group at the individual bank level, concentration risk at the banking system level will be managed through specific macro-prudential tools as and when deemed necessary.

NBFC infra financing relief proposed

In an effort to reduce the cost of infrastructure financing for NBFCs, the RBI has proposed lowering the risk weights applicable to lending by NBFCs to operational, high-quality infrastructure projects.

RBI mulls new UCB licenses after 20 years

Since 2004, licensing for Urban Co-operative Banks had been paused. Considering the positive developments in the sector over the last two decades and in response to growing demand from stakeholders, the RBI has proposed publishing a discussion paper on the licensing of new UCBs, he said.

Mahendra Kumar Jajoo, CIO (Fixed Income), Mirae Asset Investment Managers (India) said the policy review has many significant measures beyond rate adjustments such as review of ECL (expected credit loss) framework, capital market exposure limits for banks and large borrower exposure norms, which will potentially have significant impact on ease of doing business in financial services sector and deepen lending and capital market businesses.

“In terms of the immediate impact, money market rates are expected to ease further while the long term rates are likely to remain range bound,” he said.

Published on October 1, 2025