RBI Defers Capital Market Exposure Rules to July 1, 2026

The Reserve Bank of India deferred the effective date of its amended capital market exposure rules by three months, from 1 April 2026 to 1 July 2026. The deferral was announced in RBI Press Release No. 2025-2026/2360 dated 30 March 2026, which also made limited changes to clarify parts of the framework. The revised rules have therefore applied to banks from 1 July 2026.

Why the date moved

The RBI issued the final Amendment Directions on Capital Market Exposures on 13 February 2026, after a public consultation, with an original effective date of 1 April 2026. Banks, capital market intermediaries and industry associations then made representations seeking more time and clarity on operational and interpretational issues. After further discussion with stakeholders, the RBI extended the date to 1 July 2026 and issued revised Amendment Directions for commercial banks and small finance banks alongside the press release.

The deferral was not a withdrawal. It gave regulated entities an extra quarter to change policies, systems and documents before the new regime took effect.

What the framework covers

The amended framework has three parts:

• an enabling structure for banks to finance acquisitions by Indian companies;
• rationalised limits on loans to individuals against shares and other financial assets, such as units of REITs and InvITs;
• a principles-based approach to bank lending to capital market intermediaries such as brokers and clearing members.

The rules therefore matter well beyond a bank's compliance desk. Credit, treasury and risk teams, broking firms, corporate borrowers planning acquisitions and the CAs and advisers structuring these deals all need to check how the revised definitions and conditions apply to their facilities.

Acquisition finance: what was clarified

According to the RBI press release, the changes to acquisition finance are:

• Wider definition: acquisition finance now covers mergers and amalgamations, not only a conventional purchase of a target company.
• Control of a non-financial target: finance is available only where the transaction results in acquiring control over a non-financial target company. A proposal is eligible because of the nature of the target and the control outcome, not because it is labelled an acquisition.
• Holding company targets: where the target is a holding or parent company, the potential synergy criteria are to be assessed collectively across its subsidiaries. Layered group structures will need a closer look at the underlying operating businesses.
• Funding through subsidiaries: an acquiring company may borrow for onward lending to its subsidiary, incorporated in India or overseas, which will acquire the target.
• Corporate guarantee: where the finance goes to a subsidiary or special purpose vehicle, the acquiring company must give a corporate guarantee. Routing funds through an SPV does not remove recourse to the acquirer.
• Refinancing: acquisition debt may be refinanced only after the acquisition is complete in all respects and the acquirer has established control over the target, and the refinance must be used to retire the acquisition finance.

For finance teams, this means the deal timetable should separately track closing, satisfaction of control conditions, availability of any take-out facility and repayment of the original loan. Banks should verify completion and control before disbursing a refinance and should confirm that the proceeds extinguish the acquisition debt rather than fund a general corporate purpose. Board approvals and contingent liability assessments should reflect the guarantee requirement where an SPV is used.

Loans against securities to individuals

The press release confirms two ceilings that apply per individual at the level of the whole banking system:

Because the limits run across the banking system and not per lender, a bank cannot assess a proposal in isolation if the borrower already has similar credit elsewhere. Application forms, customer declarations and monitoring systems need to capture existing borrowings, and borrowers should not assume the ceiling is available afresh from each bank.

Lending to capital market intermediaries

The RBI made three clarifications for credit facilities to intermediaries:

• finance for proprietary trading may be given only against 100% collateral in cash or cash equivalents;
• the earlier prohibition on financing market makers against the securities in which they make a market has been removed;
• intraday facilities to mutual funds that are secured by guaranteed same-day receivables are excluded from capital market exposure.

The treatment of a facility can turn on its purpose, the collateral behind it and the part that counts as capital market exposure. Brokers, clearing members and market makers should check that existing lines, collateral and permitted use match the revised conditions, and mutual fund treasury teams should confirm how their intraday lines are classified.

What to review now

With the rules in force from 1 July 2026, banks should confirm that credit policies, product notes, sanction templates and technology controls reflect the revised directions, including the system-wide individual limits. Acquisition facilities sanctioned around the changeover, and any involving overseas subsidiaries, SPVs or a planned refinance, deserve a fresh check of target eligibility, control, guarantee and end-use conditions. Companies planning acquisitions and their advisers should test the target, the funding route and the refinancing plan against these conditions before signing, since a deal that works commercially may still need restructuring to qualify.

Updated on 27 September 2026: Added the RBI press release number and date, the holding-company synergy test and the intraday mutual fund exclusion; removed an unverified statement on the risk weight for irrevocable payment commitments; noted that the rules applied from 1 July 2026.