BT Explainer: Loans against shares capped system wide at Rs 1 cr: What investors should know

The Reserve Bank of India (RBI) has deferred the implementation of the Amendment Directions on capital market exposures to July 1, 2026. The final Amendment Directions were issued on February 13 this year after due consideration of feedback received during the public consultation process. The apex bank also issued certain clarifications, including the one related to caps on loans against shares, and on acquisition finance that now includes mergers & acquisitions.

The Amendment Directions are aimed primarily at providing an enabling framework for banks to finance acquisitions by Indian corporates, rationalising limits for bank lending to individuals against shares, units of REITs and InvITs, among others, and putting in place a more principle-based framework for lending to capital market intermediaries (CMIs).

They were earlier scheduled to come into effect from April 1, 2026.

"The Reserve Bank has since received representations from banks, CMIs, and various industry associations seeking an extension of the effective date, and also flagging certain operational and interpretational issues for clarification. On a review, based on further discussions with the stakeholders and on a review, it has been decided to extend the effective date of the said Amendment Directions by three months to July 1, 2026," RBI said.

The central bank made a few clarification on certain provisions relating to acquisition finance and exposures to capital market intermediaries.

Cap on loan against securities

RBI said the caps on loans to individuals against eligible securities at Rs 1 crore, as well as for subscribing to shares under IPO, FPO, or under ESOP at Rs 25 lakh per individual, would be at banking system level. This means investors cannot take more than Rs 1 crore loan against securities from all banks combined. Similarly, borrowings for subscribing to shares under IPO, FPO, or under ESOP at Rs 25 lakh per individual.

Siddartha Karnani, Partner, King Stubb & Kasiva, Advocates and Attorneys said the RBI’s clarification that the caps on loans against eligible securities and financing for IPO, FPO, or ESOP subscriptions will apply at the banking system level is a significant regulatory safeguard.

"By moving the limit beyond a single-bank framework, the regulator seeks to close potential gaps where borrowers could otherwise access multiple credit lines across banks to bypass exposure limits. This approach strengthens oversight of leverage in capital market–linked lending while promoting responsible credit deployment by banks," Karnani said.

He said the limits continue to facilitate retail participation in primary market issuances, balancing market access with systemic risk management.

Acquisition finance

In the case of acquisition finance, clarifications have been issued including the definition of acquisition finance, which now include mergers and amalgamations. The apex bank said acquisition finance may be extended only for acquiring control over a non-financial target company.

"If the target company is a holding company / parent company with control over other subsidiary companies, the criteria of ‘potential synergy’ must be collectively met for acquisition finance," RBI said.

RBI said the refinance of acquisition finance can take place only when the acquisition

finance has been concluded in all aspects and by establishment of control of the target company by the acquiring company. Such refinance should only be used to retire the acquisition finance debt.

"A corporate guarantee from the acquiring company shall be required in cases of acquisition finance extended to a subsidiary or a SPV of the acquiring company," RBI said.