RBI doubles IPO loan limit, allows up to Rs 25 lakh financing per investor

Mumbai: The Reserve Bank of India (RBI) on Wednesday announced a major set of changes to make bank credit more accessible for companies and individuals.

The central bank has decided to allow banks to finance acquisitions by Indian corporates, while also easing restrictions on lending against shares and debt securities.

Governor Sanjay Malhotra, after the Monetary Policy Committee (MPC) meeting, said that the RBI will put in place an enabling framework to help banks provide loans for acquisitions.

The move comes after the State Bank of India had requested the regulator to allow such financing.

Malhotra also said that the central bank has removed the regulatory ceiling on lending against listed debt securities.

At the same time, the lending limit against shares has been increased from Rs 20 lakh to Rs 1 crore per individual.

For IPO financing, the limit has been raised from Rs 10 lakh to Rs 25 lakh per person.

This change, effective from October 1, 2024, will especially help high net worth individuals (HNIs) to apply for larger amounts in public offerings.

The RBI has also decided to make lending cheaper for infrastructure projects. It will reduce risk weights on loans given by non-banking financial companies (NBFCs) to high-quality infrastructure projects.

Alongside, the regulator has withdrawn a 2016 rule that discouraged lending to large borrowers with bank exposure above Rs 10,000 crore. This is expected to boost overall credit availability in the system.

On regulatory timelines, Malhotra said that the expected credit loss (ECL) framework and the Basel 3 capital framework will come into effect from 2027, giving banks enough time to adjust.

Experts noted that the RBI’s decisions are aimed at encouraging more lending by banks, supporting corporate acquisitions, boosting IPO participation, and making funds more easily available for infrastructure and business growth.

–IANS