Reserve Bank of India issues revised rules for acquisition finance, securities-backed lending and credit to capital market intermediaries

The Reserve Bank of India has issued revised amendments to its Commercial Banks – Credit Facilities Directions, introducing a redesigned regime for acquisition finance, a new framework for loans against “eligible securities”, and a dedicated chapter governing credit facilities to capital market intermediaries (CMIs). The package also updates key definitions and board-level oversight items, and replaces the earlier February 2026 amendment directions. For acquisition finance, banks may lend to an Indian non-financial company to acquire “control”, or increase stake towards control, in a domestic or foreign non-financial target as a strategic investment, including via subsidiaries or acquisition SPVs, subject to a board-approved policy. Conditions include minimum net worth of INR 500 crore and net profit after tax in each of the previous three consecutive financial years (plus an investment grade rating of BBB- or above for unlisted acquirers), a cap of 75% of acquisition value for total bank financing with the balance funded from the acquirer’s own funds, and a consolidated post-acquisition debt-to-equity ceiling of 3:1 on a continuous basis. The rules restrict related-party transactions, prohibit acquisition finance for targets that have financial entity subsidiaries or joint ventures, require the control transaction(s) to be completed within 12 months of first disbursal, mandate subordination of the acquirer’s and group entities’ debt claims on the target to the acquisition finance lenders for the full tenor, and require the acquired control instruments to be unencumbered and used as core security; refinance of existing acquisition debt is permitted only after the acquisition is concluded and control established. For loans against eligible securities, banks must adopt policies covering collateral selection, concentration limits, LTV/margins and haircuts, valuation and margin calls, and exposures are generally to be included as capital market exposure under the RBI’s concentration risk framework. Eligible collateral spans specified listed equities, government securities, rated listed debt, mutual funds, ETFs (excluding commodity ETFs) and REITs/InvITs, with LTV ceilings for individuals including 60% against listed shares and listed convertible debt, 75% against non-debt mutual funds/ETFs/REITs/InvITs, and up to 85% for debt mutual funds and AAA-rated listed debt (75% for AA to BBB); LTV breaches must be rectified within seven working days. The Directions also cap most non-debt securities-backed borrowing at INR 1 crore per individual, allow up to INR 25 lakh for secondary-market purchases and up to INR 25 lakh for IPO/FPO/ESOP subscriptions (up to 75% of subscription value), and require replacement or repayment within 30 working days if collateral debt securities are downgraded below BBB(-). A new chapter for CMIs permits need-based working capital and settlement-related facilities and certain guarantees (with minimum collateral requirements, including a 50% minimum for exchange-related guarantees with at least 25% in cash), while generally prohibiting credit for proprietary trading except in tightly collateralised cases; most CMI facilities must be fully secured, subject to floors such as a minimum 40% haircut on equity shares. The revised amendments apply from 1 July 2026, or earlier if adopted by a bank in entirety. Existing facilities may continue until maturity, but fresh or renewed loans and guarantees from the adoption/effective date must comply with the revised Directions.