RBI unveils plans to bolster credit flow to corporates, capital market

Regulator to remove cap on banks’ market lending to single group, proposes to allow acquisition funding

- Anshika Kayastha & Dipti Sharma

The RBI governor said and banks' corporate credit exposure has come down.

The central bank has proposed withdrawing the 2016 rules that capped lending to a single group through market instruments and also suggested measures like allowing banks to finance acquisitions to improve credit flow to corporates and capital markets.

The Reserve Bank of India (RBI) announced the proposal to withdraw its August 2016 framework on Credit Supply for Large Borrowers through Market Mechanism, according to a statement by the regulator. It was aimed at addressing concentration risk arising from the banking system’s exposure to a single large corporate.

Separately, the regulator proposed an enabling framework allowing banks to finance acquisitions by Indian corporates, raising limits for lending against shares and units of real estate and infrastructure investment trusts. The regulator also seeks to remove the cap on lending against listed debt securities and introduce a more principle-based framework for lending to capital market intermediaries.

The RBI also proposed reviewing the September 2004 ban on issuing new licences for urban cooperative banks, citing “positive developments” over the past over two decades.