RBI raises limits on loans for shares, investing in IPOs: What changes

Central bank gives investors greater access to credit and boosts participation in capital markets

The Reserve Bank of India (RBI) has changed rules for taking loans against shares and financing initial public offerings (IPOs), significantly increasing borrowing limits and altering how retail and institutional investors access funds.

 

Individuals could borrow up to 50 per cent of the value of pledged shares, capped at Rs 20 lakh per person. Under new rules, the ceiling has been raised to Rs 1 crore. The reform is part of RBI’s broader decision to ease terms for loans against shares, units of Real Estate Investment Trusts, and Infrastructure Investment Trusts.

 

For borrowers, this means much larger credit availability using their investments as collateral. It could be particularly beneficial for high-net-worth individuals and active investors who need quick liquidity without selling their assets.

 

IPO financing limit more than doubles

 

IPO financing, a loan that helps individuals apply for shares in an initial public offering, will also see a significant hike. The limit will increase from Rs 10 lakh to Rs 25 lakh per person.

 

This means investors interested in participating in large IPOs can now raise more funds without requiring the full amount upfront. Once allotted shares are received, they are used as collateral to repay the loan. This change could encourage more retail participation in IPOs, especially in high-value listings.

 

Lending against listed debt securities simplified

 

Another key change is the removal of the regulatory ceiling on loans against listed debt securities such as government bonds, corporate bonds, non-convertible debentures, green bonds, and sovereign gold bonds (SGBs). The RBI says this will simplify borrowing and broaden access to credit for investors holding such securities.

 

What it means for borrowers

 

Higher loan access: Borrowers can leverage their investments far more than before.

 

Greater flexibility: Increased limits mean easier liquidity without selling assets.

 

Potential risks: Higher exposure to market volatility, as loan amounts depend on collateral value.

 

This move by the RBI comes amid efforts to strengthen credit markets and deepen retail participation in capital markets. While it opens doors for greater financing opportunities, borrowers must weigh the risks carefully, especially in volatile markets.