MUMBAI: The Reserve Bank of India (RBI) on Monday deferred the implementation of its revised capital market exposure framework by three months to July 1, 2026, following representations from banks and industry stakeholders flagging operational challenges and seeking clarity on certain provisions.
The amended directions, originally issued on February 13 and slated to come into effect from April 1, aim to provide an enabling framework for bank financing of corporate acquisitions, rationalise lending limits against shares and units of REITs and InvITs, and introduce a more principle-based approach to lending to capital market intermediaries (CMIs).
The central bank said it received feedback from banks, CMIs and industry associations highlighting interpretational and operational issues. After further consultations, it decided to extend the timeline and introduce clarifications to smoothen implementation.
Among the key changes, the RBI expanded the definition of acquisition finance to include mergers and amalgamations. It clarified that such financing can be extended only for acquiring control over a non-financial target company.
In cases where the target is a holding or parent company with subsidiaries, lenders must ensure that the criterion of “potential synergy” is met on a consolidated basis.
The RBI also allowed acquiring companies to avail acquisition finance for on-lending to subsidiaries --both domestic and overseas-- for the purpose of acquiring a target entity.
Further, the regulator specified that refinancing of acquisition finance can be undertaken only after the acquisition process is fully completed and control has been established.
The move is expected to provide banks and market participants additional time to align systems and processes with the revised framework, while also addressing ambiguities in the norms governing acquisition funding and exposures to capital market entities.