RBI defers implementation of capital market exposures norms to July 1

Synopsis

The Reserve Bank of India has postponed new acquisition finance rules. The implementation is now set for July 1, 2026. This decision follows feedback from stakeholders. The central bank also updated its capital market exposures framework. These changes aim to clarify lending for mergers and acquisitions. The RBI is refining guidelines for domestic lenders.

The Reserve Bank of India on Monday deferred the implementation of acquisition finance guidelines by another three months to July 1 this year, following stakeholder feedback.

The central bank stated that it has also revised the "Amendment Directions on Capital Market Exposures" framework, first announced on February 13.

The RBI had come out with the guidelines after a consultative process, allowing domestic lenders to fund acquisitions.

"On a review, based on further discussions with the stakeholders and on a review, it has been decided to extend the effective date of the said Amendment Directions by three months to July 1, 2026," the central bank said on its website.

The tweaks announced on Monday include the definition of acquisition finance, which has been modified to include mergers and amalgamations, limiting the lending for acquiring a non-financial entity alone and allowing the acquiring company to avail acquisition finance for on-lending to a subsidiary incorporated in India or overseas for the acquisition of a target company.

Refinance of acquisition finance can take place only when the acquisition finance has been concluded in all aspects and by the establishment of control of the target company by the acquiring company, the RBI clarified, adding that such refinance should only be used to retire the acquisition finance debt.

It also said that a corporate guarantee from the acquiring company shall be required in cases of acquisition finance extended to a subsidiary or a special purpose vehicle of the acquiring company.

Other objectives for issuing the guidelines had included rationalising the limits for lending by banks to individuals against shares, units of REITs, InvITs, etc. and putting in place a more principle-based framework for lending to capital market intermediaries (CMIs), it said.

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