RBI Expands Lending Limits to Boost IPO Participation and Market Liquidity

In a strategic move aimed at enhancing capital market participation, the Reserve Bank of India (RBI) has raised the individual lending limit for financing Initial Public Offers (IPOs) from Rs 10 lakh to Rs 25 lakh. The central bank has also increased the limit on loans against shares from Rs 20 lakh to Rs 1 crore. These decisions reflect the RBI's commitment to stimulating liquidity in the financial markets.

According to RBI Governor Sanjay Malhotra, "Loans against shares and IPO financing existed earlier but were not revised for many years. It is only natural that these limits be updated." This initiative is expected to draw more high net worth individuals (HNIs) into the equity markets, as well as extend to Real Estate Investment Trusts (Reits) and Infrastructure Investment Trusts (InvITs). The RBI also proposed removing the ceiling on lending against listed debt securities, enhancing bank flexibility.

The decision comes in light of an active primary market with anticipated high-profile IPOs from companies like Reliance Jio, Tata Capital, and LG Electronics. Additional measures include relaxing external commercial borrowing norms, reducing risk bases for NBFCs in infrastructure and housing finance for ongoing projects, and resuming licensing for urban cooperative banks. Furthermore, the RBI has streamlined over 250 regulatory instructions and enhanced the Integrated Ombudsman Scheme to include cooperative banks.

(With inputs from agencies.)