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Mumbai: The Reserve Bank of India (RBI) on Monday deferred by three months its circular on capital market exposures of banks, citing representations from industry associations.

The central bank has clarified a clutch of points made in its circular from February. RBI said it received representations from banks, capital market intermediaries, and various industry associations seeking an extension of the effective date, and also flagging certain operational and interpretational issues for clarification.

“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 1 July 2026,” it said.

According to RBI, it had in February issued the final guidelines after due consideration of the feedback received as part of public consultation. The directions, it said, were aimed primarily to provide an enabling framework for banks to finance acquisitions by Indian corporates. It was also meant to rationalise the limits for lending by banks to individuals against shares, units of REITs, InvITs, etc. and put in place a more principle-based framework for lending to capital market intermediaries (CMIs).

On Monday, RBI said that bank financing to CMIs or for proprietary trading may be undertaken against 100% collateral comprising cash or cash equivalents.

It said that the prohibition on extending finance to market markers against securities in which the market making operations are undertaken, has been removed.

Mint reported on 19 February that a top forum of brokers has sought regulatory intervention to defer the implementation of RBI’s directives to banks to tighten funding to proprietary traders as part of its capital market exposure norms to take effect on 1 April.

The plea dated 18 February stated that the RBI's norms would impact both price efficiency and liquidity and may even give an edge to foreign proprietary desks over their India counterparts. The RBI's consultation paper in October last year did not indicate any increase in bank guarantee collateral requirements to 100% from the current 50%, the Association of NSE Members of India (ANMI) said in a letter to the Securities and Exchange Board of India.Shayan Ghosh leads the BFSI coverage at Mint, reporting on traditional banks, shadow banks and the central bank. He has 14 years of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions' worth of toxic assets.

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